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Bad Arguments Against Increasing Rent Assistance
the left-wing case against increasing rent assistance is not great
The Australian Greens recently announced some of their proposed amendments to Labor’s Housing Australia Future Fund Bill. It’s mostly the kind of thing you would expect from a left-wing minor party: much more funding, bigger social housing targets, freezing rents, excluding for-profit developers from funding and more funding for Indigenous housing. But one thing that caught some people by surprise was their proposal to double Commonwealth Rent Assistance.
This has compelled a number of people online to come forward and argue that rent assistance is, despite what you might think, very bad for renters. For those who don’t know, rent assistance is a cash payment provided to some low-income renters receiving other welfare payments. The payment is provided directly to the renter and they can spend it however they’d like to (with the exception of community housing tenants). Like most Australian benefits it’s heavily means-tested and determining your eligibility is a massive pain.
The most common argument against increasing rent assistance is that any increase gets offset by landlords pushing up the price of rent. The theory is that rent assistance increases renters ability to pay, meaning it pumps demand, and it results in the price of rent going up. The government has given a bunch of money to landlords and left rent assistance recipients no better off.
There are two compelling reasons why this argument doesn’t hold up:
As Matt Bruenig has pointed out, this sort of theory predicts that anything that increases a renter’s disposable income would just go to landlords and be a pointless endeavour. Higher wages? Pointless. Higher payment rates for any benefit whatsoever? Pointless. It should come as a surprise that conservative and neoliberal governments have been so opposed to wage and benefit increases!
Okay, so it sounds silly, but why is it wrong? The reason is that increasing people’s disposable income does not automatically increase their willingness and ability to pay rent. Most rent assistance recipients are not going to respond to higher rent assistance by telling their landlord that they can pay more rent. They’re going to spend it on things like food and overdue bills, in part because they can’t actually afford to pay higher rent.
Modelling from Ong, R et al. shows that Commonwealth Rent Assistance is not fully captured in higher rents. Their modelled increase to rent assistance suggests that less than 7% of the increase would be lost to higher rents in moderately to severely disadvantaged markets with a relatively inelastic housing supply. In the most disadvantaged markets around 32.4% of the increase would be lost to higher rents. When considering the private rental market as a whole or the private rental markets in Australia’s major cities they found no statistically significant effect on rents at all. On all of their models an increase in rent assistance would mostly benefit recipients.
These modest costs can be mitigated by increasing the supply of social and affordable housing in disadvantaged areas. Costs impacting low-income renters in disadvantaged areas that aren’t eligible for rent assistance could also be mitigated by weakening egregious means-testing in the welfare system (e.g. eliminating the partner income test, weakening means-testing on other payments, lowering the minimum weekly rent required to get the payment etc.) Increasing the social and affordable housing supply is the focal point of the Greens’ proposed amendments, although I would like to see them do more on the anti means-testing front too.
The other argument that some people are making is that increasing rent assistance is bad or pointless because community housing tenants (including Indigenous community housing tenants) have to give 100% of their rent assistance to their community housing provider. This is often stated as if it’s some nefarious plot to swindle people out of their money but the reason for it is simple. Social housing tenants in Australia do not get to keep their rent assistance because their rent is already capped at a certain percentage of their income. Public housing tenants are not eligible for rent assistance at all while community housing tenants must pass theirs on to their community housing provider. The rent assistance just helps subsidise community housing, which is owned or managed by non-profit providers.
Some people still don’t like this because they don’t like community housing and would rather see the money go directly to renters or public housing. For what it’s worth, I do have problems with community housing, the ‘social mix’ approach and the modern centre-left aversion to public housing. But with that being said, subsidising community housing is undoubtedly a good thing. Increasing the supply of community housing would provide much needed relief to those on stuck on the waiting list. Contrary to the belief that community housing providers are dodgy or bad managers, community housing tenants are consistently more satisfised with their housing situation than public housing tenants.
As far as I can tell, there are no good progressive arguments against increasing rent assistance. There are good reasons to think that it won’t solve the housing crisis, that we should undo Australia’s absurdly strict means-testing or that public housing for everyone should be our goal. It’s not the sexiest or most exciting policy but it is not ‘free money for landlords’. It’s a good idea.
Edit: Kristin O’Connell, one of the individuals whose tweets I linked to, followed up with these tweets clarifying her position on rent assistance: