10 May 2023
Federal Budget 2023 – what do property consumers need to know?
On Tuesday night the Albanese Government delivered its first full budget since winning last year’s election. Federal Treasurer Jim Chalmers framed his first Budget by committing to support the national housing market.
“We want more Australians to know the security of a roof over their head,” Treasurer Chalmers declared.
Here are the main points relevant to the property industry:
Commonwealth Rent Assistance
As part of the Government’s pledge to provide assistance to those who need it most, Mr Chalmers announced that the rate of Commonwealth Rent Assistance would increase by 15 per cent. This increase, the largest in 30 years will give an extra $31 a fortnight to private market and community housing renters.
In his acknowledgement that renters are doing it tough, he also noted that “an essential part of the solution to pressures in the housing market is more homes.”
National Housing Accord
Last year’s mini budget flagged the National Housing Accord, which is aimed at targeting the construction of one million “new, well located home” over five years from 2024.
In October last year Mr Chalmers announced this scheme “to build the affordable homes our country desperately needs, and to help tackle our housing crisis.”
On top of its existing commitments, the government will provide $350million over five years to deliver 10,000 affordable dwellings. “This will be delivered through an ongoing funding stream to help cover the gap between market rents and subsidised rents, making more projects commercially viable,” Mr Chalmers said.
“State and territory governments will build on our commitment with up to 10,000 new homes as well. That’s up to 20,000 new affordable homes in total.” This is in addition to the 30,000 new social and affordable housing dwellings delivered through the Housing Australia Future Fund.
Housing Australia Future Fund
Also announced last year, the Government plans to establish the $10billion Housing Australia Future Fund, to be managed by the Future Fund Management Agency. The Fund will help build 20,000 new social housing dwellings, 4000 of which will be allocated to women and children who are victims of family and domestic violence and older females at risk of homelessness. A further 10,000 new affordable houses will be built for those including frontline workers.
More measures announced in the most recent spending document are as follows:
Build-to-rent projects encouraged
Build to rent (BTR) projects will be given a boost, with the government pledging to accelerate tax deductions and reduce the managed investment trust withholding tax rate.
According to the budget documents, “this measure will encourage investment and construction in the build-to-rent sector, expanding Australia’s housing supply.”
The government will also reduce the final withholding tax rate on eligible fund payments from managed investment trust (MIT) investments from 30 per cent down to 15 per cent, from 1 July 2024.
It was reported that consultation will be undertaken on implementation details, including any minimum proportion of dwellings being offered as affordable tenancies and the length of time dwellings must be retained under single ownership.
A boost to buying power, while increasing social and affordable housing
In an effort to improve access for home buyers, the Government has pledged a number of new measures to increase social and affordable housing supports.
Firstly, the government will increase the Government-guaranteed liability cap of the National Housing and Finance Investment Corporation (NHFIC) by $2 billion to $7.5 billion.
It will also alter NHFIC’s Investment Mandate to require the corporation “to take reasonable steps to allocate a minimum of 1,200 homes to be delivered in each state and territory within 5 years of the Housing Australia Future Fund commencing operation.”
Home Guarantee Scheme
Last year, the Albanese government announced the Home Guarantee Scheme, which offers 35,000 places to support first home buyers purchasing a home with as little as 5 per cent deposit and 5,000 places to assist single parents with dependents to purchase a home with a deposit of as little as 2 per cent.
From 1 July this year, elements of the scheme — including the First Home Guarantee, the Regional First Home Buyer Guarantee, and the Family Home Guarantee — will be expanded, with friends, siblings, and other families set to become eligible joint applicants under both the First Home Guarantee scheme and Regional First Home Buyer scheme.
Moreover, the programs will be expanded to non-first home buyers who haven’t owned an Australian property in the last 10 years, with the government hoping this increased allotment of the scheme will support those who’ve fallen out of home ownership, whether through financial hardship or relationship breakdown. Read more from the Real Estate Business website here.
A boost to housing and homelessness supports
Under the headline of National Housing and Homelessness Agreement Transitional Funding, the Labour Government pledged an additional $67.5 million in the 23/24 financial year to boost homelessness funding to states and territories. The current agreement provides over $1.6billion to states and territories.
Improvements to energy efficient relief
A measure that will be warmly welcomed by many Australian homeowners, Mr Chalmers announced up to $3billion in direct energy bill relief for eligible households and small businesses. Co-funded by the states, Mr Chalmers was happy to be helping households when they need it the most.
“More than 5 million households will have up to $500 deducted from their power bills in the next financial year,” he detailed.
“Real relief, right off your power bill, right when you need it,” he said.
Further, this week’s Budget includes a $1billion investment to help provide “low-cost loans for double-glazing, solar panels, and other improvements that will make homes easier – and cheaper – to keep cool in the summer and warm in the winter.”
Response to the latest Budget
In response to the most recent Budget announcements, REIA President Mr Hayden Groves, said that the Treasurer has attempted to deliver a Budget that fights off inflation and help Australians that are struggling in the context of global economic conditions.
“This Budget 2023-24 anticipates that inflation will return to RBAs target band by 2024-25 with inflation to reduce to 3¼ per cent next year.
“We especially applaud the budgeted increase of Commonwealth Rent Assistance (CRA) of 15% to Australians that need it the most to help them navigate this cost-of-living crisis which will help alleviate the pressures on a touted 1.1 million Australians.”
Mr Groves said that whilst CRA was a much-needed measure, housing supply at scale still needs to be addressed.
Corelogic’s Head of Research Eliza Owen suggests that tweaks to the Commonwealth Rent Assistance scheme could add more value in areas that are needed. “While this budget gave renters some level of recognition, low income households in the private rental market will be disappointed. Even for those who qualify for CRA, the increase in payments is modest relative to the broader increase in rents across the market.
Further review of CRA would be worthwhile to understand how it could be better expanded and targeted. For some in the private rental market, the expansion of home guarantee schemes may help them get into home ownership faster, but low-deposit home loans should be carefully considered in the context of a higher interest rate environment.
