Better the okay or the perfect? The debate about the Housing Australia fund raged in the Senate, with the Greens lambasted for opposing the Government’s promise of 30,000 new dwellings over five years. Budget papers reveal, however, that federal spending on housing is falling. Callum Foote reports.
As housing supply dwindles, renters face ludicrous price increases and new construction looks to shrink, and as many builders struggle, some going broke. In the forward estimates the federal Government has significantly reduced spending on housing by over 30%.
This doesn’t consider Labor’s proposed housing Australia Future Fund bill which has just been delayed a month to the next sitting week over complaints by independent senator David Pocock that the government has been gagging debate.
What is the Housing Australia future fund?
First signalled in Albanese’s budget reply in May 2021, the housing Australia future fund is a $10 billion housing vehicle to finance 30,000 affordable homes.
The fund would invest the $10 billion and use the earnings to spend up to $500 million a year on affordable housing projects. Pocock and the Jacqui Lambie Network have argued that this amount should be indexed to CPI, and Pocock has proposed amendments to permit the minister to spend more than $500m if the fund experiences higher than-expected returns.
“It makes no sense for the government to have to come back to Parliament and amend the legislation every time the HAFF has a good year,” Senator Pocock said.
“Indexation of the cap is also crucial to attracting the investment we need into new social and affordable rental homes at scale.”
Given the fund’s money will not itself be spent, it is not taken into account when determining Government expenses in the forward estimates.
Additionally, this Budget saw the Government increase the National Housing Finance and Investment Corporation’s liability cap by an additional $2 billion, to $7.5 billion, to provide more low-cost loans to Community Housing Providers. This is expected to support around 7,000 more new social and affordable dwellings.
Finance Minister Katy Gallagher accused the independents of joining an “anti-housing alliance of the Greens, Liberal Nationals and One Nation”, Pocock replied that debate was gagged after only 45 minutes.
Actual spending
Federal Government spending on housing and community amenities expenses are expected to decrease by 26.1 per cent in nominal terms and by 31.8 per cent in real terms over the period 2023–24 to 2026–27.
It’s a far cry from Labor’s first budget in October last year, which included a presentation of the ‘Housing Accord’, which promised ‘One Million new homes in five years from 2024’. In reality, the housing accord was a compilation of all possible state and federal house building schemes, many of which the federal government had very little to do with.
Moreover, in the decade previously 1.9 million homes had been built, leaving Labor’s starship policy which much to be desired.
Unsurprisingly, the Housing Accord didn’t even rate a mention in this year’s budget.
Presumably swept under the rug after the figures for dwelling investment were revealed. Housing construction has not just slowed but is expected to decrease in forward years hitting a trough of -3.5% in 2023, lower than the expected -2%.
Fact is, we will only know what the number of new dwellings will be once they’re built, and the Government is helping in some areas.
Build-to-rent
In the face of a flagging housing industry, the government has opted to encourage build-to-rent developers, particularly investment funds, to set up shop in Australia.
The government will reduce the withholding tax rate for eligible fund payments from managed investment trusts attributed to newly constructed build-to-rent developments from 30 to 15 per cent. This is while increasing the capital works tax deduction (depreciation) rate from 2.5 per cent to 4 percent per year, increasing the after-tax returns for newly constructed build-to-rent developments.
Property experts are quietly optimistic that the measure will meaningfully increase rental supply, dropping prices for struggling renters.
Rental assistance
Meanwhile, the Government recognises the significant pressures that many low-income renters face, and is increasing the Commonwealth Rent Assistance measure.
According to the ABS’s March Consumer Price Index, rental prices have recorded the largest annual rise since 2010, reflecting strong demand amid low vacancy rates across the country. Rental price growth continues to increase in Sydney and Melbourne with both cities recording their strongest annual rises since 2012.
The increase to the maximum rates of Commonwealth Rent Assistance by 15 per cent will come at a cost of $2.7 billion over 5 years from 2022–23. Around 1.1 million households receiving the maximum Commonwealth Rent Assistance rate will be better off.
First homeowners
The government also recognises the changing nature of early (or late) home ownership by broadening the eligibility of first home buyers schemes.
From 1 July 2023, the Government is expanding eligibility for the First Home Guarantee and Regional First Home Buyer Guarantee to any 2 borrowers jointly applying beyond the scope of spouse or de facto couples. These guarantees will also be open to those who have not owned a property in Australia in the past decade.
The Government is also expanding the Family Home Guarantee to single legal guardians of dependents, in addition to natural and adoptive parents. The Home Guarantee Scheme will also be made available to permanent residents.
Homeless
The Government has offered states an additional $67.5 million in funding. This sum represents a 12-month supply of transitional funding while the Federal government and the states hash out a new National Housing and Homelessness Agreement.
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Callum Foote was a reporter for Michael West Media for four years.