The Opportunity to Build a Success Story for Affordable Housing in Australia
As the dust settles on the 2019 election result, AAHS along with the property and development industries in general, welcomes the announcement of a dedicated Housing Minister as part of the new cabinet declared by the Prime Minister Scott Morrison. The Honourable Michael Sukkar has been confirmed as Assistant Treasurer and Minister for Housing and recognises housing affordability as a national issue for the Morrison Government.
The new housing minister will no doubt be targeting numerous issues, but one area of immediate importance is the conclusion of the National Rental Affordability Scheme (NRAS) across Australia. Commenced in 2008, the NRAS provided annual tax and cash payment incentives to investors to rent their properties at below market rents, for up to 10 years.
During the scheme, 36,736 NRAS dwellings were delivered, approximately 74% of the originally intended program, and the scheme has provided 7.8% of affordable rentals nationwide. The first of the NRAS allocations began exiting the scheme progressively from August 2018 through to June 2026, as the financial incentives conclude. While the future intentions of the owners of these properties after the scheme ends is unclear, it is unlikely that they will all be retained as affordable housing, once the annual financial incentive is no longer available to compensate for the 20% reduction in rent.
Throughout the scheme there were mixed messages about how successful the NRAS scheme was but on review there were clear outcomes evidencing that the scheme successfully increased the supply of affordable housing.
- From 2008 – 2013, NRAS created approximately $12 billion of affordable housing
- NRAS has created approximately 240,000 FTE (direct and indirect) jobs through the scheme
- NRAS investment was dominated by individual investors with 91% of homes delivered by these investors
- The traditional banking sector provided 94% of NRAS investment funding
- The NRAS scheme has provided affordable housing for about 63,000 tenants
- NRAS properties delivered housing to a wide range of demographics (32% in the groups up to 34 & 21%, 65 or over)
- The NRAS scheme delivered secure tenancies for both owners and tenants with 76% of tenants being in their current accommodation 1 to 5 years
- When asked, 30% of current NRAS tenants aspire to transition to home ownership
These statistics clearly confirm that the NRAS scheme provided long term stable investment in affordable housing for all ages that was predominantly owned by Mum and Dad investors, delivered through traditional bank funding – a success story in anyone’s books.
The potential withdrawal of up to 36,000 affordable rental properties by 2026 from a market already suffering a chronic shortage of affordable housing will have a significant impact on an increasing number of Australians already in rental stress.
During the recent election campaign, the Labor party announced a proposal to extend the existing scheme for a further 5 years for existing allocations, and the delivery of a further 250,000 allocations over the next 10 years – policies that would see further gains in cementing affordable housing as a separate asset class for investment in Australia.
The Morrison Government announced plans to offer loan guarantees for first home buyers to buy a property with a deposit of just 5% of the purchase price.
Logically, both policies could work together allowing existing NRAS tenants achieve their aspirations to transition to home ownership and allow a new group of tenant’s secure, long term affordable rental accommodation.
We look forward to working with the new Housing Minister to secure a policy commitment to address the critical need for further investment in affordable housing in Australia. The proof is in the pudding - what strong, long-term thinking can Australia deliver for tenants, investors and the industry at large?
General Manager Development