How to ease the rent squeeze


The July 24 Sydney Morning Herald reported Australian Bureau of Statistics figures showing that rents across Sydney had increased by 8% over the 2007-08 financial year, almost twice the rate of inflation.

On July 25, the SMH quoted data from Australian Property Monitors showing that rents for new tenancies (where a new tenant takes out a lease) had increased typically by 11% for units and 20% for houses. In the Canterbury-Bankstown area, this increase was up to 20% for new leases on units.

According to the NSW Tenants Union, in the 2002-03 financial year, 862,000 households in Australia were in housing stress (defined as spending more than 30% of their gross income on housing costs). Of these, 60%, or 515,000, were renters. The NSWTU estimates that the situation has deteriorated over the last five years, as since 2003, rents have increased and the supply of rental housing has failed to grow sufficiently. They estimate that as many as 25% of all rental households are low-income households in housing stress.

One excuse for the increase of rent above inflation has been the ratcheting-up of interest rates by both the Reserve Bank and the commercial banks independently, responding to higher credit costs brought on by the sub-prime mortgage crisis in the US. However, with only around 50% of landlords paying a mortgage according to the July 25 SMH, this explanation is insufficient.

With rental vacancies at less than 2% across many of the more affordable suburbs in Sydney and in other capitals, landlords are free to increase rents by more than their increase in costs. With a flagging share market, the incentive of negative gearing (where landlords may claim costs for a rental property against taxable income) and limited capital gains tax, "investing" in rental property with the aim of maximising short-term profit at the renter's expense, has become very attractive.

Social housing limited

Neglect by governments at both a federal and state level has exacerbated the rental squeeze on low-income households, as social housing has become inaccessible to all but the poorest in the community. Funding levels have not been maintained, meaning that stocks of social housing across the country have declined.

"Social housing should be regarded as the foundation of an affordable housing policy", Chris Martin, policy officer for the NSWTU told Green Left Weekly. He said that while the Labor government of PM Kevin Rudd was making some moves to improve the situation of social housing, the response of the NSW state government had been "quite disappointing".

"The NSW state government promised an affordable housing strategy by 2006 and no such document has ever turned up", Martin said. Recent changes to planning legislation will also "frustrate those local councils that have been trying to use their powers in relations to developer contributions to create affordable housing".

"Funding to social housing under the Howard government decreased by 30%", Martin said. "At the very time that the shortage of affordable housing really began to bite, they were cutting back on social housing as well. It was a disastrous policy."

In some states, Martin argued, stocks of social housing declined in real terms during the Howard years. In NSW, the situation was only slightly better. While the NSW government contributed marginally more funds than required under its funding agreement with the federal government, stocks stagnated at a time of growing demand.

Between 1992 and 2006, Housing NSW, the state department that leases out public housing in NSW, failed to increase income thresholds for public housing tenants. "This meant as [nominal] incomes rose, people drifted out of eligibility", Martin said. "The effect of that was to further restrict eligibility to social housing."

The NSWTU is hoping that the Rudd government will increase funding for social housing at least to 1996 levels in real terms in the new funding agreement being negotiated with the states, which will be implemented from January 2009.

A further attack on NSW public housing tenants was introduced in 2005: tenancies are now reviewed for continuing income eligibility. The previous policy was simply to increase rents as tenants' incomes rose.

The new policy leads to evictions from public housing should household income increase above established thresholds. "It's a disincentive for people to work because they may have to choose between their home and their work", Martin explained, calling for the policy to be scrapped. "Very few public housing tenants have been reviewed as ineligible. People have taken the message and made sure that they've stayed under the limit", and therefore are caught in a poverty trap, Martin explained.

National Rental Affordability Scheme

The Rudd Labor government's answer to the rental crisis is to establish a scheme where it gives tax incentives to developers who build "cheap" housing that will be offered at 20% less than the market rate. The National Rental Affordability Scheme, launched on July 24, aims to offer affordable housing to 1.5 million low- and middle- income households.

The greatest flaw of the scheme, however, is that it relies on attracting private investment, which will inevitably flow to where it finds the greatest profit. In order to attract private capital, the government has been forced to offer a minimum of $8000 a year for each dwelling, according to its website on the scheme — indexed each year at the rate of the Consumer Price Index. How much social housing, which would remain public property, could instead be built with this money?

Martin said that the scheme is "certainly not" a replacement for social housing. "The way the scheme is set up, it means that there are households that will be too poor to be eligible for the scheme, because they won't be able to afford the rents", he said. "It couldn't do the job that social housing should do."

The Australian Greens' housing policy calls for "adequate investment in public and community housing throughout the community to ensure its social and economic viability." The Greens call for increased funding to social housing to meet current and projected demand and to minimise waiting times.

Greens MLA and NSW housing spokesperson Sylvia Hale said on April 30 that "the Greens are campaigning for at least 10% affordable housing in all new multi-unit developments across the state and have given notice of a private members' Bill to give councils the power to set affordable housing requirements in new developments".

The Socialist Alliance argues on its website that "housing is a basic human right". In order to alleviate the massive shortage of social housing, it calls for the establishment of a "a large-scale building program" to increase social housing stocks and the provision of "local health, education and other services and access to quality public transport", in all housing developments. The Socialist Alliance also calls for "community control of public housing through democratically elected housing boards comprised of tenants and housing workers", and for legislation capping rents at a maximum of 20% of income to end landlord exploitation of low income earners.