Loophole turns rent scheme into a uni rent scam JUDITH SLOAN THE AUSTRALIAN MARCH 11, 2014 The National Rental Affordability Scheme was launched with much fanfare by the Labor government in 2007. The declared aim of the scheme was to “stimulate the construction of 50,000 high-quality homes and apartments, providing affordable private rental properties for Australians and their families”. The NRAS would increase the supply of new affordable rental housing, reduce rental costs for low and moderate income households, and encourage large-scale investment and innovative delivery of affordable housing. The total cost of the scheme was put at close to $5 billion. While the government spoke of assisting members of the police force, teachers and nurses to live close to their places of work, in reality the NRAS has struggled to meet its targets and has ended up as a dubious money-spinner for universities to build accommodation principally accessed by international students. For many years, the provision of rental assistance to welfare recipients has been a feature of our system of social security. By contrast, the NRAS got involved in the construction game. As the global financial crisis emerged, there was even a part of the NRAS called “shovel ready”. To qualify under the NRAS, the rents must be judged to be 20 per cent under market and tenants must meet certain (initial) income limits. These are set according to household type. A couple with three children can have a combined income of $127,000 and still be eligible under the scheme. The definition of dwellings is contained in the legislation. “An NRAS dwelling must be self-contained. It must be demonstrated that a tenant, or tenants, would be able to live independently within the dwelling and not need to access external or common facilities.” But here is a clearly anomalous feature of the scheme: the subsidy given to the tenants attaches to the unit. Presently set at a maximum figure just above $10,000 a year, a one-bedroom NRAS dwelling can attract the same subsidy as a three-bedroom NRAS dwelling. The obvious incentive is for developers to build the smallest possible dwellings that will attract the NRAS subsidy. Forget the nurses and teachers with families. This scheme is almost perfectly designed for university accommodation. It would be interesting to inspect some of this newly built university accommodation to see whether it really fits the NRAS definition of dwelling. My guess is that many units are dogboxes, with the pretence of a kitchen and a tiny bathroom. In fact, Rick Wallace of this newspaper established that at least 4000 units of the initial (unmet) target of 25,000 units are student housing and most of the subsidised tenants are international students. This is quite extraordinary. International students are barred from accessing all sorts of government benefits available to permanent residents and citizens. They are barred from accessing Medicare and must carry private health insurance. They are barred from accessing public transport concessions by state governments. But they can avail themselves of subsidies of more than $10,000 a year, courtesy of the Australian taxpayer under the NRAS. Initially, I thought this must be wrong. But I found a NRAS application for subsidised accommodation and there it was — a tick the box for what is your residency status. There was no suggestion that people in Australia under a student visa were not eligible under the scheme. Indeed, those with a bridging visa due to the expiry of a temporary protection visa are also eligible under the scheme. As for the composition of the student body occupying the new NRAS university accommodation, more than 50 per cent of the tenants are international students. At the University of Canberra two blocks have been built accommodating 600 students eligible for NRAS subsidies and about 60 per cent of these occupants are international students. And here’s the bit I really love: the vice-chancellor maintains that “our accommodation guarantee makes the University of Canberra an attractive destination for international students and provides peace of mind for parents whose children are going away from home for the first time”. I guess when the subsidy is coming from the long-suffering taxpayer, he would say that. And note that the parents’ income is irrelevant when determining the eligibility of students for subsidised accommodation — again, a marked contrast with other forms of government support for university students. The NRAS has been the perfect scheme for scammers and those who can game the arrangements, given the extraordinary laxity of the rules governing the scheme. The bureaucrats who advised the government on this scheme should hang their heads in shame, although the fact the scheme requires enormous bureaucratic resources to administer on an ongoing basis is probably not a coincidence. In keeping with so many thought bubbles of the previous Labor government that simply ended up as costly and ineffective policies, the legislation underpinning this scheme was always patently inadequate and replete with loopholes. The fact an estimated pitiful sum of less than $30 million has been saved in terms of direct rental assistance as a result of the NRAS (a scheme costing billions) tells you a lot about government and bureaucratic incompetence. At this stage, the federal government is playing its cards close to its chest as far as the future of the NRAS is concerned. Its only statement is that “there is significant scope to improve the administration of the scheme to spur delivery”. My advice is to forget about improving the administration of the NRAS. Ditch it as soon as possible and hasten the run-off, including ruling out further eligibility for international students. Judith Sloan is The Australian’s Contributing Economics Editor.
Posted on: Mon, 10 Mar 2014 16:13:23 +0000
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