Whatever other strengths and weaknesses are to be found in the interim report of the government’s welfare reform group, it is glaringly weak in the key area of housing and rent assistance.

Patrick McClure and his team acknowledge that current rent assistance arrangements have proved inadequate, particularly for single parents and families, as private rents have risen far ahead of rent assistance for welfare recipients. Between 2001 and 2013, median rents have grown at least one and a half times faster than rent assistance and for some groups more than doubled.

And the interim report cites recommendations from both Jeff Harmer’s 2009 pensions review and the Henry tax review that rent assistance should grow more rapidly to match what’s happening in the real world.

But the interim report appears more interested in the perverse incentives created by income-based rent for public housing than in addressing the more fundamental problem of lack of public housing. The perverse incentives — in which public housing tenants avoid opportunities to increase their income in order to retain their housing — are indeed an issue, but a secondary one to the problem of lack of low-income housing.

The Harmer review noted “6% of age pensioners live in public housing and 11% receive Rent Assistance. For disability support pensioners, the proportions are 18% and 27% and for carers 15% and 21%.” Its finding on the issue perhaps signal why McClure et al didn’t want to focus too closely on housing. Harmer found:

“Rent Assistance and social housing have complementary roles to play in addressing the financial security of these pensioners. The Review notes that the government has proposed an increased investment in social housing and considers that reforms to Rent Assistance would complement this.”

The problem is, the Rudd government’s massive, GFC-era boost to social housing, which produced hundreds of additional public housing units across the country, was followed by a fall in social housing investment by the states — a fall not just back to previous levels but well below previous levels. In NSW, in the five years to December 2007, ABS trend figures show around 56 new public housing dwelling units were approved each month. Since January 2012, that has average 49 units. In Victoria, the 2003-07 average was 45 units a month; recently it has been 35 a month. In Queensland, it was 59 units a month; now it’s 29. In South Australia, approvals have fallen from 52 a month to 36 a month. In Western Australia, there’s been a fall from 86 to 64 a month, but the WA government still leads the nation in investing in public housing, especially given its size.

The slowdown in social housing approvals has been accompanied, at least for the last 12 months, by a welcome recovery in private dwellings, which will indirectly take a little pressure off low-income housing, but it has not been sufficient to stop rents from growing faster than CPI in cities like Sydney, especially given housing construction fell off a cliff in the last days of the Labor government in NSW and has thus been recovering from a low base.

This isn’t merely an equity issue, but an important factor in the overall success of the goals of the McClure approach: as the interim report notes, family circumstances and the cost of housing are the main reasons why people don’t move for work opportunities. A relocation allowance of the kind to be introduced tomorrow doesn’t address the problem that moving to where there are likely to be more employment opportunities means moving to where there is likely to be more expensive housing — especially if you are already in public housing.

In that context, the whole logic of the government’s welfare reforms, aimed at driving people into employment, falters in the face of a complex web of federal, state and local government policies constraining housing supply and, in particular, low-income housing supply. Increasing rent assistance will simply increase the amount of money chasing the same limited supply of housing.

The report’s wishy-washy “How could Rent Assistance be better targeted to meet the needs of people in public or private rental housing?” doesn’t go close to engaging with this issue.