This report’s overarching aim is to shed light on possible cost-effective reforms of demand-side housing assistance that could improve housing outcomes for low-income renters. The main demand-side rental housing assistance for low-income renters in Australia is CRA, which is payable to eligible households renting outside the public housing sector.

Various studies have suggested that, as CRA rules are currently structured, payments to low-income private renters are insufficient to achieve benchmark affordability because the real value of CRA has fallen well behind rent. Furthermore, there remains scope for improved targeting so that CRA entitlements more closely match the needs of different cohorts and accommodate the heterogeneity of housing markets across Australia. Concern has also been raised that increases in a demand-side rental housing assistance like CRA would be shifted into higher rents, rather than being captured within renter households’ budgets to ease their affordability pressures.

Key points:

• By international comparison, Australia’s Commonwealth Rent Assistance (CRA) regime is distinctive in terms of being (a) restricted to income-support recipients; (b) paid to renters, not landlords; (c) capped at modest maximum rates; (d) regionally invariant; and (e) not rationed.
• Out of 1.41 million low-income private renter income units, nearly two-thirds or 933,000 are assisted by CRA. Meanwhile, CRA is also paid to 419,000 private renter income units with moderate incomes, partly due to targeting error.
• Over one-third of low-income CRA recipients still carry a net housing cost burden of more than 30 per cent after CRA is deducted from rents.
• Raising the CRA maximum rate would improve affordability outcomes for 623,800 income units or 44 per cent of low-income private renters. However, it is the costliest of the three modelled reforms, requiring additional annual expenditure of $1 billion to amount to a total cost of $5.6 billion.
• Because it would involve severing the existing link with other social security entitlements, constitutional barriers would need to be overcome to change the CRA eligibility rules to reflect housing need. However, it is possible that this issue could be addressed within existing constitutional limitations.