Today, July 1, is the start of a new financial year. It also marks the end of the National Rental Affordability Scheme, which once provided more than 35,000 affordable rental homes across the country.
The scheme was introduced by the Rudd government in 2008 in response to declining affordability. But it was later axed by the Abbott government in 2014, with no new dwellings approved after 2016. This June, the final 3,600 properties left the scheme.
In the end, the scheme did deliver on some of its main promises. It increased the supply of affordable rental housing – in a relatively short period of time – and delivered dwellings that would not otherwise have been built.
But it wasn’t without vocal critics, who pointed out a range of flaws in the way it was run and the outcomes it delivered. So, looking back, what can we learn from this experience? And has the government done enough to fill the gap left by this program?
Cheaper rents for an overlooked group
The scheme offered a financial incentive for developers to deliver affordable rental housing. This was in the form of indexed tax incentives which by 2026 equated to more than A$13,000 per dwelling.
Dwellings had to be new and rented out at less than 80% of the local median rent.
These incentives were limited to ten years, so properties have been gradually leaving the scheme since 2018. The final round of properties approved in 2016 left this year.
To be eligible for the scheme, tenants had to be on incomes too high for social housing and generally below the state median income. This profile includes many essential workers, such as new teachers, cleaners and childcare workers.
These tenants would traditionally rent at the bottom end of the private market, where competition is fierce and supply very limited.
Gil Ribeiro/Unsplash
Was the scheme too generous?
While $13,000 doesn’t sound like much, it more than compensates for the 20% discount on market rents. Some commentators, including Grattan Institute, have previously argued the scheme provided windfall gains to developers.
However, more than half of all scheme incentives went to organisations with a charitable status, varying from 73% of incentives in Victoria down to 32% in South Australia.
What kind of homes were delivered?
Dwellings delivered tended to be smaller. More than half were apartments or studios and more than two thirds were two-bedroom properties or smaller.
The bulk of properties – more than 22,000 – dropped out of the scheme between 2022 and 2024. There has been little research into what has happened to the tenants of these properties as incentives ended.
There is little doubt many private landlords would have increased rents to market levels, given demand in the sector. Many tenants would have been hit with 20% or more hikes in rent at the end of their lease.
Many other tenants, however, who had been renting a National Rental Affordability Scheme dwelling owned by a community housing provider, may have been lucky enough to retain some form of rent subsidy and remain in affordable housing.
For their part, state and territory governments have done little to step in and support those tenants (although the Queensland government did announce a plan to buy more than 400 dwellings from the scheme and keep them affordable).
What can we learn?
In 2016, I was lead author of a research project funded by the Australian Housing and Urban Research Institute which evaluated the scheme. This research identified a range of positives and negatives.
On the plus side, we found the scheme:
- delivered a supply of affordable housing to a low-to-moderate income cohort often ignored in affordability discussions
- accelerated housing supply in a relatively short period of time
- delivered dwellings that would not otherwise have been built, which were well distributed across cities.
These incentives could also be combined with other subsidies, which was particularly helpful for community housing providers.
But it also had several downsides, including:
- administration was overly complex due to a split between federal and state processes
- the ten-year time period was too short to secure institutional investment
- it delivered unintended outcomes, including significant funding of student accommodation
- the standard incentive payment skewed development to smaller dwellings.
Despite these problems, overall, the scheme delivered a good supply of affordable housing to those on low and moderate incomes who fell outside the eligibility limits for social housing.
Thousands of tenants benefited from affordable housing who would otherwise have been competing in the bottom end of a crowded, low-quality private rental market.
Should the government introduce a replacement?
While the federal government has increased funding of affordable housing through the Housing Australia Future Fund, it hasn’t delivered housing outcomes as quickly as the National Rental Affordability Scheme managed to achieve in its short lifespan.
There is still a significant unmet need for households with incomes too high for social housing but too low for decent private rental accommodation. While the community housing sector is moving into this space, there is a need for direct government funding to plug that gap.
With the focus of government policy on housing supply, it is surprising state or federal governments haven’t introduced a replacement for the National Rental Affordability Scheme – minus the problems – to leverage direct investment from the private sector into newly built affordable housing.
This could provide welcome housing opportunities for those on incomes insufficient to benefit from the government’s home ownership support schemes but too high to benefit from investment in social housing.
