National Rental Affordability Scheme legislation introduced into Parliament
The Rudd Government today introduced legislation to establish the National Rental Affordability Scheme.
NRAS is a key component of the Rudd Government’s $2.2 billion affordable housing package, which will boost rental stocks, help people save for their first home and lower housing infrastructure costs for some entry level housing.
Delivering on an election commitment, NRAS will help build up to 50,000 new rental properties across Australia at a cost of $623 million in the first four years.
If market demand remains strong, another 50,000 incentives for a further 50,000 affordable rental dwellings will be made available over five years from July 2012.
NATSEM figures show there are now 1.1 million Australian households in housing stress. Almost 700,000 of these households are renters and many of these renters are low and moderate income earners.
Rental vacancy rates are below two per cent in most capital cities. The Scheme will increase the supply of affordable housing and reduce rental costs for many low and moderate income households.
With NRAS properties to be rented out at 20 per cent below market rate, low to moderate income workers such as those in childcare, retail and hospitality can afford to live in areas where their skills are needed.
Up to 1.5 million households will be eligible to be tenants under the Scheme.
With incentives to be indexed to the rental component of the Consumer Price Index, NRAS will offer institutional investors and other eligible entities annual incentives every year for 10 years, provided conditions continue to be met.
This is a new way of doing business in Australia and will create a new asset class for institutional investors in affordable residential housing.
The two key elements of the incentive are:
- an annual Commonwealth Government incentive of $6,000 for each dwelling in the form of a refundable tax offset or payment and;
- an annual State or Territory government incentive of $2,000 or more, for each dwelling, which will be provided through cash payments or in-kind financial support.
The bill provides the flexibility required to address changing circumstances, including determining market rent, tenant eligibility criteria, acceptable periods of vacancy and reporting requirements in support of eligibility for incentives.
An exposure draft of the regulations will be released in the near future, to assist with understanding the operation of NRAS.