12 October 2016
PDF Version [405KB]
Carol Ey
Social Policy
Executive
summary
-
Housing affordability is a significant issue for low income
households in receipt of social security payments.
-
The social security system recognises the additional financial
challenges that non-homeowners face in two ways:
– providing
Commonwealth Rent Assistance (CRA) to assist with the cost of rent for those
social security recipients in the private rental market and
– relaxing
the assets test eligibility for payments for non-homeowners compared to
homeowners.
-
Declining rates of home ownership and lower levels of public
housing provision mean that more social security recipients are accessing
private rental accommodation.
-
Rental costs have been rising at a higher rate than CRA
thresholds and rates, leading to increased numbers of recipients experiencing
housing stress, that is, where housing costs exceed 30 per cent of
the gross household income.
-
While CRA does reduce housing stress for many income support
recipients, the majority of those aged under 25 remain in housing stress
even after receiving CRA.
-
Both homeowners and non-homeowners are subject to an assets test
to determine their eligibility for receipt of income support payments. The
family home is excluded from the test. Non-homeowners have a relaxed assets threshold
to compensate for this, however most have few assets anyway.
-
There have been a number of proposals to include at least some
consideration of the family home in the assets test arrangements, but there has
been no action on this to date. While such changes may ensure social security
payments are better targeted and reduce outlays, they would not address housing
stress among non-homeowners.
-
Proposals for changes to CRA to improve support for those faced
with high rental costs have not been acted on, even where potential offsetting
savings have been identified. In view of the increasing levels of housing
stress being experienced by income support recipients, it would appear timely
to revisit these proposals.
Contents
Executive
summary
Introduction
Table 1: housing tenure of recipients
of social security payments, September 2007
Changes in the Australian housing
environment
Figure 1: home ownership rates by age
of household head at Census, 1961–2011
Figure 2: home ownership rates of
income support recipients, selected payments, 1993–2013
Figure 3: proportion of recipients
claiming CRA, selected payments and total, 2003–2013
Commonwealth Rent Assistance (CRA)
Table 2: maximum CRA payment,
threshold levels and rent required to receive maximum payment by family
situation as at June 2016
Figure 4: rental affordability by
indicative households on social security incomes, Victoria, December 2005
and December 2015
Assets test arrangements
Table 3: asset test limits for
allowances and pension, June 2016
Table 4: assets of Age Pensioners
included in the assets test, December 2015
Options for change
Conclusion
Introduction
Housing tenure is a significant factor in
the adequacy of income support payments, with those who own their own homes
outright generally having the highest ‘after housing’ incomes, while those in
the private rental market have the lowest.[1]
Some commentators have remarked that the Age Pension system in particular is
predicated on the basis that most recipients own their homes.[2]
In 2007, the most recent data available, most couples
receiving the Age Pension were living in their own homes, as were just over
half of single Age Pensioners (see Table 1 below). However this is not the case
for singles receiving other payments, in particular Disability Support Pension
(DSP), Parenting Payment Single (PPS), Newstart or Youth Allowance.
Table 1: housing
tenure of recipients of social security payments, percentage distribution, September
2007
| |
No rent |
Funded aged |
Public |
Private rent— |
Private rent— |
Home owner / |
|
| Main
transfer payment |
paid |
care |
housing |
No RA |
RA |
purchaser |
Total |
| Couples |
|
|
|
|
|
|
|
| Age Pension |
4.0 |
1.5 |
2.8 |
1.3 |
7.5 |
82.9 |
100.0 |
| Carer Payment |
5.4 |
0.0 |
8.2 |
3.2 |
17.6 |
65.6 |
100.0 |
| Disability
Support Pension |
5.3 |
0.3 |
10.7 |
3.1 |
17.5 |
63.2 |
100.0 |
| Family
Tax Benefit (only) |
7.6 |
0.0 |
1.5 |
10.8 |
20.6 |
59.5 |
100.0 |
| Newstart Allowance |
10.6 |
0.0 |
9.8 |
8.6 |
35.2 |
35.9 |
100.0 |
| Parenting
Payment Partnered |
8.5 |
0.0 |
4.6 |
7.3 |
36.9 |
42.7 |
100.0 |
| Youth Allowance |
22.3 |
0.0 |
3.8 |
19.7 |
51.8 |
2.4 |
100.0 |
| Other |
7.8 |
0.1 |
4.2 |
8.7 |
26.0 |
53.2 |
100.0 |
| All |
6.0 |
0.7 |
4.2 |
5.3 |
16.5 |
67.3 |
100.0 |
| Singles |
|
|
|
|
|
|
|
| Age Pension |
9.1 |
9.8 |
9.0 |
3.2 |
15.4 |
53.4 |
100.0 |
| Carer Payment |
20.6 |
0.0 |
16.5 |
14.9 |
23.7 |
24.2 |
100.0 |
| Disability
Support Pension |
15.6 |
1.1 |
19.3 |
14.6 |
32.2 |
17.2 |
100.0 |
| Family
Tax Benefit (only) |
8.8 |
0.0 |
3.2 |
18.5 |
29.9 |
39.5 |
100.0 |
| Newstart Allowance |
20.4 |
0.0 |
8.8 |
22.1 |
37.6 |
11.0 |
100.0 |
| Parenting
Payment Partnered |
16.7 |
0.0 |
13.3 |
6.7 |
30.0 |
33.3 |
100.0 |
| Parenting
Payment Single |
10.4 |
0.0 |
14.3 |
11.4 |
45.3 |
18.5 |
100.0 |
| Youth Allowance |
7.2 |
0.0 |
0.7 |
71.6 |
20.1 |
0.4 |
100.0 |
| Other |
10.0 |
0.3 |
8.8 |
19.3 |
29.5 |
32.2 |
100.0 |
| All |
11.9 |
3.6 |
10.6 |
17.9 |
27.3 |
28.6 |
100.0 |
Source: J Harmer, Pension
Review: Background Paper, Department of Families, Housing, Community
Services and Indigenous Affairs, Canberra, August 2008, p. 42, accessed
14 June 2016.
The social security system recognises the additional
financial challenges that non-homeowners face through two mechanisms—Commonwealth
Rent Assistance (CRA) to assist with rent payments for those in the private
rental market, and more generous thresholds for the assets tests for payments.[3]
However, both these mechanisms have remained essentially unchanged since the
late 1990s, while the Australian housing market has altered considerably during
that time. Therefore it is timely to review how effective these measures are in
reducing the housing stress of income support recipients who don’t own their
own homes.[4]
Changes in
the Australian housing environment
According to Census data compiled by economist Saul Eslake,
Australian home ownership peaked at 72.5 per cent of households in 1966, and
has subsequently declined to 67.0 per cent in 2011.[5]
This decline has been mainly due to a significant reduction in the proportion
of younger households purchasing houses, possibly associated with later entry
into the workforce and family formation, but since 1991 there has also been a
decline in home ownership among older age groups as shown in Figure 1 below.
Figure 1: home
ownership rates by age of household head at Census, 1961–2011
Source: S Eslake, ‘The housing
affordability trap’, Inside Story, 12 May 2016, accessed 14 June 2016.
The decline in home ownership is also reflected among social
security recipients, except in relation to the Age Pension where there has been
a slight increase in home ownership rates since 1998 (see Figure 2).
Figure 2: home
ownership rates of income support recipients, selected payments, 1993–2013
Source: Department of Social Services (DSS), Occasional
Paper No. 1 and statistical
papers, accessed 14 June 2016.
As can be seen in Table 1 on page 3, public housing provided
by state and territory governments (which does not attract CRA) is also a
significant form of housing for income support recipients. However public
housing stocks have also declined since the mid-1990s.[6]
While this decline has been partially offset in recent years by an increase in
other forms of social housing, such as low cost rental accommodation provided
by the community sector, the Australian Institute of Health and Welfare notes
that ‘To meet the projected increase in the demand for public rental housing in
Australia expected by 2026, the social housing dwelling stock will have to
increase at an even faster rate than the total dwelling stock.[7]
The decline in home ownership and the reduction in the
availability of public housing have combined to increase the proportion of
social security recipients living in private rental accommodation and in
receipt of CRA (see Figure 3).
Figure 3: proportion
of recipients claiming CRA, selected payments and total, 2003–2013
Source: DSS, relevant Statistical
Papers, accessed 14 June 2016.
At the same time, the cost of private rental accommodation
has increased substantially faster than CRA payments. While CRA rates increased
by between 30.1 per cent and 30.4 per cent (depending on family circumstances) between
September 2005 and September 2015, median rent is estimated to have increased
by 67.2 per cent for three bedroom houses and 74.5 per cent for two bedroom
units (weighted capital city average) over the same period.[8]
These changes create a challenge for the social security
system in ensuring that payment levels are adequate to allow income support
recipients to actively participate in society, while limiting the costs to the
social welfare budget.
Commonwealth
Rent Assistance (CRA)
Some form of assistance with rent has been provided to
certain social security recipients since 1958, with CRA introduced in 1985 and
subsequently extended across all income support payments, as well as for
low-income Family Tax Benefit Part A (FTB (A)) recipients not in receipt of an
income support payment.[9]
In 2014–15, some $4.2 billion was paid in CRA.[10]
CRA is payable in addition to other social security payments
where more than a minimum rent is paid to a private landlord or community
housing provider. It is not generally payable for those in public housing or
those in government funded places in nursing homes and other aged care
facilities, and special rules apply to single sharers, people who pay board and
lodging and those who live in retirement villages.[11]
CRA is paid at the rate of 75 cents for each dollar of rent paid above the
minimum rent threshold, up to the maximum rate applicable. The minimum rent threshold
and maximum payment per fortnight are determined by the family situation of the
recipient as set out in Table 2 below. Thresholds and rates are indexed in
March and October each year in line with movements in the Consumer Price Index
(CPI).
Table 2: maximum CRA payment, threshold levels
and rent required to receive maximum payment by family situation as at June
2016
| Family situation(a) |
Maximum CRA
payment per fortnight |
No payment if
fortnightly rent is less than |
Maximum CRA payable
if fortnightly rent is more than |
| Single, no children |
$130.40 |
$116.00 |
$289.87 |
| Single, no children, sharer |
$86.93 |
$116.00 |
$231.91 |
| Couple, no children |
$122.80 |
$188.20 |
$351.93 |
| Partnered, illness separated, no children |
$130.40 |
$116.00 |
$289.87 |
| Partnered, temporarily separated, no children |
$122.80 |
$116.00 |
$279.73 |
| Single, one or two children |
$153.02 |
$152.60 |
$356.63 |
| Single, three or more children |
$172.90 |
$152.60 |
$383.13 |
| Couple, one or two children |
$153.02 |
$225.82 |
$429.85 |
| Couple, three or more children |
$172.90 |
$225.82 |
$456.35 |
| Couple, illness or temporarily separated, one or two
children |
$153.02 |
$152.60 |
$356.63 |
| Couple, illness or temporarily separated, three or more
children |
$172.90 |
$152.60 |
$383.13 |
(a) There are also levels for parents with shared care
arrangements or not in receipt of FTB (A).
Source: DSS, ‘Commonwealth
Rent Assistance’, DSS website, accessed 14 June 2016.
In June 2015, there were 1,343,431 recipients of CRA.[12]
The major payment types of these recipients were Newstart (22.4 per cent), DSP
(19.9 per cent) and the Age Pension (18.3 per cent). The majority (53.8 per
cent) were single with no children, 21.1 per cent were single parents and 16.5
per cent were couples with children. Only 8.4 per cent were couples with no
children.[13]
The median fortnightly entitlement was $128.40, while the
median rent paid was $415.38 per fortnight (pf).[14]
This means that half of CRA recipients were paying in excess of $415.00 pf in
rent. Given that the rent required to obtain the maximum CRA rate in 2015 was
less than $400.00 for all groups except couples with children, who only
represented 16.5 per cent of the total, this suggests many recipients were receiving
the full rate of CRA and paying rent at well above the maximum rate cut-off
levels.
‘Housing stress’ is usually defined as households where more
than 30 per cent of gross income is spent on housing. In 2015, 69 per cent of
households receiving CRA would have been in housing stress if they hadn’t
received CRA, but CRA reduced the proportion in housing stress to 41 per cent.
However CRA was less effective for reducing the housing stress of young people
aged under 25 (who were more likely to be single), with 58 per cent still in
housing stress even after receiving CRA.[15]
That is, even when receiving CRA, more than half of young people on income
support (most of whom receive Newstart or Youth Allowance) are spending greater
than 30 per cent of their income in rent.
Using the level of 30 per cent of gross income to determine
‘affordable rent’, the Victorian Department of Human Services monitors the
proportion of rental properties on the market in both metropolitan and regional
areas in Victoria which are affordable for those on selected social security
payments. As can be seen in Figure 4 below, in December 2015 only 0.3 per cent
of one-bedroom rental properties in metropolitan Melbourne were assessed as
affordable for a single Newstart recipient with no children, while only 2.9 per
cent of two-bedroom properties were affordable for a single parent with one
child. The situation for larger families was somewhat better, with 29.4 per
cent of properties in Melbourne assessed as affordable. Properties in regional
Victoria were considerably more affordable, with nearly a quarter of
one-bedroom properties affordable for a single Newstart recipient, while over
half the larger properties were affordable for recipients with children.
Affordability has declined significantly across all categories
of income support recipients in the last decade, although the proportion of
properties in Melbourne assessed as affordable for single Newstart recipients
with no children has always been low.
Using similar methodology, Anglicare undertakes an annual
snapshot of rental properties to assess how many properties across Australia
are affordable for those on low incomes. In the snapshot undertaken in
April 2016 they only found one property of the 75,410 available for rent
over the weekend surveyed which was affordable for a single person on Youth
Allowance, and only 21 were affordable for a single person on Newstart.[16]
Figure 4: rental
affordability by indicative households on social security incomes, Victoria, December 2005
and December 2015
Source: Victorian Department of Human Services (VDHS), Affordable
lettings by LGA December quarter 2015, VDHS
website, accessed 14 June 2016.
A possible consequence of the greater affordability of
rental properties in regional areas is that income support recipients may move
from metropolitan to regional areas in order to access affordable housing,
despite potentially reduced employment opportunities. Analysis undertaken in
2003 for New South Wales and South Australia suggested that there was a net
flow of income support recipients to non-metropolitan areas, which contrasted
with net migration from the country to the city by the general population.[17]
It is also likely the lack of affordable housing deters those on income support
living in regional areas from moving to metropolitan areas.
Overall it appears that while CRA makes a valuable
contribution to improving the housing options and likely well-being of those in
receipt of social security payments, the rapid rise in private rental costs relative
to CRA rates in recent years has reduced the subsidy’s effectiveness. In
particular, despite access to CRA, many single income support recipients find
it difficult to afford private rental housing.
Assets test
arrangements
As noted above, the social security system also acknowledges
the different circumstances of homeowners and non-homeowners through applying
different asset test levels.
When the Age Pension was introduced in 1909, receipt of
payment was subject to a means test on assets (as well as one on income) which
included the pensioner’s residence. The family home was excluded from the
assets test in 1912, and has not been included subsequently. Various forms of
means tests have operated since that time, with asset levels not considered for
eligibility during the period 1976 to 1985. The assets test was reintroduced in
1985, with different levels for homeowners and non-homeowners. Non-homeowners
were permitted a higher level of assets before losing payments, presumably to
compensate for the lack of homeownership. The 1985 arrangements have
essentially been in place since, with relatively minor changes.[18]
For allowances, the assets test is a threshold level, where
the allowance is not payable if the assets exceed the designated amount. In
relation to pensions, the full pension is payable if assets are below the
threshold, while assets over the threshold reduce the value of the pension by
$1.50 per fortnight for every $1,000 above the threshold amount. The assets
test is applied independently of the income test, with the amount payable being
the lesser of the income and assets test calculations. The thresholds are
generally indexed in line with changes in the CPI, although 2014 Budget changes
paused the indexation of the thresholds for allowances for three years from
1 July 2014.[19]
This means the threshold for allowances is no longer aligned with the one for
pensions. The current asset test thresholds are set out in Table 3 below.
Table 3: asset
test limits for allowances and pension, June 2016
| Family situation |
Allowances |
Pensions |
| Homeowners |
Non-homeowners |
Homeowners |
Non-homeowners |
| Single |
$202 000 |
$348 500 |
$205 500 |
$354 500 |
| Couple (combined) |
$286 500 |
$433 000 |
$291 500 |
$440 500 |
| Illness separated (couple combined) |
$286 500 |
$433 000 |
$291 500 |
$440 500 |
| One partner eligible (combined assets) |
$286 500 |
$433 000 |
$291 500 |
$440 500 |
Source: Department of Human Services (DHS), ‘Assets’,
DHS website, accessed 14 June 2016.
In introducing the 1985 assets test arrangements, the Hawke
Government did not follow the recommendation of the panel it had established to
review the test arrangements to include the family home in the assets test.
Instead it decided that ‘in Australia it is fairer to allow
exemption of the home, as long as the inequity that this introduces in relation
to people who do not own their own homes is addressed in other ways.’[20] To address this inequity,
non-homeowners were allowed an additional $50,000 in assets before the asset
test took effect. It is unclear how this figure was decided upon. Median
capital city house prices in 1985 were in the range $52,000 to $90,000, so it
may have been considered that this was the equivalent to the value of a modest
house.[21]
On the other hand, $50,000 in assets above the test threshold reduced the
pension by $100 per week, so it may have been felt that this provided an
adequate income to pay for rental costs for non-homeowners.
While the gap between the assets tests for homeowners and
non-homeowners has only changed in line with the CPI since 1985, housing prices
have increased at a much faster rate, particularly in recent years. For
example, from December 2003 to December 2015 prices for capital city
residential properties increased by 82.4 per cent, compared to an
increase of 38.0 per cent over the same period in the asset test gap between
non-homeowners and homeowners on the pension.[22]
This means that while the additional asset allowance for
non-homeowners in June 2016 is $146,500 for allowees and $149,000 for
pensioners, the mean capital city residential dwelling price has risen to
$612,100 in December 2015.[23]
Hence if the additional allowance was initially meant to represent the value of
a modest house, the current differential is substantially less than that.
Changes to the asset test taper arrangements mean that the
additional allowance of $149,000 above the threshold now reduces the pension
received by $112.75 per week, considerably lower in real terms than the initial
value of $100 per week in 1985.
Changes to the pensions’ assets test announced in the 2015
Budget, which are due to take effect on 1 January 2017, will increase
this gap to $200,000, but this is still likely to be less than the value of the
average pensioner’s home.[24]
These changes will also increase the assets threshold, but assets above the
threshold will reduce the pension payable at the rate of $3.00 per $1,000 per
fortnight, rather than the current rate of $1.50 per $1,000 in assets above the
threshold. This means the value of the additional $200,000 (for those at the
threshold limit) translates to $300 per week in pension, which is similar in
real terms to the 1985 value.[25]
However, non-homeowner pensioners have considerably fewer
assets on average than homeowners, even without considering the value of the
family home, so in general this additional allowance makes little difference.
As Table 4 shows, the average value of assets included in the assets test for non-homeowner
Age Pensioners is less than half of that for homeowners. More than half of
non-homeowners have less than $50,000 in assets, compared to around a third of
single homeowners and 16.5 per cent of couples who own their home.
Thus while the relaxation of the assets test introduced in
the 2015 Budget is expected to result in some four per cent of pensioners
receiving increased pensions, this will have little impact on non-homeowners,
because few are affected by the assets test.[26]
As at June 2013, only 1.7 per cent of non-homeowners received a reduced Age
Pension due to the operations of the asset test, compared to 19.0 per cent of
homeowners.[27]
Table 4: assets
of Age Pensioners included in the assets test, December 2015
| Family situation |
Average asset value |
Percentage with less than $50,000 in assets |
| Single homeowner |
$143 023 |
36.3% |
| Single non-homeowner |
$70 556 |
68.3% |
| Couple homeowner |
$277 612 |
16.5% |
| Couple non-homeowner |
$109 279 |
56.5% |
Source: DSS, ‘DSS
Demographics December 2015’, Data.gov.au website, accessed
14 June 2016.
Options for
change
Numerous reports have recommended amending the pension
assets test to take into consideration the value of the family home, in part
due to concerns that its exclusion results in distorted housing decisions, for
example, not downsizing.[28]
There is also a view that relatively wealthy homeowners should not be as
reliant on taxpayer funded assistance.[29]
The Productivity Commission recently summarised the
recommendations of several of these studies in its review of the housing
decisions of older Australians (see Box 1). The Commission noted that the
family home has a key role in Australia’s retirement savings and income system,
and quoted Prime Minister Hawke’s comments:
... there is a feeling ... throughout the community there is some
special significance attached to the home. People don’t like to feel that that
is something which is included in some sort of testing in their rights in
regard to the pension.[30]
However the Commission itself concluded, ‘Removing the family home
exemption would be the most efficient and equitable outcome, but this appears
intractable in the immediate future. At a minimum, there is a strong case on
equity grounds to set a limit on its value.’[31]
However it noted that any such cap on the value of the family home that was
exempt from the means test may have to take into consideration regional
variation in housing prices.[32]
Most of the inquiries that considered changes to the
pensions assets test to account for the value of the family home did not
address the issue of access to affordable housing for those who don’t own their
own homes, and hence did not consider the role of CRA. However, some reviews
have suggested changes to CRA arrangements.
In 2009, the Harmer Pension Review concluded that while the
then pension rates were adequate for couples living in their own homes or
public housing, it found ‘strong evidence that many pensioners in private
rental housing face particularly high costs and have poor outcomes.’[33]
It suggested that there would be merit in restructuring the rent thresholds to
remove access for those paying relatively low rents to better target those
facing high housing costs, and also suggested the arrangements regarding
sharers should also be reviewed.[34]
These findings were subsequently incorporated into the recommendations
of the Henry review of the tax system:
-
Recommendation 102: The maximum rate of Rent Assistance should be
increased to assist renters to afford an adequate standard of dwelling. To
ensure that Rent Assistance can be maintained at an adequate level over time,
the rent maximum should be indexed by movements in national rents, which could
be measured by an index of rents paid by income support recipients.
|
Box 1: Suggested reforms to the Age Pension affecting housing
The Henry Review — cap for exemption
The Henry Review (Henry et al. 2010) suggested that to increase the fairness of the means test for the Age Pension, a cap should be applied to the exemption of the principal residence — amounts above a specified cap would be included in the assets test, and be subject to deeming. It was argued that this arrangement would make an allowance for the primary role of housing in providing shelter, but also recognising that beyond this basic function, housing represents an asset that people purchase with an expectation of generating a future return. Henry et al. (2010) stated that such an approach would ensure that only housing of ‘significant value’ (p. 550) was targeted by the means test. They estimated that a cap of $1.2 million would result in approximately 10 000 Age Pension recipients having their principal homes partially assessed under the means test.
National Commission of Audit — cap for exemption
The National Commission of Audit proposed that from 2027-28, the threshold for the inclusion of the principal residence in the Age Pension means test should be set at the indexed value of a residence valued at the time of writing at $750 000 for couples, and $500 000 for a single pensioner (NCA 2014a).
Rice Warner — cap for exemption and no part pensions
Rice Warner [a financial services research and consultancy firm] recommended that singles should be permitted to have $250 000 in superannuation assets ($350 000 for couples) plus a home value of up to $1 million to be eligible for the Age Pension. For those with assets exceeding these amounts, no Age Pension would be payable — that is, tapering would be eliminated. Those with a home value in excess of $1 million who wanted to obtain access to the Age Pension would need to sell their home, or alternatively, borrow against the property to reduce their net equity position to $1 million. In their submission to the Australian Government’s Tax White Paper, Rice Warner (2015) revised their threshold to $1.5 million for the principal residence and up to $500 000 for all other assets (including superannuation).
Grattan Institute — no exemption for principal residence
Recognising that including the value of the principal residence in the Age Pension assets test would disadvantage asset rich, income poor households, Daley et al. (2013) suggested that those who fail [sic] the assets test due to the value of their home be permitted to access the Age Pension, but for the Australian Government to accumulate a claim against the dwelling in return. The value of the debt to the Australian Government could be incorporated in the assets test, such that over time a person’s net asset value might reduce to the point where they became eligible for the Age Pension (depending on the value set in the asset test threshold) without accumulating further debt.
Centre for Independent Studies — no exemption for principal residence
Cowan and Taylor (2015) advocated including the entire value of the principal residence in the Age Pension assets test. This was part of a three-pronged approach which also included legislating for a default reverse mortgage product to be offered by banks and superannuation funds, but guaranteed by the Australian Government, as well as deeming income from the reverse mortgage product and including it in the Age Pension income test.
|
Source:
Productivity Commission, Housing Decisions of Older Australians, Research paper, Productivity Commission, Canberra,
December 2015, p. 125, accessed 12 June 2016.
-
Recommendation 103: To better target an increase in the maximum
rate, Rent Assistance should be part of the income support system, with
eligibility based on rent paid and the income support means test, rather than
on eligibility for another payment (for example, Family Assistance).
-
Recommendation 104: Mechanisms should be developed to extend Rent
Assistance equitably to public housing tenants along with removing
income-linked rent setting in public housing.[35]
Recommendation 104, together with Recommendation 106, that
the states charge market rents for public housing, were designed to address the
inequity between income support recipients in public housing and those
receiving CRA in the private rental market, as well as to improve the
efficiency of public housing investment.[36]
The Rudd Government rejected Recommendation 103, and also the proposal that the
states charge market rents to public housing tenants, but did not explicitly
respond to the recommendation to increase the maximum rate of rent assistance.[37]
The 2012 Senate Committee inquiry into the adequacy of the
allowance payment system noted that many submissions to the inquiry concluded
that ‘the Newstart Allowance did not enable people to house themselves in a
manner conducive to finding employment’, in particular because of the high
proportion of recipients who were renting privately.[38] High housing costs were
considered likely to increase the risk of homelessness and limit the funds
available to cover the costs of job hunting such as making phone calls,
travelling to and from interviews, and buying suitable interview clothes.
One witness, Dennis Trewin, from the Academy
of Social Sciences, suggested that raising the amount of rent assistance would
improve housing affordability, but this was not taken up by the Committee.[39] Instead it
considered raising the basic rate of allowances but rejected this in part due
to the cost, and focussed on strategies to reduce the amount of time recipients
spent on welfare.[40]
More recently the Reference Group on Welfare
Reform (McClure review) reiterated the Henry recommendation to remove
income-based rental arrangements for public housing tenants, and extend CRA to
cover them, because these arrangements provided a disincentive for income
support recipients to gain employment.[41]
In addition, the Reference Group recommended a review of the levels and
indexation of CRA ‘to ensure that it appropriately reflects the costs of rental
housing to tenants’.[42]
The 2015 Senate inquiry into housing
affordability concluded:
Unequivocally, evidence confirmed the fact that low-income
earners need rental assistance to access affordable and appropriate housing and
that they were becoming increasingly reliant on this assistance. Moreover, a
number of comprehensive reviews have recognised that for some period of time the
rate of CRA has continued to slip behind the rate of rent increase. Indeed, as
far back as 2009, the call for an increase in CRA was clear and definite.
Evidence presented to this inquiry highlighted this growing gap.[43]
As a result, while noting that a rise in CRA
may have an inflationary effect on rents if not accompanied by an increased
supply of affordable rental properties, it recommended:
that the
Australian Government:
- review the
eligibility criteria for CRA to ensure that it is targeted at those most in
need;
- review the
method of indexing CRA with a view to retaining its adequacy; and
- review the adequacy of CRA.[44]
At the time of writing the Government had
not responded to these recommendations.
Similarly, following a review of earlier
proposals, the Productivity Commission considered a ‘dedicated review of CRA,
which includes the structure and level of payment, is warranted to ensure it is
effective in supporting low-income private renters who are at risk of poverty.’[45]
The Commission also noted that there appeared to be an inequity in the CRA
rules between residents of mobile homes (who are generally eligible for CRA) and
those in retirement villages (who are generally not).[46]
Conclusion
The availability
of affordable housing is recognised as a key component in the ability of income
support recipients to live adequately on their payments.
Changes in the
Australian housing market have led to a greater proportion of income support
recipients accessing the private rental market at the same time as private
rental costs have increased substantially relative to the indexation of CRA. This
has meant a decline in housing affordability, particularly for single
recipients of allowance payments, potentially impacting on their ability to
participate in jobsearch activities, and thus extending their reliance on
income support.
There have been
several calls for a review of CRA arrangements to address this issue, but no
action has been taken to date.
Analysis
undertaken by the Harmer review and the Productivity Commission suggest that
there is scope to increase the maximum CRA payments available to those in
higher cost rental properties, without undue budgetary pressure, through
reducing payments to those in lower rent accommodation and by removing
inconsistencies in the current system. As such additional payments would be applied
directly to housing costs they are less likely to create disincentives to find
work, which has been a concern about proposals to raise the base rates of
allowance payments, and may act to reduce the current incentive to reside in
areas of low rent with few employment prospects. With no imminent changes
apparent in the current housing environment, such proposals appear worthy of
greater consideration.
[1]. W Stone, S
Parkinson, A Sharam and L Ralston, Housing
assistance need and provision in Australia: a household-based policy analysis,
Australian Housing and Urban Research Institute (AHURI) Final Report 262, AHURI,
Melbourne, May 2016, p. 27, accessed 14 June 2016.
[2]. See for
example Senate Economics References Committee, Out
of reach? The Australian housing affordability challenge, The Senate,
Canberra, May 2015, pp. 165 and 190, accessed 14 June 2016.
[3]. Access to
income support payments is subject to means tests which assess both income and
assets. The family home is not included in the assets tests. Further details on
the assets test are provided later in this paper.
[4]. It is
generally considered that a household is in housing stress where housing costs
exceed 30 per cent of the gross household income. Other measures are sometimes
used. See Australian Bureau of Statistics (ABS), Measuring wellbeing: frameworks for Australian social statistics, 2001, cat. no. 4160.0, ABS, Canberra, 2001,
accessed 23 June 2016.
[5]. S Eslake, ‘The housing
affordability trap’, Inside Story, 12 May 2016, accessed
14 June 2016.
[6]. K Jacobs, R
Atkinson, A Spinney, V Colic-Peisker, M Berry and T Dalton, What
future for public housing? A critical analysis, AHURI research
paper, AHURI, Melbourne, February 2010, p. 28 and Australian Institute of Health
and Welfare (AIHW), Housing assistance in Australia 2016 supplementary data: social housing
dwellings, AIHW, June 2016, Table 1,
accessed 14 June 2016.
[7]. AIHW, Housing
assistance in Australia 2014, AIHW, 2014, pp. 60–61, accessed
23 June 2016.
[8]. CRA figures
derived from Australian Government, ‘5.2.6.10 RA Rates - June 1990 to Present Date’,
Guides to social policy law website, house rents from Real Estate
Institute of Australia (REIA), Quarterly
median house rents all capital cities, REIA, December 2015 and other
rents from REIA, Quarterly
median other dwellings rents, REIA, December 2015, all accessed
21 June 2016.
[9]. Further
information about the history of CRA can be found in C Ey, Social security payments for the unemployed, the sick and those in
special circumstances, 1942 to 2012: a chronology, Background note, Parliamentary
Library, Canberra, 4 December 2012, pp.
7 and 56‑9, accessed 23 June 2016.
[10]. Department of
Social Services (DSS), Annual
report 2014–15, DSS, 2015, p. 48, accessed
23 June 2016.
[11]. Further
details on eligibility can be found at DSS, ‘Commonwealth
rent assistance’, DSS website, accessed 12 June 2016.
[12]. AIHW, Housing assistance in Australia 2016 supplementary data: financial
assistance, AIHW, June 2016, Table 1,
accessed 14 June 2016.
[13]. Ibid., Table
2.
[14]. Ibid., Table
1.
[15]. AIHW, ‘Financial
assistance’, AIHW website, accessed 12 June 2016.
[16]. Anglicare
Australia, Rental
affordability snapshot, Anglicare Australia, Canberra, 2016,
p. 11, accessed 23 June 2016.
[17]. N Marshall, I
Burnley, P Murphy and G Hugo, Migration
of income support recipients from non-metropolitan NSW and SA into Sydney and
Adelaide, Positioning paper, 55, AHURI, Melbourne,
July 2003, pp. 4 and 17, accessed 12 June 2016.
[18]. Further
details about the history of the assets test can be found in D Daniels, Social security payments for the aged, people with disabilities and
carers 1901 to 2010, Background note, Parliamentary Library, Canberra,
21 February 2011, pp. 30–42 and pp. 45–6, accessed
12 June 2016.
[19]. Parliament of
Australia, ‘Social Services and Other Legislation Amendment (2014 Budget
Measures No. 6) Bill 2014 homepage’, Australian
Parliament website, accessed 12 June 2016.
[20]. R Hawke, ‘Report
and Ministerial statement’, House of Representatives, Debates, 1
June 1984, p. 2718, accessed 21 June 2016.
[21]. P Abelson and
D Chung, Housing
prices in Australia: 1970 to 2003, Economic research paper,
04/9, Department of Economics, Macquarie University, Sydney, 2004, p. 8,
accessed 21 June 2016.
[22]. Ibid., Table
1: Residential Property Price Index, Index Numbers and Percentage Changes,
accessed 20 June 2016 and Australian Government, ‘4.10.3 Historical Age and Invalid (Disability Support) Pension income
and assets limits‘, Guides to social policy law website, accessed
20 June 2016.
[23]. Australian
Bureau of Statistics (ABS), Residential Property Price Indexes: Eight Capital Cities, Dec 2015, cat. no. 6416.0, ABS, 22 March 2016, accessed
21 June 2016.
[24]. Parliament of
Australia, ‘Social Services Legislation Amendment (Fair and Sustainable
Pensions) Bill 2015 homepage’, Australian
Parliament website, accessed 12 June 2016.
[25]. ABS, Consumer Price Index, Australia, Mar 2016,
cat. no. 6401.0, ABS, 27 April 2016, accessed 21 June 2016.
[26]. M Klapdor, Social
Services Legislation Amendment (Fair and Sustainable Pensions) Bill 2015,
Bills digest, 129, 2014–15, Parliamentary Library, Canberra, 2015, p. 10,
accessed 12 June 2016.
[27]. DSS, Statistical paper no. 12: income support customers: a statistical
overview 2013, DSS, Canberra, January 2015, p. 6, accessed
12 June 2016.
[28]. Australia’s
future tax system (Henry Review), Report
to the Treasurer: part two—detailed analysis, Department of the
Treasury, December 2009, p. 550, accessed 12 June 2016. The
Productivity Commission reviewed a number of studies investigating the issue
and considered there was some evidence to support this view, see Productivity
Commission, Housing decisions of older Australians,
Research paper, Productivity Commission, Canberra, December 2015,
pp. 123–4, accessed 12 June 2016.
[29]. S Cowan, ‘Fairness
and the family home’, Centre for Independent Studies website,
1 May 2016, accessed 12 June 2016.
[30]. Productivity
Commission, op. cit., p. 20.
[31]. Ibid., pp.
20–1.
[32]. Ibid., pp.
128–9.
[33]. J Harmer, Pension review
report, FaHCSIA, Canberra, February 2009, p. xiv, accessed
12 June 2016.
[34]. Ibid., p. 94.
[35]. Australia’s
future tax system (Henry Review), Report
to the Treasurer: part one—overview, Department of the Treasury,
December 2009, p. 101, accessed 12 June 2016. For a full
discussion of the considerations of the Henry Review on CRA see part two, op.
cit., pp. 595–609.
[36]. Australia’s
future tax system, part 2, op. cit., p. 609.
[37]. K Rudd (Prime
Minister) and W Swan (Treasurer), Stronger, fairer, simpler: a tax plan for our future, media release, 2 May 2010, accessed
12 June 2016.
[38]. Senate
Education, Employment and Workplace Relations References Committee, The adequacy of the allowance payment system for jobseekers and others,
the appropriateness of the allowance payment system as a support into work and
the impact of the changing nature of the labour market, The Senate, Canberra, November 2012,
p. 42, accessed 12 June 2016.
[39]. Ibid., p. 43.
[40]. Ibid., p. 54.
[41]. Reference
Group on Welfare Reform, A
new system for better employment and social outcomes: final report, DSS,
Canberra, 2015, p. 59, accessed 20 June 2016.
[42]. Ibid., p. 40.
[43]. Senate
Economic References Committee, op. cit., p. 393.
[44]. Ibid., p.
394.
[45]. Productivity
Commission, op. cit., p. 96.
[46]. Ibid., p.
101.
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