What should we learn from the National Rental Affordability Scheme?

Stream: Housing and homelessness
Date: Monday, 9 September 2019
Time: 1.30 pm – 3.10 pm

Abstract

There have been widespread calls for tax incentives for developers to build more affordable housing. The last major affordable housing initiative, the National Rental Affordability Scheme (NRAS), saw 35,000 new affordable homes built over the past decade. This paper evaluates NRAS. It finds NRAS did little to help most low-income earners with their housing costs. First, the subsidy was expensive compared to the value of the rental discount provided. We estimate that between one third and half of total NRAS spending didn’t flow through to discounted rents to tenants. Second, the value of the subsidy didn’t vary with the size or location of the dwelling constructed. Third, eligibility criteria for the scheme were not tightly targeted. Inevitably far more people are be eligible than there are places available, making the scheme a lottery that provide more assistance to some people than others – and generally not the most needy. If government were to provide NRAS-style incentives for social or affordable housing, there are ways to make the policy work better. But NRAS-style schemes have inherent problems: they create substantial implementation risks for government; they produce incentives for developers to house tenants less likely to be those in greatest need; and there will inevitably be a gap between the subsidy paid to developers and the benefit received by households. There are better ways to provide housing support that are more cost effective, and would better help the people who need it most.

Authors

Brendan Coates (Presenter), Grattan Institute
Brendan is the Household Finances Program Director at the Grattan Institute. Before joining Grattan, Brendan worked with the World Bank in Indonesia, and prior to that, he undertook a number of roles with the Australian Treasury, including as part of the Treasury’s China Policy Unit. Brendan holds a Masters of International Development Economics from the Australian National University and Bachelors of Commerce and Arts from the University of Melbourne.

John Daley, Grattan Institute
John has been the Chief Executive of the Grattan Institute since it was founded nine years ago. He has published extensively on economic reform priorities, budget policy, tax reform, housing affordability, and generational inequality. This work is underpinned by themes of prioritising government initiatives, and the limits to government effectiveness.

John graduated from the University of Oxford in 1999 with a DPhil in public law after completing an LLB (Hons) and a BSc from the University of Melbourne in 1990.

Carmela Chivers, Grattan Institute
Carmela joined Grattan in October 2016. Her research background is in political economy and economics, with a particular emphasis on experimental and behavioural economics. Prior to starting at Grattan, she worked as a tutor of political economy at Sydney University, and also as a research assistant for the Sydney Southeast Asia Studies Centre.

Carmela holds a Bachelor of Arts in Political Economy and Economics from the University of Sydney. She was awarded First Class Honours in Political Economy in 2015.