Rent assistance caps for low-income earners and incentives to boost the supply of build-to-rent schemes were among the features of Tuesday night’s budget, among other measures to support the housing market.
The Albanese government highlighted a range of measures in its 9 May budget, including cost-of-living relief, housing support, healthcare, and clean energy initiatives, which it believes will deliver “a stronger economy and a fairer society.”
And while there is some good news for renters in this week’s federal budget, Australia is currently facing an acute rental affordability crisis, and for some renters struggling with low vacancies and escalating rent prices, it may not be enough.
Treasurer Jim Chalmers emphasised the ongoing struggle faced by many Australians in securing affordable housing during his budget speech. He highlighted the long-standing challenge of providing secure and affordable housing for a significant portion of Australia’s population.
So who came out on top in Tuesday’s budget?
WINNERS: LOW-INCOME RENTERS
Rent assistance cap to increase, providing relief for low-income renters
The only immediate benefit specific to renters in this budget is that the rent assistance cap will increase. This means that individuals receiving Commonwealth Rent Assistance (CRA), which currently supports around 1.1 million low-income Australians, will receive enhanced financial assistance.
Am I eligible for rent assistance? You might be eligible for CRA if you’re on an income support payment like Youth Allowance, JobSeeker or parenting payment. Your rent must also be above a certain fortnightly amount to be eligible for the payments. You must live in private rental accommodation or community housing to access it.
The CRA program will undergo its most substantial increase in more than three decades, as the government plans to raise the maximum rate by 15%, or up to $31 per fortnight.
If you’re a single CRA recipient with no dependents, don’t share your rental home with anyone else, and receive the maximum amount of assistance, your payment would increase from $157.20 a fortnight to $180.80.
This is a fairly significant enhancement to the existing program, and it’s projected to incur costs of $2.7 billion over five years and $700 million a year after that. This is on top of the $4.9 billion previously allocated to elevate the JobSeeker, Austudy, and Youth Allowance rates by $40 per fortnight.
In his speech, Treasurer Jim Chalmers acknowledged that rents constitute a significant portion of the cost-of-living pressures that people encounter and emphasised that the bigger issue is the insufficient housing supply.
LOSING OUT: MIDDLE-INCOME RENTERS:
If you don’t qualify for low-income support payments but are struggling to secure properties or face rising rents, there’s not much immediate relief.
While incentives to boost the supply of build-to-rent schemes have been announced (more on that below), these schemes won’t deliver new supply to the market for several years.
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Tax incentives introduced for build-to-rent projects
Budget 2023-24 included an announcement of tax breaks to encourage build-to-rent projects. These are properties purpose-built for renting. They’re typically larger-scale apartment-style developments and are generally owned and maintained by the developer and leased out.
To encourage new BTR projects, the government plans to:
- Increase the depreciation rate from 2.5% to 4% per year for projects that commence after 9 May 2023
- Cut the withholding tax rate for eligible fund payments from managed investment trusts (MIT) attributable to residential BTR projects from 30% to 15%, starting 1 July 2024, for income attributable to newly built BTR projects.
These changes will apply to projects with 50 or more dwellings available for public rent and owned by the same landlord for a minimum of 10 years before potential sale. Additionally, tenants must be offered a lease duration of at least three years per dwelling.
Although the government estimates the cost of the build-to-rent deduction to be $10 million in 2025-26 and $20 million in 2026-27, indicating modest initial uptake, these measures aim to stimulate interest and activity in the BTR sector.
The introduction of tax relief for build-to-rent projects aims to encourage increased investment and development in this housing segment. It promotes long-term rental options and addresses the evolving needs of tenants in the housing market.
What about rising household energy costs?
The government will spend $3 billion on direct bill relief. This will be co-funded with state governments to eligible households. This means pensioners, seniors health card holders, and family tax benefit A and B recipients.
According to the release, more than 5 million households will have up to $500 deducted from their power bills next financial year.
In his speech, Chalmers said the policies meant electricity price increases are expected to be around 25 percentage points less than what was projected – and 16 percentage points less for gas.
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A push to expand social and affordable housing initiatives
The government intends to increase the liability cap of the National Housing Finance and Investment Corporation (NHFIC) by $2 billion, reaching a total of $7.5 billion.
This expansion will facilitate the construction of affordable and social housing by allowing the agency to provide low-cost, long-term loans to community housing providers.
Scheduled to take effect from July 1, this initiative aims to tackle the urgent demand for affordable housing nationwide.
Expansion of Home Guarantee Scheme to address rising house prices
To tackle rising house prices, the government will expand the Home Guarantee Scheme starting July 1. The scheme will now allow friends, siblings, and other family members to apply jointly, and it will also include non-first-home buyers who haven’t owned property for a decade or longer, as well as permanent residents.
Under this scheme, eligible buyers can purchase property with a deposit as low as 5%, with the government acting as a guarantor for up to 15%of the loan.
The Family Home Guarantee criteria will also be expanded to include legal guardians. These changes aim to enhance access to homeownership and address the challenges posed by increasing house prices.
Increased funding allocated to homelessness services
The budget allocates increased funding to bolster homelessness services.
An additional $67.5 million has been pledged for the upcoming financial year, aiming to enhance funding for homelessness support in the states and territories.
This funding will be channelled through the extended National Housing and Homelessness Agreement, which will remain in effect until June 2024.