$6000 tax incentive ...

Under a $600 million Labor policy to be formally announced today, investors will receive an annual $6000 tax incentive to build 50,000 homes to rent to eligible families at 20 per cent less than the average market rent.

http://www.news.com.au/business/story/0,23636,22234631-31037,00.html


Why would this be attractive to investors ? Being told who can rent your property at decreased rates for $6k - doesn't sound like a great deal to me.

What are your thoughts ?
 
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If the $6k is more than the 20% discount then it may be ok, but you have to wonder about the quality of the the tenants if they are being given extra help by Kev to be able to afford the (discounted) rent.

I know that there is rental assistance now, but this whole scheme is yet another instrument to give people less incentive to get out and improve their lives and get ahead.

Instead of giving people handouts (not us; the qualifying families) Labor should be trying to find ways to motivate people to apply themselves and contribute to society.

But that doesn't win votes.
 
Personally I wouldn't do it. I would much rather have IPs in the mid to upper socioeconomic demographic. Although you still get the occasional bad tenant, it's rarer, and I think people who have something to lose will work to protect what they have. If you have a tenant paying 50 bucks a week living below the poverty line they can easily say "sure come over and take my stuff - it's worth about 20 bucks anyway".

I would be vastly more supportive of a plan to spend $6000 on 50,000 families to improve education and health standards.
 
Couple points that is raised with me:

a) "20% discount to market rent" - what happens in 2yrs when rents have increased substantially more again and become unaffordable again?

b) Might not be attractive to all investors anyway depending on individual circumstances.

c) Does that mean lower re-sale price if investor needs to sell an IP with an effective "rent control"?

d) This assumes that these tennants actually save the extra money instead of just spending it on extra gadgets or night outs etc. Otherwise - again back to square one.

Just another easy answer which makes good headlines and get's uneducated votes: "20% less rent pw? Awesome, vote Kevin!!"
 
We think this will go a long way to helping ordinary families and hopefully ... if we take a little bit of pressure off the rent they're paying each week they might be able to save a deposit for their own home,"

Yeah right... God I hate politicians.

What interest me though is the demographics. Just how much of the voting population fits in this category? and/or the first home buyers..

The seem to be putting a lot of focus on these policies.. Can it really make that much of a difference to the outcome I wonder?

I would think the current 70% of owner occs and 30% IP's out there would represent a far bigger voting power and one not likely to be swayed by cheap tricks like this.

Cheers,

Arkay.
 
Yeah right... God I hate politicians.

What interest me though is the demographics. Just how much of the voting population fits in this category? and/or the first home buyers..

The seem to be putting a lot of focus on these policies.. Can it really make that much of a difference to the outcome I wonder?

I would think the current 70% of owner occs and 30% IP's out there would represent a far bigger voting power and one not likely to be swayed by cheap tricks like this.

Cheers,

Arkay.

Arkay, I believe it also has to do with Labor not really being able to find another strong topic with which they can attack the govt. on. At the moment, this is a big issue for a lot of people, and an area where a lot of (relatively) cheap and popular promises can be made for political point scoring.
 
As far as I was aware this incentive was only to be offered to institutional investors and superannuation funds who build this accommodation - or at least that's my reading of the articles in 'The Australian' and 'AFR'. (Another good reason to have an SMSF, perhaps?).

I thought that governments in general had realised what socio-economic problems are created by this type of housing - I distinctly remember the Housing Commission multi-storey concrete ghettos in Carlton and other near-city suburbs in Melbourne in the 1970s. Went to visit some people there a couple of times (they were young married couples in the military) - it was seriously scary in broad daylight!!!

Steve, I think you're right - Labor are looking for an issue on which they can attack the government. Maybe they are hoping this will distract voters from realizing that they are totally lacking in vision and in detail in the policy area.

Cheers
LynnH
 
greedy tenants have it too good now, and now they want to offer a further 20% discount at taxpayers expense. Just gets more ridiculous by the day.
 
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Define Market Rent?

Not to mention 20% discount to whose definition of market rent?
The Government's? APM's API's etc etc

In times when rents are supposedly increasing at double digits rates p.a. (and rightly so given poor yields/lack of rental stock available) I would be quite unwilling to give up:
a/ my choice of tennant
b/ a fair appraisal of 'market rent' for my IP
c/ and then receive 20% less than this dubious market rent appraisal

All for only 'up to' 6k per year

Jase
 
Not to mention 20% discount to whose definition of market rent?
The Government's? APM's API's etc etc

In times when rents are supposedly increasing at double digits rates p.a. (and rightly so given poor yields/lack of rental stock available) I would be quite unwilling to give up:
a/ my choice of tennant
b/ a fair appraisal of 'market rent' for my IP
c/ and then receive 20% less than this dubious market rent appraisal

All for only 'up to' 6k per year

Jase

ahhhh but Jase, Labor is'nt looking for our vote! They're looking to strengthen their support amongst their core demographic, and hopefully collect some concerned Liberal voting first home owners along the way! Does'nt matter if investors will ever go for it or not, as long as it gets Labor voted in :D
 
The Office of Housing takes alot of flack for not keeping their houses in livable condition. Now they have a chronic build up of maintainence issues. Likely they simply dont have the funds to keep up.

Now Big Brother (aka the federal government) is coming to the rescue of a problem left underfunded by the States. Its very similar politics to JH bailing out the hospital in Devonport, but smarter because KR cant be accused of porkbarreling marginal electorates. I don't even think there are alot of votes in this for him - these people are likely labour voters anyway. I'm usually pretty cynical about politicians but this actually seems like good policy rather than an election ploy. It would however be important not to create suburbs of these type houses......

I dont think it will really affect the rental market for the majority of investors. Its really just patching the safety net for alot of people who have genuinely been squeezed out of buying or renting any liveable accomodation. They are unlikely to be able to afford the rent being charged by private investors and even if they could, they may be tagged as undesirable tenants for various reasons. It may even be a blessing for private investors that this rental pool is housed by institutional investors. The quality of the rest of the rental market probably just rose.
 
There are several things that Governments could do now which would reduce the cost of holding Investment property and thereby reducing rents. Two easy ones -
1. get rid of Land tax (which was supposed to happen with the GST anyway!) But that is currently collected by Labor State Governments so that aint going to happen.
2. Reduce the costs of stamp duty - that would cut thousands of dollars off the cost of buying a property;
 
There are several things that Governments could do now which would reduce the cost of holding Investment property and thereby reducing rents. Two easy ones -
1. get rid of Land tax (which was supposed to happen with the GST anyway!) But that is currently collected by Labor State Governments so that aint going to happen.

I think the point of the policy is to strengthen the safety net for the disadvantaged, not to lead to a generalised reduction in rent for those who can afford to pay. They did a similar thing with Medicare - incentives to bulk bill concession card holders, but very little to stop out of pocket fees for the average person.


If someone was paying $250 / wk rent and they got rid of land tax, would you drop the rent? Most investors would see it as compensation for poor yields and pocket the benefit. Investors would only drop rent if demand decreased / there was an over supply.

2. Reduce the costs of stamp duty - that would cut thousands of dollars off the cost of buying a property;
There is alot of evidence to show that decreasing the entry costs to buying a house just makes the houseprice higher and negates the initial benefit ( a la first home owners' grant). The only thing that seems to reduce houseprices is increasing supply. Since well located land is limited supply, I think that they need to allow this land to be better utilised (high density).
 
If someone was paying $250 / wk rent and they got rid of land tax, would you drop the rent? Most investors would see it as compensation for poor yields and pocket the benefit. Investors would only drop rent if demand decreased / there was an over supply.

And maybe this reduction in Land Tax would provide more incentive for people to purchase and hold rental properties and thereby increase supply, which in turn increases competition for tenants which means that rents must be reduced.

I really dont like the higher density housing idea!
 
well irrespective of any other argument the land tax should be abolished - it's just the states doing a double tax grab.

I have an idea.. how about the government stops messing with the free market and let demand and supply find its natural balance?
 
I wonder if any of the institutions this is aimed at have stepped up and said they are interested in doing this for "up to" $6000.

Perhaps it would be better to offer a one off up front payment or incentive to anyone building a new rental property where the value of the property is a set % below the median for city. That would encourage the building of rental property that is by nature affordable without having to artificially try to keep the rent low and without attaching a whole heap of administrative overhead.
 
And maybe this reduction in Land Tax would provide more incentive for people to purchase and hold rental properties and thereby increase supply, which in turn increases competition for tenants which means that rents must be reduced.

Increases the supply of rental properties.

Does not increase the supply of total properties on the market.

So some of the would be home buyers get outbid by (the now increased number of) investors and become renters. The increased competition for tenants will be offset by the increased number of people seeking rental accomodation.

I'm not a great fan of high density either, btw. But I'm also not a great fan of urban sprawl (esp with CO2 / green house considerations). If you cant go up and you cant go out, the only other solution I see is having more people live in the same house. While I hear this annecdotally (kids living with the folks until their late 20's), the reality is that households are getting smaller.

Something has got to give.:confused:
 
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Perhaps it would be better to offer a one off up front payment or incentive to anyone building a new rental property where the value of the property is a set % below the median for city. That would encourage the building of rental property that is by nature affordable without having to artificially try to keep the rent low and without attaching a whole heap of administrative overhead.

The policy is designed to get marginalised people into decent housing. If you built a house x% below median price and got your rebate, would you not then try and find the best possible tenant? If the prospective tenant was "receiving Family Tax Benefit Part A and the maximum amount of Commonwealth rental assistance" would you seriously consider them in a tight rental market? If these properties would only attract tenants with a dubious ability to pay rent, would you even invest in them?

If the government really wants landlords to rent to tenants in financial distress, they need to give landlords some certainty that they will be paid and their property will be well looked after:
- Direct payment from Centrelink / PAYG for the duration of the lease (which the tenant cant stop or reverse) would be a good start.
- Payment of damage claimable through Centrelink / PAYG benefits
- Tribunals who support rental agreements rather than bleeding heart stories. Again costs which can be recovered through PAYG/ Centrelink.
 
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