Australian demographic trends and implications for housing assistance programs

AHURI Final Report 286
Taxation Housing subsidies Housing Housing prices Low income housing Rental housing Affordable housing Housing assistance Australia
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Research Summary

The study forecast future expenditure on housing assistance programs; the additional outlays on ISPs due to asset test concessions to home owners; and the aggregate value of home owner tax subsidies. These three housing subsidy components are estimated to increase from $25 billion in 2011 to $32.8 billion in 2031. This study also presented a secure lease scheme for low-income households who are eligible for public housing but currently live in private rental housing and require long term, stable housing. These households include the elderly, disabled, those suffering from long-term health conditions and families with children.

Key Findings

  • The combined impact of demographic change, and shifts in the Australian population’s tenure profile, will be large. We forecast a 61 per cent increase in the number of households eligible to receive Commonwealth Rent Assistance (CRA) from 2011 to 2031. CRA payments are forecast to rise from $2.8 billion in 2011 to $4.5 billion in 2031—a 62 per cent addition to real budget expenditures. About half of the predicted increase is due to demographic changes, and the other half to an increase in private rental housing’s tenure share.
  • The rise in the budget cost of providing rent rebates to public housing tenants is more modest: an increase in budget cost from $1.1 billion in 2011 to $1.5 billion in 2031 is forecast.
  • We estimate that in 2011, 730,000 home owners received higher income support payments (ISPs) than would have been the case in the absence of home owner asset test concessions. The budget cost of meeting these higher payments is predicted to rise 38 per cent above 2011 levels to $8 billion in 2031.
  • Housing tax subsidies have a much larger budget cost than either housing assistance or the asset test concession. However, the predicted steep falls in rates of home ownership over the time horizon mean that projected increases in the aggregate real value of tax subsidies are relatively modest: we forecast a 23 per cent increase, from $15.3 billion in 2011 to $18.8 billion in 2031.
  • In aggregate, the 2011 budget cost of housing subsidies (including the asset test concession) cost government $25 billion. By 2031 that figure is likely to have risen to around $33 billion.
  • An alternative form of housing assistance is a secure leasing scheme, designed to provide more stable housing for especially vulnerable households that are eligible for public housing but currently reside in private rental, while curbing increases in the budget cost of housing subsidies.
  • Simulations show that, in the absence of a secure leasing scheme, CRA payments to secure-lease-eligible tenants would amount to an estimated $8.6 billion over a five-year period (2010–14). On the other hand, accommodating these tenants in public housing would have cost the government $13.1 billion over the five years.
  • Under the proposed secure leasing scheme, governments would be required to pay private landlords an incentivising premium of $14,891 or, on an annual basis, $3,498 in each year of the five-year lease. The annual equivalent budget cost is $2.38 billion with the total real budget cost summing to just over $10 billion over the five years.
  • Secure lease tenants would continue to be eligible for CRA payments which would sum, over five years, to $7.4 billion, instead of $8.6 billion under status quo conditions. This $1.2 billion budget saving can be deducted from the estimated $10.1 billion budget cost of implementing the secure lease program.
Publication Details
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Melbourne, Australia