A $19 fortnightly boost will go into the pockets of struggling households for rental assistance against a backdrop of sky-rocketing housing costs.
But with less than a third of renters eligible for the payments and no sign of an imminent increase in supply, housing affordability is unlikely to improve for years.
The Commonwealth Rent Assistance benefit will be increased by 10 per cent, the second boost to the payment in two years after a 15 per cent rise in 2023/24.
It would provide much-needed help for young people and renters of all ages doing it tough, Treasurer Jim Chalmers said as he delivered the federal budget on Tuesday.
"Rising rents are another big part of the inflation challenge, and we're supporting renters who need our help," he said.
Rents increased by 0.9 per cent over the December quarter, a major contributor to inflation continuing to remain above the Reserve Bank's two to three per cent target range.
Dr Chalmers said the $1.9 billion increase to rent assistance over five years would put downward pressure on inflation but Treasury has advised the increased money flowing into the housing market would place a modest upward impact on market rents.
That's unwelcome news for the more than two-thirds of renters who will not receive rent assistance, with no increase to eligibility despite calls from housing advocacy groups - such as Everybody's Home - to do so.
The Albanese government is seeking to drive down housing costs by boosting supply, announcing fee-free TAFE courses for in-demand construction skills and an extra $1 billion to build infrastructure that enables new developments.
"The investment in vocational education and training to support the construction sector is welcome, but it will take years to flow through the system," Urban Taskforce Australia CEO Tom Forrest said, urging the government to prioritise skilled trades in immigration policy.
The government will also stimulate build-to-rent developments by providing tax incentives, which analysis by the Property Council of Australia found would unlock 150,000 apartments over the next decade.
"We know that building homes is hard work," Housing Minister Julie Collins said.
"It won't happen overnight but increasing supply is the best and most lasting fix to Australia's housing shortage."
The government has also continued funding for the National Agreement on Social Housing with the states, that will result in $9.3 billion in funding for homelessness services over five years, including an extra $423.1 million in additional spend above indexation.
"The boost to investment in more social, affordable and community housing alongside infrastructure and skills funding boosts is another contribution to increasing the supply of homes," Housing Industry Association Managing Director Jocelyn Martin said.
But these incentives may take some time to work through the system, with dwelling investment predicted to fall by three per cent this financial year as a result of higher interest rates and elevated construction costs, before picking up in 2025/26.
The government has a target to build 1.2 million homes over the next five years, but current forecasts show the industry falling over 100,000 dwellings short.
"We would have liked to have seen this budget go further with bold decisions about structural reform of the housing system in Australia," the chief executive of National Shelter, Emma Greenhalgh, said.
The government should have reformed tax concessions for negative gearing and the capital gains tax discount, Ms Greenhalgh said, referring to changes that have long been called for by affordable housing advocates.
