Recent announcements tackling housing supply
It’s been a time of unprecedented activity as State and Federal governments, together with industry stakeholders, seek to tackle the housing crisis across Australia. As is clear from the fortnight snapshot below, there are a number of different levers available to both State and Federal Government which may be adjusted to address these issues – although ultimately, a coordinated effort amongst all industry stakeholders is likely to be required in order to conquer the issues currently faced.
On 20 March 2023, the Queensland Council of Social Service (QCOSS) released its Town of Nowhere campaign report, ‘A blueprint to tackle Queensland’s housing crisis’, written by Professor Hal Pawson and a number of UNSW colleagues (available here).
The report highlights the dire housing situation in Queensland – with around 150,000 households with unmet housing needs – and found homelessness in Queensland has risen by 22% since 2017 (against a national average of 8%).
The report makes a number of recommendations to both the Queensland and Commonwealth governments with a view to tackle the housing crisis, including:
- Enhanced policymaking, including greater transparency;
- Expanding approaches to meet needs, including expansion of funds and a phasing in of inclusionary zoning;
- Ensuring affordability and security for tenants, including reforms to Rent Assistance and rental regulation, as well as facilitating build-to-rent development; and
- Minimising broader impacts, including reforms to taxation arrangements.
The report sparked significant commentary ahead of the Queensland Government’s second housing roundtable, held on 28 March 2023.
Roundtable and reforms
Following the inaugural Housing Summit in October 2022 and subsequent Outcomes Report in December 2022 (available here), the recent housing roundtable saw a number of further reforms and initiatives announced by the Queensland Government.
Some of the more notable announcements include:
- Rent stabilisation – a limit of rent increases to once per year (announcement here). Caps on rent increases, while previously discussed, have not yet been proposed.
- Prefab homes – opening of a QBuild Rapid Accommodation and Apprenticeship Centre, aimed at bringing additional housing supply online faster (announcement here).
- NRAS acquisitions – announcement of funding under Housing Investment Fund (HIF) for the acquisition of properties exiting the National Rental Affordability Scheme (NRAS) (announcement here). The impending closure of NRAS has been a significant issue in the sector for some time.
Perhaps one of the most significant announcements was that from Treasurer and Minister for Trade and Investment, The Honourable Cameron Dick, in relation to build-to-rent (BTR) developments.
It was announced (here) that, from 1 July 2023, BTR developments that feature at least 10% of rental homes as affordable housing will be entitled to:
- a 50% discount on land tax payable for up to 20 years;
- a full exemption for the 2% foreign investor land tax surcharge for up to 20 years; and
- a full exemption from the Additional Foreign Acquirer Duty for the future transfer of a build-to-rent site.
The proposed tax breaks appear similar to those that already exist in New South Wales, however, without yet knowing how ‘build-to-rent’ property will be defined in the Queensland legislation, the true scope of these concessions remains unclear.
At least in the New South Wales context, experience shows that the government has used this surcharge duty exemption and land tax concession to promote other policy agendas, significantly reducing the number of projects that qualify (and increasing the compliance burden on those projects that do).
For example, in New South Wales, a development will only be considered a ‘build-to-rent’ property if a significant proportion (10% or more) of the labour force hours spent on the construction of the building involves or involved work performed by apprentices or trainees, long-term unemployed workers, workers requiring upskilling, workers with barriers to employment, Aboriginal jobseekers or graduates. While laudable, these requirements are not necessarily consistent with the aim of addressing housing affordability.
Similarly, ‘affordable housing’ is an imprecise term and could capture anything from crisis accommodation and social housing (rent calculated based on income), through to housing offered at a discount to market rent.
At this stage, there is no indication as to the criteria that the Queensland Government proposes will be used in order to ensure access to the newly announced concessions, though it is hoped that these will ensure that the underlying objective – unlocking housing supply – can be achieved.
Queensland Treasury is set to consult with the property industry on these concessions ahead of their rollout in three months’ time.
The last two weeks have been a turbulent time at a Federal level, with the Labor Government’s legislation relating to the establishment of a $10 billion Housing Australia Future Fund (HAFF) so far failing to achieve the support needed to pass the Senate, with concerns from the Greens and independents that significantly more investment is needed.
With the upcoming Federal budget in May, this will be an interesting space to watch – with many hoping to see a raft of additional measures implemented to incentivise BTR investment in Australia (and complementing the proposed changes at a State Government level), such as:
- addressing the irrecoverable GST expense associated with the construction of BTR accommodation, to reduce costs; and
- allowing managed investment trusts to be eligible for a reduced withholding tax rate on rental income received in respect of BTR projects, with a view to increasing foreign investment in the industry.
We expect a continued focus and activity in this sector over the next three to six months, as reforms are rolled out with a view to addressing the current housing crisis.
As part of these reforms, it is hoped that both State and Federal governments keep the policy intent of the changes in mind, with a view to encouraging investment in the sector and unlocking homes for Queenslanders, rather than limiting the changes in such a way as to be of limited assistance.
The BTR sector looks to at last be gaining much needed momentum, however, although the Queensland concessions sound promising, any significant investment in the sector is likely to also require Federal Government support (and reform) to encourage investment in this space.
As HIF, and hopefully HAFF, continue to expand, additional opportunities and models will hopefully arise to tackle the crisis, particularly given the cessation of NRAS.
For more information, or if you would like assistance with any of the issues raised in this alert, please contact one of the authors below.
This publication covers legal and technical issues in a general way. It is not designed to express opinions on specific cases. It is intended for information purposes only and should not be regarded as legal advice. Further advice should be obtained before taking action on any issue dealt with in this publication.