Affordable Homes Plan

[dave99]

Today Rudd announced a plan to promote affordable rentals. Basically, if you rent a property 20% under market for 10 years, you get a $6000 tax credit per property each year, plus $2000 one-off rebate from state government.

Rudd hopes to attract 100,000 properties into the scheme. Would you consider such a scheme? ($6000 is way more than the 20% of total rent foregone for many IPs). Do you think it will help reduce rents?

 

[LynnH]

Dave

Has Rudd opened this scheme up to the 'mum and dad' investors? When I read about the 'proposed' proposal yesterday, the article stated that the scheme was only open to the instos and superfunds. The article also suggested that the state government contribution would not necessarily be in cash. Any more details of this???

Cheers
LynnH

 

[dave99]

Yep, it's for the "private sector" - I guess this means mums & dads. I thought private investors owned the bulk of residential property anyway.

BUt reading a little closer:
- For new homes only, does not apply to an existing home.
- State government rebate may be in kind, like a stamp duty rebate, rather than cash. But for most a stamp duty rebate is effectively cash, almost everyone has to pay it.

I think it's a great idea to encourage people to invest in new housing, rather than just bidding up prices on existing homes, which does nothing for the economy or housing supply.

 

[myla]

hello,

it will get gobbled up like the FHG into building cost,

we do not have the workers to build new houses, housing/unit starts have been dropping for years yet my income (building worker) has been going up and up,

the government is just "doing" something to appease the likes of aus for afforable housing, churches etc

the afforability crisis is a myth

thankyou

myla

 

[Dis]

I'm curious how this will make "extra property" available rather than subsidise people who were going to do this anyway. Only difference being they get their money upfront and take a cut in rental.

edit:
Agree Myla. It sounded like a FHOG for landlords.

Changing the regulations to make the following less expensive would be both cheaper and more effective IMHO:
a) The red tape on development
b) The land tax on providing resi property for rent
c) The costs ($ and time and lost rent) incured by landlords due to tenants not meeting their obligations.

 

[marg4000]

On the 6pm news report in Brisbane they said the offer was open to "private investors - banks and superannuation funds".

It did not sound like it was open to individuals.
Marg

 

[alexlee]

Thinking about this another way, if Rudd was going to put through policies to increasing IP stock, why would he want to give it to mum and dad investors? Isn't the Australian IP market already too dependent on mum and dad type private investors? If you get more institutions to buy into residential property (you see more of this in the US), that might make the market more stable. It would certainly make this sort of scheme much easier to manage if you have, say, 100 funds owning 1,000 properties each, rather than 100,000 investors owning 1 property each.

Theoretically, institutions are less manic-depressive than individual investors, especially mum and dad type investors who only own one IP.
Alex

 

[eKwatee]

It may be attractive for larger companies that employ low income earners. These large companies could set up these type of property investment under their own managed super funds. The companies could offer the housing to their employees at the proposed 20% discount rate, and any good growth in the Capital of the housing would actually come back to the employees throught their super. Would encourage the workers to maintain the homes and not leave the company.

 

[LynnH]

Have to agree that this sounds like a 'FHOG for landlords' and will, in all probability, do exactly what the FHOG did back in 2000: push up the prices of new homes with prices of established homes following suit. I dare say the local and state governments (and anyone else with vested interests) will want to dip their paws in this honeypot, too.

When - oh when - will pollies learn to leave the market to its own devices. Their well-meaning intervention usually results in the opposite of what was intended. Then again, it looks good in the media .....

Cheers
LynnH

 

[GIDDO]

Au Contraire

I am not very knowledgeable about market forces and FHOG and the new RUDD plan.
Can anyone explain why the new plan is "FHOG for landlords" (Dis and Myla)

I thought that more rental stock would necessarily mean less pressure on prices for same.

Because the $$$$ are going straight to the developers and yet the final rent price should be the same as the market??? would that not mean the Rudd plan would NOT be inflationary for rental prices?

It will take ages anyway and with the delays I would imagine no one ould notice any difference.

Can anyone help me with this?

 

[Perp]

Can anyone explain why the new plan is "FHOG for landlords" (Dis and Myla)

I thought that more rental stock would necessarily mean less pressure on prices for same.

Here are my predictions and logic, but I look forward to hearing others' thoughts:

All land available for development is currently being developed, as quickly as practicable.

If more land is released, there's no reason to think that it wouldn't also be developed as quickly as practicable.

Therefore no new stock will be created by the incentives. Thus the incentives will only have the effect of making new stock relatively more attractive than old stock, increasing the prices of new stock (generally on the fringes) relative to the prices of existing stock (inner city).

Given that investors are (or should be) interested in yield, increased new stock prices will simply increase the market value of rent. Possibly (probably?) rents will be the same after the 20% discount, as they would be if there were no incentives and no discount.

The prices will become imbalanced, whereby properties on the fringes will not be that much less expensive than inner city properties, relative to the lower desirability of living there. Given that the incentives (rent discounts) cut out after 5 years, in 5 years' time the rents in the fringe areas will increase by 25%, tenants will realise it's not much cheaper to live in the artificially inflated fringe than in the inner city, and will flock to the inner city.

Thus I predict no savings in rent, no new housing stock, and a boom in inner city prices in 5 years' time.

 

[THEHEATH]

Here are my predictions and logic, but I look forward to hearing others' thoughts:

All land available for development is currently being developed, as quickly as practicable.

If more land is released, there's no reason to think that it wouldn't also be developed as quickly as practicable.

Not true, not all land is currently being developed as quickly as practical (search "land banking").

Also, I think by not opening this up to mum and dad investors then you remove the possibility of this becoming another FHOG for landlords whereby the money is just absorbed added onto the cost, or at least you remove the chance of that cost being passed on as increased building costs to the public.

 

[Mofra]

On the 6pm news report in Brisbane they said the offer was open to "private investors - banks and superannuation funds".

It did not sound like it was open to individuals.
Marg

If that is true, it will make the purchase affordability worse by attracting banks & super funds (who traditionally avoided residential property) which will increase demand.

 

[jingo]

Not true, not all land is currently being developed as quickly as practical (search "land banking").

Also, I think by not opening this up to mum and dad investors then you remove the possibility of this becoming another FHOG for landlords whereby the money is just absorbed added onto the cost, or at least you remove the chance of that cost being passed on as increased building costs to the public.

I'll be interested to see which superannuation funds and property trusts leap onto this idea. There will need to be an attractive profit in it for them to be interested in the first place.

 

[myla]

hello,

who and how is market rent going to be determined,

so many variable's, views, balconies, dishwasher, security, painted or not painted, landscaped not landscaped, single garage or double garage

it will fall over,

thankyou

myla