The Australian has published a good article today explaining how the National Rental Affordability Scheme (NRAS) – a $4.5 billion scheme launched by the former Labor Government in 2007 amid claims that it would increase the supply of affordable rental housing to low and moderate income households – turned into a rort used by universities to supply subsidised accommodation to international students:
Half of the units built by universities under the Rudd government’s flagship social housing scheme were let to foreign students to the detriment of the low-income workers the scheme was supposed to help, a damning audit has revealed.
…universities had systematically exploited the National Rental Affordability Scheme to build units for wealthy foreign students. The Australian National Audit Office report reveals that universities had secured more than 10 per cent of the $10,000-a-year incentives available under the NRAS and largely used the cash to house fee-paying foreign students…
“No processes have been put in place to monitor or evaluate whether the scheme has encouraged large-scale investment in affordable housing, the innovative design of affordable housing and/or whether NRAS has had any flow-on effect in the housing market,’’ the audit found.
In principle, I have no objection to the Government providing subsidised rental accommodation (although freeing-up the supply-side of the housing market would likely ameliorate some of the pressures). In fact, given Australia’s busted rental market – whereby insecure one-year rental terms are commonplace – there is scope to provide longer-term leases that provide renters with greater security of tenure.
However, any such programs must be reserved for low income locals. Moreover, the incentive structure of NRAS should also be changed to encourage the construction of larger apartments and houses suitable for local families, rather than shoebox-sized apartments for students.
On this point, one of the major flaws of NRAS is that the maximum $10,000 subsidy can be the same regardless of the number of rooms built. This gives developers the incentive to supply shoebox student accommodation rather than larger homes targeted at impoverished local families.
NRAS is not bad in principle. Rather, like many policies of the former Labor Government, it has been implemented poorly with bad incentives built-in. Fix these incentives, and ban provision to foreigners, and you have the makings of a good Scheme.
Obviously, freeing-up the supply-side of the housing market would also help to ameliorate some of the pressures emanating from high rental costs, and should also be pursued with vigour by all levels of government.
