Private rental market ‘the epicentre’ of Australia’s housing affordability problem, report finds

The federal government should overhaul commonwealth rent assistance, focus on fixing the rental crisis, and wind back concessions and grants for homebuyers in favour of funding stretched homelessness services, the Productivity Commission has found.

The $1.6bn agreement to help facilitate affordable housing in Australia has also failed to reduce inequity and national reform is now imperative, it said.

The commission on Friday released the findings of its review into the National Housing and Homelessness Agreement (NHHA), the key document that governs federal funding to the states for housing services.

The NHHA was "ineffective" at meeting its stated objective of improving access to affordable, safe and sustainable housing and preventing and addressing homelessness, and it "does not foster collaboration or hold governments to account", the report said.

Homebuyer assistance schemes, meanwhile, were described as "a hodgepodge of overlapping programs", with the report saying there was little evidence to show that homeownership in its own right improved society.

The nearly $3bn currently spent on first homeowner grants and stamp duty concessions, a figure more than double that spent in 2016, would be better spent on preventing and addressing homelessness, services that were "very clearly struggling. Some of them are almost in permanent crisis," said Roberts.

Addressing the unaffordability of the private rental market was critical to increasing access to safe, affordable and sustainable housing, with the report noting that steep increases in rents have squeezed public and community housing, increased waiting lists, prevented people from leaving, and over-stretched homelessness services.

The private rental market was "the epicentre of the affordability problem. That's what's driving demand for social housing and homelessness services," said Roberts.

Early efforts at tenancy law reform in Victoria and elsewhere needed to be backed by evidence showing their benefits against potential costs, such as increases to rents, to ensure they were contributing to a safer and more secure private rental market, the report said. A similar obstacle faced tenancy support services aimed at helping renters find and sustain private rentals.

"Governance and research arrangements under the next Agreement could help to build, and share, the evidence base for both initiatives," the report said.

The commission recommended the $5.3bn commonwealth rent assistance (CRA) scheme be in the NHHA and overhauled.

CRA payments are currently only available to those on income support, and not available to people in public housing. There was a strong case to trial "portable" rent assistance, the commission said, expanding its eligibility to public housing tenants and allowing that support to follow the person rather than the property.

The report cited numerous studies dating back to 1976 that supported the concept.

"Social housing is an essential safety net. It's the option that best suits quite a lot of people, and they're going to be long-term residents of social housing," Roberts said.

But the system didn't give residents much flexibility about where they lived or the kind of housing they lived in, he said, with many people stuck in unsuitable areas or, as in many cases of people with disabilities, dwellings that weren't properly accessible.

At the same time, the commission said state and local governments needed to find ways to increase the supply of housing, without tipping the scales towards institutional investment.

"Supply-side reforms can lift rental vacancy rates and decrease rents, leading to improved rental affordability for low-income households over the short to medium term. However, supply, and its effects on rents, is only one side of the affordability story. Without changes to lift incomes, and income supports, many households will not be able to find affordable rental housing," the report stated.

Property-based subsidies for affordable housing, like the defunct National Rental Affordability Scheme, were often poorly targeted and not an effective or efficient way to reduce pressure on renters, the researchers found.

Housing advocates have been calling for a national strategy for years. The Labor government pitched a national housing and homelessness plan and a national housing supply and affordability council as part of its election platform in May.