Ideas to reform super part one: Rethink rent assistance

Experts say retirees who rent need more help

What is Commonwealth Rent Assistance?

Commonwealth Rent Assistance is a payment made to those receiving at least one other type of government income support, such as the age pension. How much people get depends on how much they pay in rent. 

The maximum fortnightly rent assistance payment a single person (without dependent children) can get is $142.80. A combined couple can get up to $134.60.

As of 2019, the maximum Commonwealth Rent Assistance payment only covered 34% of the average single person’s fortnightly rent and 24% for that of couples. Further, it covered less than 20% of average market rents.

These payments are an important policy in making housing more affordable for retirees. 

The Retirement Income Review (RIR) found that “many retired renters achieve poor outcomes in terms of financial distress and income poverty” and noted some submissions had suggested the government raise rent assistance to ease this distress.

The RIR concluded the payment has become “increasingly less effective in preventing income poverty and assisting eligible renters to secure an adequate standard of living in retirement”.

This ineffectiveness is due to payments not keeping pace with market rents and a particularly sharp rise in rental costs for low-income earners. 

Advocates call for rent assistance increase

Grattan Institute research previously found that increasing rent assistance would be a well-targeted measure to reduce poverty among retired Australians. It recommended a 40% increase.

Australian Council of Social Services (ACOSS) has advocated a 50% rise.

Advocacy groups for retirees such as National Seniors Australia and Councils of the Ageing (COTA) have also called for the maximum rate to be increased.

There are ways for the government to both save money on rent assistance and reduce rental stress by making the payments more targeted

The Productivity Commission into Human Services also recommended that rent assistance be extended to renters in public housing so that all eligible tenants in social housing receive the payment.

A 2017 Australian Housing and Urban Research Institute (AHURI) study concluded there are ways for the government to both save money on rent assistance and reduce rental stress by making the payments more targeted.

Rent assistance not keeping up with rental prices

Leo Patterson Ross, CEO of Tenants Union NSW, says rent assistance needs to be increased and eligibility broadened. 

“It hasn’t increased in line with rents for many, many years and, increasingly, people are finding it tough,” he says.

The government-instigated and independent RIR reached the same conclusion on payments not keeping up with rent increases. 

It hasn’t increased in line with rents for many, many years and, increasingly, people are finding it tough

Leo Patterson Ross, Tenants Union NSW

The payments are indexed to the Consumer Price Index (CPI) rather than market rents. The Australian Bureau of Statistics defines CPI as “a measure of the average change over time in the prices paid by households for a fixed basket of goods and services”. This aspect of rent assistance has long been questioned. The Henry Tax Review in 2009 recommended changing the indexation of rent assistance in line with market rents.

Policy think tank Grattan Institute and organisations such as COTA, National Seniors Australia, ACOSS and Mission Australia have also argued indexing these payments to the CPI is inadequate.

Rent assistance for those with little or no super 

Patterson Ross says measures intended to address housing affordability that tie in with the super system are only helpful to a limited group of people.

As we covered in a previous story, experts don’t believe that recent tweaks to the First Home Super Saver Scheme and downsizer contributions will have a substantive impact on housing affordability. 

“Even if those solutions are successful for that cohort, they’ll make very little difference more broadly,” he says of initiatives within super.

“To the extent that they do make a difference, some will probably increase demand and prices and so might help the individual who receives the assistance but won’t support a more affordable housing system in general.”

With home ownership rates declining, ensuring the system delivers a reasonable standard of living for retirees who rent becomes imperative. 

Solutions based around boosting the super balances of retirees can only go so far, as super is linked with employment and those who spend time out of the paid workforce may retire with little super.

Retirees facing housing stress

The RIR calculated what a 40% increase in rent assistance might look like, both for government spending and those individuals who receive it.

The review didn’t answer the question of how much rent assistance would need to be increased to lift a substantial amount of recipients out of poverty.

It found that even an apparently substantial 40% increase “does not significantly alleviate stress and income poverty rates for renters in retirement”. 

Frequent moves can be costly and stressful, especially for older Australians

In fact, the suggested 40% increase would only amount to a 1 percentage point reduction in financial stress for renting retirees. It followed from these findings that a “broader approach should be considered”.

On the latter point, the review is in line with expert views that rent assistance is just one part of the puzzle.

The AHURI study suggests further investment in public and community housing and reform to tenancy law, in addition to targeted rent assistance increases, is needed.

Many parties involved in this debate also believe social housing levels are inadequate. Mission Australia, ACOSS and Grattan Institute have all advocated for a well-targeted increase in this housing to help vulnerable renters facing homelessness.

Patterson Ross says another issue is the lack of security for renters. People renting a property may often have to move because the landlord ends their tenancy or the property becomes unliveable. Frequent moves can be costly and stressful, especially for older Australians.

“More public and community housing would resolve this as the rents are more naturally affordable … the important thing with [this type of] housing is that it has the kind of stability that the private market often won’t offer.”

Patterson Ross also says there needs to be better coordination between federal and state/territory governments and the establishment of a national housing strategy to ensure these programs are designed effectively.

Modelling for rent assistance

Super Consumers Australia director Xavier O’Halloran says the next step should be to produce more detailed modelling to determine the impact of different levels of increased rent assistance.

We need a system that ensures all Australians, and not just homeowners, can live a dignified, secure life in retirement

Super Consumers Australia director Xavier O’Halloran

“We know that a lot of retirees who are renting are facing housing stress. We also know that the answers don’t exclusively lie in the super system. The Retirement Income Review made clear that even substantial increases to rent assistance won’t solve all these challenges.

“The first step, however, is to get a better understanding of how increases to this payment could help retired renters. We need a system that ensures all Australians, and not just homeowners, can live a dignified, secure life in retirement.”

This content was produced by Super Consumers Australia which is an independent, nonprofit consumer organisation partnering with CHOICE to advance and protect the interests of people in the Australian superannuation system.