This article is from the Australian Property Journal archive
TACKLING housing affordability and investment in social housing were the centrepieces of Labor’s election campaign, but will Prime Minister-elect Anthony Albanese revisit the proposal to supercharge the nascent build to rent sector?
The housing crisis, cost of living and affordability were major issues for both major political parties at this year’s election and on the weekend, Australians elected Labor to form the 47th parliament.
Australian Property Journal has wrapped up Labor’s policies.
Help to Buy
At the official Labor campaign launch, Albanese unveiled a $329 million initiative where the government will contribute equity of up to 40% to the purchase price of a new home, and up to 30% for an existing home.
The scheme is open to 10,000 and to qualify, first homebuyers need to save a deposit of 2% and qualify for a home loan with a participating lender. Furthermore, they are not subject to lenders mortgage insurance, saving around $30,000. The scheme is open to individuals with a gross annual income of up to $90,000 or $120,000 for couples. Applicants must be an Australian citizen.
Successful applicants have the option of taking additional equity in the property over the life of the home loan and they do not have to pay rent to the Commonwealth. The minimum stake they can opt to purchase at any one time is 5%. However, if their income exceeds the gross annual income threshold for over two consecutive years, they are required to repay the Government’s contribution in part or whole as their circumstances permit.
Albanese said the scheme would cut the cost of a mortgage by up to $380,000 for low- and middle-income Australians. He pointed out that 40 years ago approximately 60% of low- and middle-income families owned their own home, however today it is only 28%.
Australians need to save for at least eight years for a deposit, according to Domain, while over 40% of voters in most Sydney, Brisbane and Melbourne electorates are experiencing rent and mortgage stress.
Right sizing for older Australians
This policy was unveiled by PM Morrison at the Coalition’s official campaign launch, which Labor pledged to support.
The scheme allows Australians over the age of 55 to top up to $300,000 into their superannuation from the sale of their home. The policy allows older Australians to unlock their home equity by right-sizing. Although this does not contribute to the housing supply, the intent is that older households would sell their larger homes to a younger family.
It will be available to 1.3 million empty nesters and pensioners. However, the rules do not require they downsize per se or buy a smaller home, meaning this is an incentive to boost their super by selling their primary residence if they have owned for 10 or more years.
First Home Loan Deposit Scheme
Labor is aiming to help 10,000 regional families into their first home each year, tripling the places allocated in the current federal government’s 2021 First Home Loan Deposit Scheme for those living in regional areas.
The new scheme would provide eligible first home buyers with a 5% deposit to enable earlier access to the housing market, without the need to pay Lenders Mortgage Insurance (LMI).
To qualify for the places, first home buyers must have lived in their regional area for more than 12 months.
Social housing
Last year in his budget reply speech, Albanese unveiled the $10 billion Housing Australia Future Fund to deliver 30,000 social housing properties over its first five years. Among those would be 4,000 for new social housing homes for women and children experiencing domestic and family violence and older women on low incomes, and 10,000 affordable homes for frontline workers such as nurses, emergency services workers and police.
The Future Fund Board of Guardians would manage the new housing fund.
It will be the biggest investment in social housing by any government in Australia, augmenting the record investments by state governments, such as Victoria’s 10-year $5.3 billion Big Housing Build strategy to deliver 12,000 new homes, Queensland’s $1.9 billion Queensland Housing Strategy Action Plan 2021-2025 to boost supply by 10,000 and Western Australia’s $319 million Social Housing Economic Recovery package.
Specialist Disability Accommodation (SDA)
Albanese said during the election, a Labor government would restore trust in the National Disability Insurance Scheme (NDIS) for 4.4 million Australians.
A major component of the NDIS is Specialist Disability Accommodation (SDA), Labor will investigate the $500 million underspend to ensure people with disability can access appropriate housing.
Will PM Albanese become the build to rent government?
In this 2019 election, then Labor shadow treasurer Chris Owen said Labor would the bold move to halve the Managed Investment Trust withholding tax rate, giving institutional investors better tax concessions to encourage investment in the build to rent sector.
“We will cut the managed investment trust withholding rate in half, on tax distributions attributable to investments in build-to-rent housing. The rate will be lowered from 30% to 15% – encouraging new housing supply. Build to Rent provides more stable long term tenancies and more housing in desired locations close to public transport and close to employment opportunities,” Bowen said at the time.
The policy was part of Labor’s housing tax reforms which included abolishing negative gearing but was abandoned when Anthony Albanese was elected opposition leader.
It is unclear whether the new PM and Treasurer Jim Chalmers would adopt the proposal.
With rental vacancies tightening and the National Housing Finance Investment Corporation forecasting a shortfall of 163,400 homes by 2032, the property industry says build to rent can fill the void left by build to sell.
Known as multifamily in United States, it is the largest investment asset class in America with a staggering 31.4% of Americans living in multifamily housing.
And unlike the predominantly build to rent apartments proposed in Australia, most Americans live in single-family detached housing in multifamily communities.
According to a 2019 survey conducted by the American Housing Survey and the U.S. Census Bureau, there are 43.9 million multifamily units across the US and Statista shows 37.8 million residences are single detached homes within masterplanned multifamily communities.
The Palms multifamily community in Las Vegas
In the United Kingdom, where it is also known as build to rent, the sector has exploded after the government reformed its policies in 2015.
According to the British Property Federation, in seven short years there are now 212,177 build to rent homes in the UK, including both London and the regions.
Furthermore, there are 42,119 homes under construction and 99,273 in planning.
