Friday, March 14, 2014

The National Rental Affordability Scheme

The revelations concerning the National Rental Affordability Scheme are a spectacular, but in many respects textbook, example of how migration driven population growth undermines government efforts to solve social problems in general, and meet infrastructure needs in particular.

The National Rental Affordability Scheme was established to help low-income or disadvantaged people who were being financially crippled by high rents. It was, and still is, a worthy objective, though it is regrettable that Australia’s rapid population growth has pushed up housing prices, damaging housing affordability and having knock on consequences for rents, helping create the problem in the first place.

The scheme provides incentives of $10,000 a year to unit developers who agree to charge rent at 20% below market rates. Some 20,000 units have been built under the scheme, but it turns out that 40% of them have gone to students, in many cases from overseas. One in two student units constructed under the scheme has been let to foreign students. In Victoria the picture is even more dramatic, with seven out of ten units being let to foreign students.

The theory behind bringing in and educating overseas students is that it brings in revenue, a kind of export income. In practice, as we see here, taxpayers are subsidising it in a major way – the total cost of the scheme is $4.5 billion – and poor Australians struggling to pay the rent miss out.

This is unfortunately all too typical of the impact of population growth on infrastructure provision, particularly in our cities. Money which should be solving infrastructure problems gets diverted into capacity expansion, so our housing, transport, schools and health services never seem to be able to keep up.


  1. The educational sector has become a lucrative export industry for Australia, but the irony is that the students actually come here and do their studies! It means extra stress on our already overloaded infrastructure, and unaffordable housing squeeze. The students should be self-funded, and not deprive social housing from our most needy! The educational institutions should, to really be an "export" industry, be basing their campuses overseas, or by distance, not implode our already overloaded public housing shortages. Students are meant to bring economic benefits, not an economic or social burden. Costs of living are extremely high in Australia, the students should be fully award of the costs of their studies and stay in Australia.

  2. Dear Kelvin, I think we'd all do well to have a paper, treatise whatever from you in circumstances of the furious misinformation campaign currently being conducted by vested interests. The Australian newspaper to its discredit simply writes defensive economically sub-literate articles on housing that seem to want to distract from the fundamentals of supply and demand.There's talk of "scape goating" foreign investment - as if multi-millionaire property speculators are an unfair target. The vested interests in this chaos are succeeding in confusing the issue. The most hilarious article I've seen suggests multiple billion$ spent by foreigners annually has no real effect. The facts need to be marshalled.

  3. Just where do asylum seekers fit in with this mix? For those who advocate a more humane treatment of asylum seekers, we must ask - where would they be housed? Already our record-breaking population growth is denying our most vulnerable affordable housing, and social housing, so the limited resources for the world's vulnerable would likely to make them outcasts - and add to the housing queues. There's a huge disparity between ideals, and reality. While politicians still see "growth" as an indication of raw economic success, more people will be disadvantaged and thrown out in the cold. An export industry is meant to go off-shore, so international students are adding to the housing problem, and revenues are not being used for the benefit to the community. It wasn't long ago that the Great Australian Dream was achievable, but greed and gluttony for growth has destroyed it!