September 13, 2008
CORPORATE Australia has flocked to a Rudd government offer of tax breaks in return for construction of low-cost rental accommodation, joining community housing providers in proposing 13,000 new low-rental dwellings in the next year.
The Rudd Government has received 244 proposals under the first round of its national rental affordability scheme and expects to be able to offer low-rent properties to battling families within months.
Under the scheme, a key Labor election promise, investors will earn federal and state tax breaks worth $8000 a year on each dwelling for a decade.
In return, they must rent the properties to eligible low-income earners for 20 per cent less than the commercial market rental rate.
The guidelines for the scheme mean about 1.5 million people will be eligible to apply for the cheap rent.
As the Real Estate Institute of Australia and the Australian Council of Social Service applauded the move yesterday, Housing Minister Tanya Plibersek said she was delighted with the number of applications for the first round of funding, which closed 10 days ago.
Ms Plibersek said 244 applications had been lodged proposing to build 12,770 new dwellings in the first year of the scheme.
The Government will approve 3500 new dwellings initially, followed by 7500 next year and 25,000 in the following two years.
"I expect we'll be able to turn some keys in front doors certainly this financial year," Ms Plibersek told The Weekend Australian yesterday.
She said existing market forces in the real estate sector had failed low-income earners.
Government intervention would bring rental accommodation within the reach of thousands of low-income families.
"For the vast majority of people, once they are in the market when it comes to buying their own homes, they are all right," she said.
"But there are some areas where there is obvious market failure. One of those is affordable rental, with very low-rental, low vacancy rates anyway; people who are looking for something at the affordable end of the market are really doing it very tough."
She said the previous government's assumption that the market provided for everyone was flawed.
According to the Department of Housing, rental accommodation was scarce across all capital cities in June, with vacancy rates in Melbourne, Perth, Adelaide and Darwin at about 2 per cent.
Rises in rents were exceeding wages growth and large numbers of people were unable to find accommodation.
Ms Plibersek said regional cities, particularly in mining areas, were even worse, with the Queensland city of Mackay's vacancy rate at 0.2 per cent.
She said applications lodged under the first round of the NRAS scheme were evenly divided between private entities, such as developers and financial institutions, and not-for-profit community housing organisations.
She said she had not been through all of the applications, but believed the involvement of the corporate sector was crucial.
Ms Plibersek hoped for increasing involvement from financial institutions through managed investment schemes.
"If a financial institution had a product which allowed a number of investors to band together, that would be appropriate for this scheme."
She said there was little incentive for investment in low-rental properties, with companies and individual investors instead seeking investments with potential for high capital growth.
The new scheme would balance the scales, allowing investors to use the tax breaks to legitimise the inclusion of low-rent properties with less capital growth as a part of their broad investment portfolios.
Ms Plibersek said the Government had resisted the temptation to spend more in the first two years of the scheme because of labour shortages in the construction industry and a fear that a sudden escalation in construction could put upward pressure on inflation.
In coming weeks the applications would be assessed against the scheme's criteria, with decisions guided by issues such as the proximity of proposed dwellings to services and the environmental efficiency of their design.
Of the proposals received for the first round, 5091 were in NSW, 2973 in Queensland, 2652 in Victoria, 1038 in Tasmania, 458 in West Australia, 402 in South Australia, 100 in the Northern Territory and 56 in the ACT.
Real Estate Institute of Australia president Noel Dyett said his organisation supported the scheme and did not believe that offering the properties at 20 per cent below market value would pervert the rental market.
"Investment in this sector is simply not happening now," Mr Dyett said.
"We need this because the private market is not going to cater for lower-income earners without some government incentives."
Australian Council of Social Service president Lin Hatfield Dodds said the project was a major step forward and would help low-income earners put a roof over their heads.
"It's really a significant plank in terms of housing affordability,' Ms Hatfield Dodds said. "It is a good way of energising investment. We still need, and the Government is working on, an affordable housing strategy. There's still a lot of work to be done, but we think this is a very important initiative."
Obviously not all of those will go through but that sounds like an awful lot of supply. I wonder where they are planning on putting them in.
http://www.theaustralian.news.com.au/story/0,25197,24338627-601,00.html