Rent subsidies in Crikey

I have a little piece in Crikey today. It is over the fold:

Rent subsidies a good idea — if you’re looking to help landlords

Ever with a finger on the public pulse, the Prime Minister has identified rising rents as a hot issue, and in response is considering rent relief.

There’s not a lot we are sure of in economics, but the surgical interference with housing markets is usually doomed to failure. Rent caps can cool investments in rental markets including upkeep. Rent subsidies, when there is a shortage of housing stock, flow into the hands of landlords and provide no real short-term relief. And subsidies to own homes also bid up house prices in the short run and only as more land is opened up is there a supply response.

The problem is that to deal with housing issues one must first identify root causes. If families are hurting because rents or mortgage rates are rising, the cause usually isn’t a housing market one but a capital markets one. And that brings with it the tricky question of what might be wrong with capital markets.

The answer is: in aggregate, not a lot but at a distributional level, plenty. Shocks to capital markets can disproportionately impact on the poorer and more vulnerable sections of the community. A sharp drop in housing affordability can place families at risk, in terms of losing their homes, right away. That means despair, displacement, school movements, loss of credit ratings and arguably the realisation of people’s biggest fears.

But it is that fear that is the issue and the alleviation of it, the solution. Insurance against housing market fluctuations is what is required. The shared equity mortgage that gives families the opportunity to not put all their nesteggs in the one housing asset is one idea. Another is one suggested by myself and Stephen King – the Housing Lifeline. That is a line of credit provided by the government and designed to smooth the housing bumps. What is more, Australia has experience with just this sort of thing with HECS.

So surgical strikes are not necessary to resolve housing problems. The issue is insurance and the government should think about how it can be provided.

2 thoughts on “Rent subsidies in Crikey”

  1. I sit on the Residential Ten.Tribunal in Adelaide and am frequently asked to evict tenants who cannot pay their reny. One case involved a person who advised me that Centrelink said he was dead and when he proved that this was not so they said his payments would restart in 6 weeks. Landlord asks for possession, I don’t give it. There are many cases like this especialy around Xmas time when casual workers receive no money from work or Centrelink – its appalling, but of course we would rather follow the US instead of the Europeans or the Scandanavians who are civilised.

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