Housing scheme “hijacked for wealthy foreign students”

By Leith van Onselen

The Age has published an article today on how the National Rental Affordability Scheme (NRAS) – a $3.2 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, which is now being investigated by the Turnbull Government:

The Turnbull government will launch an independent inquiry into allegations of rorts and misconduct plaguing a multibillion-dollar federal scheme designed to help house the poor.

Social Services Minister Christian Porter will announce the review of the National Rental Affordability Scheme on Thursday, following a string of complaints against housing providers.

Under the $3.2 billion Rudd government scheme, investors purchase new property and rent it out to low-income earners for 20 per cent less than market rates, in return for an annual $11,000 government subsidy.

But since its launch in 2008 the scheme has faced persistent criticism that it has failed to meets targets and has been hijacked to build student housing for wealthy foreign students…

The government’s investigation will be conducted by an independent consultant to be appointed in the coming days. The scheme currently costs about $300 million a year and is due to run until 2025-26.

In principle, I have no objection to the Government providing subsidised rental accommodation. 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 have encouraged 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 was that the maximum $10,000 subsidy could be the same regardless of the number of rooms built. This gave 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 was 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, lowering immigration, freeing-up the supply-side of the housing market, and improving rental security and tenure would do much more to ameliorate the rental pressures afflicting Australia’s big cities, and should  be pursued with vigour by all levels of government.

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Comments

  1. Christian Porter for PM. Porter is systematically and conscientiously working through the morass of government transfers, weeding out rorts, excesses and so on, singlehandely attempting to ensure the welfare transfer system is efficient, fair and sustainable.

    If only all Ministers were as diligent, Ms Payne and Mr Pyne.

    • Yes, especially now that it’s finally being reported that landlords are structuring leases around the December/January holiday period so that they can airbnb residential housing as random hotel rooms for tourists during that time. I’ve got no idea where residents and their belongings are supposed to go for that month, plus the nuisance factor of needing to pack up and move every 10-11 months is just ridiculous.

      That airbnb crap isn’t helping rental housing availability or affordability and needs to be banned except for a limited number of days in one’s own primary residency (with only 1 of those allowed per year) as other housing-constrained, tourist-popular cities have done.

      • There are 20,000 units taken off the market in Sydney and Melbourne alone. NSW parliamentarians were recently flown to San Francisco by Airbnb to a conference to corrupt them further and ensure Australia remains one of the few countries not to legislate against Airbnb.

        This site gives an overview of how many properties AirBnb takes off the market in your area:
        http://insideairbnb.com/sydney
        http://insideairbnb.com/melbourne/

      • @Eric, Yup I am well-acquainted with that rort and Murray’s site.

        I am the last regular tenant in my small unit block. The rest are single unit unlicensed hotel rooms. And who knows if when my lease is up for renewal I will be allowed to stay. If my lease is not renewed, they have literally created a rogue non-centrally-managed hotel out of a residential unit block.

        I’ve put in 10-page submissions, I’ve emailed MPs, I’ve signed a petition, I’ve had a letter published in one of the local Sydney newspapers, etc. Blind Freddy could see that the last thing you do for a fair go, when you’ve got a big asset-level divide between the gots (have an over-valued house with or without a mortgage) and the got-nots, is give the gots more money and make it more expensive for the got-nots to get by, by increasing rents within 45 minutes of the CBD due to decreased availability, and costing got-nots either in increased rent or increased commuting costs.

      • If its foreign student housing then that is good for them as most of them go home for the holidays. This means they get to leave for 2 months, and not have to cover the rent of an unoccupied property (assuming they want to move back in the new year)

      • If its foreign student housing then that is good for them as most of them go home for the holidays. This means they get to leave for 2 months, and not have to cover the rent of an unoccupied property (assuming they want to move back in the new year)

      • @kiwikaryn I am completely unconcerned about foreign students. If they can’t afford it here, they can pick another country to go to school in. I am a citizen, and I’m focused more on citizens living and working in the area for the long term (those of us who missed the initial stages of the price rocket and were priced out of owning despite 6 figure salaries).

    • @Hobbitt
      Tenant stuff in going into short term storage options.
      Check out growth of this industry: TAXI BOX and imitators, Super Cheap Storage (Anything but!!!! Ironic marketing – is this a new thing?
      Seem Indians have cornered the removal market. Try booking anything on line especially via any gumtree ad and you will be directed back to same Indian operator with bullssst pricing etc. Haters will say its their right to make a buck out of the system if they can. That is the bu$$$$$$ attitude and approach that has allowed AIRBNB and all its associated S$$T to proliferate.
      Generally speaking its $$$$ renters and their families. They are pathetic, undeserving and should make way for better paying customers spewing out of airports pretending to be students etc.
      To my astonishment an acquaintance who jumped the public housing Q and happily resides in a two bedder bayside Melbourne told me that homeless people have been knocking back accomodation because they prefer living on the streets as they make more money ($30 – $40 per hour) out of a hat on the pavement????
      Whatever helps you sleep at night?

      • @billygoat Sure, because everyone knows renters have lots of spare cash to splash on two sets of removals (one out and then later one back in) and storage, and losing whatever their bond was (because landlords always figure out a way to keep part or all of it) and having to front up MORE bond for their next place, etc. Conveniently, this spare cash COULD otherwise be going toward a deposit on a home of their own.

  2. Where Governments subsidies are involved, I am sure you would not find one single scheme which is not rorted.

    • Sure. That would be the same the world over. It is more the extent of the rorting that can become a problem. If you are getting 90% effectiveness from a government program that is one thing, but 50% is something else. Of course the absolute quantum of any rorting will also be relevant.

      A baby and bathwater thing.

    • The Singapore Government is the biggest player in Singapore’s housing market. Try rorting that and see how far you get before you’re being caned on top of a huge fine and forced sale.

      Everything about Oz is a fricken joke.

      • Speaking of airbnb, Singapore’s taking their cane to those seeking to repurpose residential housing to hotel rooms, something fierce, with 6-figure fines PER OFFENSE to violators.

        They’re currently seeking public input on how they might allow some short-term letting without adverse impacts to communities, so they may soften this stance in the future (and probably will — even an anti-full-time-airbnb-properties person like myself can see that a $100-200K fine per violation is a bit extreme, but then again, I get the sense that Singapore enforces its laws by enacting penalties so over-the-top that people will do anything, even follow the law, to avoid incurring them.) But even if they step it down a notch or two, I expect they’re not going to be welcoming full time airbnb’ing with open arms.

      • Singapore enforces the law rigorously, and they will not step down a notch. The results speak for themselves.

      • That can’t be right. I’m assured by a poster above that any time Government gets involved it’s always party time from crooks and rorters.

  3. Heres a novel idea.
    Instead of the government providing poorly targeted incentives that are guaranteed to get rorted to private companies to provide government services, the government just provides the services themselves.
    Problem solved.

    • You will need a DNA transplant to do that! Infected with neo-liberal ideology, cannot see market failures even if they are in plain sight.

      • But what is “proper” public housing. It is always going to require a subsidy from someone and it is going to be abused by others.

      • UBI doesn’t have to be put in place, there are alternatives.
        Read this for 2 possible alternatives. http://marshallbrain.com/manna1.htm
        Unfortunately unlike the story, I think Australia is heading down the US path where people are simply thrown on the scrapheap, not supported with UBI.

      • Just give UBI to the poorest voters […]

        Then it’s not “universal”.

        Stop calling your requests for higher welfare a UBI.

      • UBI doesn’t have to be put in place, there are alternatives.
        Read this for 2 possible alternatives. http://marshallbrain.com/manna1.htm
        Unfortunately unlike the story, I think Australia is heading down the US path where people are simply thrown on the scrapheap, not supported with UBI.

        The “Australia Project” part of that story is essentially describing a UBI.

        But you are right that it is laughable to think that would happen here today. Maybe forty-odd years ago we had the kind of leaders who might see it through.

      • The “Australia Project” part of that story is essentially describing a UBI.

        Yep, and the US side describes what happens without it, following massive rollout of automation and AI.

    • Truly novel concept there — government as service provider rather than broker between a private citizen and a private provider.

    • Government funded social housing has been in a financial death spiral since needs-based allocations were introduced. As a general rule, dwellings are allocated to those deemed to be in highest level of need. Rents are calculated at 25% of household income but because tenants are all drawn from the “high needs” segments of the waiting list, almost all of them are on benefit so the actual amount collected is 25% of sod all. Because rents no longer even cover maintenance, governments, to one degree or another, have been selling stock to partially cover the shortfall.
      The result is that public housing supply in Australia basically hasn’t budged in a decade while demand for it has surged on the back of skyrocketing population and housing costs. If it wasn’t for new stock added by the community housing sector, the supply of social housing would actually have gone backwards.

      The expectation that NFPs should do the heavy lifting on new supply is all part of a broader trend in govt do everything by proxy which I suspect has less to do with economic rationalism and more to do with the desire of politicians and public servants to make sure they have someone outside government to blame if it all goes wrong.

  4. This is old news, rehashed to deflect from the China debacle and to give the government something to hit the ALP over the head with again. The universities were minor players in the scheme of things.

    There are plenty of good news stories around NRAS, especially those provided by genuine community housing providers like Mission Australia and Blue CHP.

  5. China / Chinese taking advantage of something profitable? Who could have possibly guessed.

    May as well save time and just start cutting them cheques.