The Commonwealth Government has announced that it will not proceed with Round 5 incentive allocations under the National Rental Affordability Scheme (NRAS).
Below we review the announcement and subsequent publications by the Department of Social Services (Department) regarding this Budget measure.
BACKGROUND TO NRAS
NRAS commenced in 2008. The scheme aims to promote the development of affordable housing by the provision of a refundable tax offset or cash payment for providers of housing leased at a rate of 20 per cent or more below market value rent. The scheme was also designed to allow for collective investment in relevant dwellings by the provision of tax offsets to investors in an investment consortium or trust.
NRAS incentives were offered to participants in a series of rounds following calls for applications. Applications for Round 5 incentives opened on 18 April 2013 and closed on 22 May 2013. No incentives have been offered in respect of Round 5 to date.
Budget papers released on 13 May 2014 state that the Government will not proceed with Round 5. The Government asserts that this measure will achieve savings of $235.2 million to be redirected to other policy priorities.
Funding for incentives from earlier rounds that are uncontracted or not used within agreed timeframes will be returned to the Budget however funding for tenanted NRAS properties will be unaffected.
In commenting upon the announcement, the Department has stated that the scheme was slow in delivering affordable homes and has failed to achieve delivery targets despite ongoing funding.
CONSEQUENCES OF ANNOUNCEMENT
The Department has released further information regarding the expected outcome of this measure, summarised as follows.
- In relation to Round 5, the previous assessment process was not finished and no further work will be undertaken. No incentives will be allocated for Round 5 and there are no funds allocated for future rounds.
- Incentives already allocated will continue to be funded for up to ten years subject to satisfaction of agreed timeframes.
- In the past, dwellings have been delivered after agreed dates and the Department will be withdrawing incentives where insufficient progress is made. In this regard, the Government will be imposing tighter conditions on the delivery of dwellings and participants will be notified of any changes to conditions.
- Investors in completed NRAS dwellings that are currently rented as part of the scheme should be unaffected by the announcement.