The Grattan Institute has savaged a Rudd government scheme to create affordable rental accommodation as an expensive, inefficient and poorly targeted failure.

The National Rental Affordability Scheme was a costly failure, says new report. Credit:Dion Georgopoulos

In a scathing analysis, the think tank says the National Rental Affordability Scheme, which was set up to provide low-cost housing to lower income earners, actually handed developers and landlords a windfall of more than $1 billion.

Brendan Coates, the institute’s program director for household finances, said the government subsidy for the scheme, known as NRAS and launched in 2008, was set far higher than what was required to provide a 20 per cent rental discount to eligible tenants.

The scheme was scrapped by the Abbott government in 2014, but Mr Coates said landlords of homes built through the scheme are still receiving about $11,000 of public money each year.