Federal Budget 2023-24: plans to tackle the social and affordable housing crisis
The 2023-24 Federal Budget contained several key announcements for the social and affordable housing sector, including new build-to-rent projects and increase to Commonwealth Rent Assistance. We outline what was announced and impacts for stakeholders.
- Build-to-rent tax concessions: incentives for eligible new build-to-rent projects where construction commences after 9 May 2023. The Government will increase the rate for the capital works deduction (depreciation) to 4% per year. It will also reduce the final withholding tax rate on eligible fund payments from managed investment trust investments from 30% to 15%.
- National Housing and Homelessness: provision of additional funding of $67.5 million in 2023 to boost homelessness funding to states and territories. The Government has committed to a one-year extension of the National Housing and Homelessness Agreement to 30 June 2024. Negotiations are underway with the states and territories as to the use of Commonwealth funding for housing.
- Commonwealth Rent Assistance: increase of the Commonwealth Rent Assistance cap by 15%, costing $2.7 billion over five years commencing from 2022-23.
- National Housing and Finance Investment Corporation (NHFIC): increase of NHFIC’s liability cap by $2 billion to $7.5 billion, enabling increased support for social and affordable housing through loans to community housing providers (CHPs). NHFIC’s Investment Mandate will be amended to require NHFIC to take reasonable steps to allocate a minimum of 1,200 homes to be delivered in each State and Territory, within five years of the Housing Australia Future Fund commencing.
- Support for more social and affordable housing: redirect interest earnings on unallocated NHFIC funds to support more delivery of housing priorities.
The measures above are said to expand on the 2022-23 October Budget measures which include the Housing Accord, the Housing Australia Future Fund and the Help to Buy Scheme:
- Housing Accord: investment of $350 million over five years from 2024-25 to support funding of an additional 10,000 affordable homes under a Housing Accord with state and territory governments and other key stakeholders. Commonwealth support will be in the form of availability payments over the longer term to support institutional investment into affordable homes, including by super funds.
- Housing Australia Future Fund (HAFF): investing $10 billion in the newly created Housing Australia Future Fund, to be managed by the Future Fund Management Agency. This will look to generate returns to fund 30,000 social and affordable homes over five years and allocate $330 million for acute housing needs. Unfortunately, this legislation is still not passed through Parliament, mainly because of opposition from Greens senators.
- Help to Buy Scheme: the Government will invest $324.6 million over four years from 2022-23 to establish the Help to Buy Scheme. This is to assist people on low to moderate incomes to purchase a new or existing home with an equity contribution from the Government.
- Regional First Home Buyers Guarantee: support for people who have lived in regional locations for more than 12 months to purchase their first home in the regional location with a minimum 5% deposit (10,000 places per year to 30 June 2026).
Impact for key stakeholders
The announcements on new build-to-rent projects will be welcome for superannuation funds that are interested in the asset class. The intention of these measures is to make build-to-rent projects more attractive to super funds from a tax perspective and are welcomed by major industry bodies, such as the Property Council.
The increase to Commonwealth Rent Assistance will be welcomed by community housing providers, as this will provide additional revenues to support existing and future social and affordable housing. The increase to the NHFIC liability cap is also of importance to community housing providers, as this will ensure that NHFIC can continue to provide long-term and low-cost loans to this client base.
The main issue for social and affordable housing remains the passing of the HAFF legislation through the Parliament, which is currently being blocked by some senators. It is critical this legislation is passed as soon as possible to stimulate further projects and social infrastructure in this sector. Further delays to this legislation will delay the commencement of projects in this sector and increase the backlog of social and affordable housing. In this regard, it is noted that wait lists for social housing are in the order of 10 years. We welcome the Commonwealth Government’s Housing Australia Future Fund and would like to see it approved by Parliament as a key priority.
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