Housing system broken and unfair

The June 2017 Productivity Commission Report has declared that Australia’s social housing is broken and in desperate need of repair and has suggested a bold proposal to help solve the problem.

The draft report into reforms to Human Services, which is up open for consultation until July 14, suggests that a 15 per cent increase in Rent Assistance would help vulnerable Australians cope with rising rental prices.

But the Australia Council of Social Service (ACOSS) says the proposal still doesn’t go far enough in addressing the real issues behind our housing affordability crisis.

The Productivity Commissioner Stephen King believes that a 15 per cent increase in Rent Assistance would also help to relieve the burden on social housing by providing Australians with assistance to enter private housing markets and higher cost areas. These high-cost areas typically offer more jobs, higher pay, better schools and other services.

Currently, the maximum Rent Assistance that can be paid is $175.42 per fortnight ($132.20 if you do not have dependant children). This amount is in addition to any other benefits paid. Around 1.3 million households currently receive r Rent Assistance at a yearly cost to the Government of $4.4 billion.

Dr Cassandra Goldie said the proposed increase won’t cover the cost of rent for many Australians and may only fuel further demand for existing rental properties.

“To move to a housing system where everyone including people on the very lowest incomes is competing in the open rental market would be a dangerous move,” said Dr Goldie.

“The proposed 15 per cent increase in [Rent Assistance] would go nowhere near what would be needed to ensure people have adequate income to compete, hence our recommendation for a minimum 30 per cent, plus a serious increase in funding towards social and affordable housing.

“The draft proposals may do nothing other than fuel the demand side of the rental market putting upwards pressure on prices, risking even greater poverty and homelessness amongst people already in serious housing stress.”

The draft report also made recommendations about end-of-life care, health care, social and community services, with the hope of improving the effectiveness of human services across Australia.

Opinion: Rent assistance is a bandaid over a bullet wound

Providing Australians with increased Rent Assistance will be a welcome shot in the arm, but it will also contribute to increased competition in an already slim – and hideously overpriced – rental market. If the Government was to increase Rent Assistance by 15 per cent it would add another $660,000,000 to the bottom line. Wouldn’t that money be better spent on social housing?

It would help to reduce the pressure on the private rental market, which may drive rent prices down. It will also help age pensioners and low-income families to stay closer to major cities, where the jobs, health services and amenities are located.

In the 1970s, the proportion of total houses built by the public sector was over 16 per cent. Nowadays, it is a paltry 1.2 per cent. If 30 per cent of Australian households are renters, then surely increasing their access to affordable housing will help their, and the Government’s, bottom line.

As YourLifeChoices has reported time and again, prospects of a comfortable retirement improve dramatically for those who own their home. Renters, on the other hand, face a grim future.

YourLifeChoices’ Retirement Affordability Index 2017 shows just how high a proportion of retirement income is paid on rent. Cash-strapped Couples (couples who rent on an Age Pension) spend 22 per cent of their income on rent, while Cash-strapped Singles (singles on an Age Pension who pay rent) pay 29 per cent of their income.

And although social housing is just one suggestion for improving our current housing affordability crisis, there are other suggestions that may help in future, but all have their pros and cons. These include:

Allow access to superannuation for house deposits

Pros: will provide first-home buyers with money to compete with investors

Cons: will raise house prices, defeats the purpose of super

Cut stamp duty

Pros: will reduce upfront costs for first-home buyers

Cons: provides sellers with incentive to charge more for houses, removes incentives for selling, thus reducing the supply of homes

Cut negative gearing and capital gains tax

Pros: will deter investors from buying properties so they can claim a loss and use it to reduce their taxable income

Cons: the myth that it will push up rent prices, cause a drop in the building of new houses

Provide equity financing

Pros: allows a limited number of first home-buyers to partner up with the Government (most likely state) and buyers will only have to pay 75 per cent of the value of the property, with the 25 per cent payable upon sale of the house

Cons: not many – will have to be tightly means tested

Increase taxes for foreign investors

Pros: may reduce the demand for high-density housing in city areas, deter foreign investors who drive up property prices

Cons: could be a segue to racism, foreign ownership only accounts for a small portion of the total property ownership market (although most likely inner city, close to CBD)

The Government’s plan to introduce a foreign investor ‘ghost house tax’ of up to $5000 for every property left vacant is a smart move, but it too may not go far enough.

So as much as an extra 15 per cent will help renters, especially age pensioners, more is needed to fix the problem. It may be too late for current older Australians, but the Government has time to improve the system for the retirees of the future.

Do you think 15 per cent is enough to help solve the housing affordability problem? Should the Government be looking at other ways to fix the problem? Which of the aforementioned methods do you think would help? Do you have any other suggestions?

Related articles:
Retirement housing Budget 2017
Housing affordability not an issue
Could retirees cash in with new rules?

Written by Leon Della Bosca

Publisher of YourLifeChoices – Australia's most-trusted and longest-running retirement website. A trusted voice on Australia's retirement landscape, including retirement income and planning, government entitlements, lifestyle and news and information relevant to Australians over 50. Leon has worked in publishing for more than 25 years and is also a travel writer and editor, graphic designer and photographer.

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