A shortage of affordable rental housing represents a major barrier to the economic and social participation of individuals and families, and an increasingly visible constraint on economic growth. This shortage impacts directly not only on low-income households, but increasingly also on households on moderate incomes. This report highlights that meeting this challenge involves a relatively modest financial cost, but generates substantial economic and social benefits.

There is a serious shortage of affordable housing in Australia. In particular, the demand for [ow-cost rents! housing exceeds the supply of such accommodation. It is estimated that in 1999, 742 000 low-income households were in ‘housing stress’: their housing costs were so great that they were not left with a sufficient income to meet other basic needs. Most of these households — more than 400 000 — were renting privately from a property owner. An important task for policy design is to allocate risks to those who can best manage them. In the context of affordable rental housing, it is argued that this would imply allocating rental price risk to tenants themselves. In practical terms, this eliminates rental price risk from a cost to government perspective, as neither governments nor private investors need to be compensated for it. For tenants, this is valued positively, as it translates into stable rents.