Will they fix the housing crisis?

The “housing crisis” has become the topic du jour and the federal budget delivered on Tuesday night acknowledged its significance. 

But to what extent and was it enough?

The most noticeable shift in the government’s approach to policy was from home ownership to providing more supply. While the ‘Home Guarantee Schemes’ are to continue, new initiatives were announced around an adjustment to Commonwealth Rent Assistance (CRA), Build-to-Rent (BTR) development incentives, a further increase to funding of community housing, and increased funding to the states to tackle homelessness.

The government recognised the plight of low-income renters in the private sector with a very modest increase in the CRA payment. However, it doesn’t come close to meet the surge in rents of recent months so I doubt many will be better off. Furthermore, whilst home ownership would seem a better outcome for this cohort, raising a deposit has become almost prohibitive.

The government is encouraging the private sector to take the lead in the construction of new dwellings by providing incentives around build-to-rent schemes but how much affordable housing this will create is still in question.

Below is a summary of the changes that the government has proposed in order to relieve cost of living, in particular with relation to housing.

Commonwealth Rent Assistance (CRA)

CRA is the government’s largest single housing assistance program. It announced a 15% increase to the maximum rate of CRA from September. At a cost of $2.7 billion, the increase is expected to equate to a $31 rise per fortnight. This is in contrast to CoreLogic’s recent figures which show the national median rent has increased the equivalent of $113 per fortnight in the year to April alone. However, it must be noted that some households receiving CRA are also entitled to other government benefits, depending on their circumstances.

Build-to-Rent (BTR)

The Labor party announced a swathe of proposed housing policy reforms prior to the 2019 federal election and these went on to be blamed for their shock loss. Although not at the forefront, amongst them was tax reform on BTR developments. BTR refers to a residential development where all units are retained and rented by one owner, as opposed to developers building housing to sell off to individuals.

Labor’s May budget outlined “a reduction in the withholding tax rate for eligible fund payments from managed investment trusts attributed to newly constructed build-to-rent developments from 30 to 15%”. The Morrison Government actually increased the withholding rate to 30% for residential housing income (with the exception of investments in social and affordable housing investment) and industry players in the building and development space believe this has hindered the development of BTR in Australia. So, essentially Labor is reverting the tax rate back down to 15% to make BTR investment more attractive.

Expanding eligibility of recipients for low-deposit home loan schemes

The Federal Government currently has three low-deposit home loan schemes:

• The First Home Guarantee, which enables eligible first home buyers to access a home loan using a 5% deposit without paying lenders mortgage insurance (LMI). It has 35,000 places per year.

• The Regional Home Guarantee, which enables eligible first home buyers in regional Australia to access a home loan using a 5% deposit without paying LMI. It has 10,000 places per year.

• The Family Home Guarantee, which enables eligible single parents to access a home loan a 2% deposit without paying LMI. It has 5,000 places per year.

This week’s budget outlined an expansion to the criteria of those who could qualify for home guarantee schemes:

• The offerings may now apply to any two applicants beyond spouses and de facto couples (for example, parents and children, siblings or even friends).

• Non-first home buyers who have not owned a home for at least 10 years may now be eligible for the First Home Guarantee and the Regional Home Guarantee (where they already qualified for the Family Home Guarantee).

• Single legal guardians of dependents may now qualify for the Family Home Guarantee.

• Permanent residents may now also qualify for the Home Guarantee Schemes.

It remains to be seen how effective these proposed changes will be in facilitating home ownership and occupancy for all Australians. What is evident is that the plight is being recognised and solutions are being debated.

On the ground

Stock levels are still low compared to average and on an annual basis, sales are -20.7% lower year-on-year. We saw an increase in new listings in the lead-up to Easter, which traditionally presents us with a seasonal peak. However, with the onset of the cooler months it is likely that numbers will fall again. There is no evidence that buyer levels will concurrently drop off so we are expecting strong competition, resulting in good auction clearance rates and robust sale prices through the winter months.

As we know, spring is often regarded as the peak selling season but remember that your competition when selling your property is other sellers. Every day can bring another property on the market so why wait? If you are thinking of selling, my strong recommendation would be to prepare now.