A NEW smart technology platform would result in affordable homes “delivered in every BTR project”, according to a Housing All Australians (HAA) submission to the federal government.
The Albanese government is currently receiving feedback on its Treasury Laws Amendment Bill 2024: Build-to-rent developments, which aims to encourage offshore institutional investment in the nascent sector and release more housing supply amid the national housing crisis. It is proposing to increase the depreciation rate for the capital works tax deduction and to reduce the final withholding tax rate on eligible fund payments from managed investment schemes, where construction has started post-9th May 2023.
However, to access the concessions under the draft legislation, the build-to-rent development must include a minimum 10% component of affordable housing.
A federal government review of National Housing Finance and Investment Corporation in 2021 estimated the investment required to meet the shortfall in public, social and affordable housing over the next two decades will be in the order of $290 billion. Meanwhile, research from Knight Frank shows the BTR sector is expected to see 55,000 dedicated units completed by 2030.
In its submission, HAA – a national private sector “for purpose” organisation and registered charity, whose co-founder and director is former Frasers Property Australia general manager Robert Pradolin – said it is important to recognise that the value created by the concessions is constant for a development, however, market rent is different in every location.
“The higher the market rent, the greater the gap between the market rent and the maximum income limit, and the greater the depth of subsidy needed to fill the gap. These points need to be recognised when considering drafting the legislation.
Given the variability in the depth of subsidy needed to meet the income limits, the requirement for a minimum 10% of affordable housing will result in scenarios where the delivery of affordable housing will not be viable due to the inability to meet all the required criteria concurrently.
“This is because, where the subsidy gap is considerably larger, it will not be viable to deliver a full 10% affordable housing. Nevertheless, it would still be valuable. As long as the concession is fully utilised, any percent of a development delivered as affordable housing is better than 0%. These will all be lost opportunities,” the submission said.
HAA said its Progressive Residential Affordability Development Solution (PRADS) affordable housing register – an evolution of its existing PRADS affordable housing model, and being developed with digital property exchange platform PEXA – would be used as an assessment tool that uses smart technology to consider the variables, and then back-solve for the number of affordable homes that can be delivered through the available concessions.
“If the federal government wants to maximise the delivery of affordable housing in locations where the key/essential workers are needed, then every opportunity to do so should be exploited,” HAA said in the submission.
“This will ensure that affordable housing will be delivered in every BTR project. We must use every opportunity, even if the outcome results in less than 10% affordable housing.”
“Whilst some BTR developments will not be able to satisfy all the criteria as proposed, and therefore not be able to deliver affordable housing, some developments in locations where the gap between the marker rent and the MIL is considerably less, should be required to provide greater than 10% of affordable housing to avoid unjustly enriching the BTR developer.
“In both situations, by using the PRADS register, the public interest test will always satisfy as the use of the concessions in the delivery of affordable housing will be maximised.”
HAA believes the proposed increase in the depreciation rate for the capital works tax deduction and reducing the final withholding tax rate on eligible fund payments from managed investment schemes, will “help address the subsidy gap and unlock critical private sector offshore capital to increase Australia’s affordable housing supply”.
“However, there is no reason to preclude existing BTR development in providing affordable housing providing transparency is available on how the concessions have been effectively applied in the inclusion of affordable housing and that ongoing compliance can be monitored.”
HAA said discussions with a tier 1 community housing provider (CHP) has indicated that substantial savings will be achieved in their organisation once the PRADS register is fully operational.
“If this is multiplied across all the CHPs in Australia, this would result in significant savings and, therefore, more homes being able to be built with the same funds.”
The PRADS affordable housing register would also provide a centralised platform that records all affordable housing obligations and enable government to monitor the compliance of all stakeholders over the life of the commitment, HAA said.
