AHURI BRIEF

What is in the 2017-18 Budget for housing and homelessness?

An overview of housing and homelessness measures in the 2017-18 Federal Budget

The 2017-18 Budget was presented by the Federal Treasurer, Hon Scott Morrison MP, on 9 May 2017 with a number of new measures for housing and homelessness. Here is a brief overview.

National Housing and Homelessness Agreement (NHHA)

The NHHA will replace the National Affordable Housing Agreement (NAHA) from 1 July 2018 and will combine funding currently allocated under the National Affordable Housing Specific Purpose Payment (NAHSPP) and the National Partnership Agreement on Homelessness (NPAH).

The NHHA will target jurisdiction-specific priorities including supply targets, planning and zoning reforms and renewal of public housing stock while also supporting the delivery of frontline homelessness services. Funding for both the housing and homelessness sectors will be ongoing and indexed.

National Housing Finance and Investment Corporation (NHFIC)

The National Housing Finance and Investment Corporation (NHFIC) is being established as an affordable housing bond aggregator to raise money at lower rates from the wholesale bond market for not-for-profit community housing providers. The Government will provide $63.1 million over four years from 2017–18 (including $4.8 million in capital) to establish and run the NHFIC, which is due to commence operations on 1 July 2018.

National Housing Infrastructure Facility (NHIF)

The National Housing Infrastructure Facility (NHIF) will, over 5 years, provide $1 billion to support local governments to finance critical infrastructure such as transport links, site remediation works and power and water infrastructure needed to speed up the supply of new housing. Payments of $600 million in concessional loans, $225 million in equity investments and $175 million in grants will be made to local governments through state and territory governments. The NHFIC will administer the NHIF.

Funding homelessness services

Government will provide an additional funding of $375 million over three years from 2018–19 as part of the new National Housing and Homelessness Agreement to fund front line services to address homelessness.

Super saver plan

A first home super saver scheme will allow voluntary superannuation contributions of $15,000 per annum and cumulative maximum of $30,000 in total (per person if in a couple) for first home buyers. These savings can be withdrawn and used for a deposit, and will be taxed at 30 percentage points below the normal marginal rate. Both members of a couple can take advantage of this measure to buy their first home together. The scheme commences on 1 July 2017, and contributions and deemed earnings, net of tax, can be withdrawn from 1 July 2018.

Downsizing

The budget provides incentives for older people to downsize their place of residence and thus free up supply of family-sized housing stock. From 1 July 2018 individuals aged 65 and older will be able to contribute up to $300,000 of the proceeds from the sale of a principal residence that they held for at least 10 years into their superannuation and thus take advantage of the tax incentives.

Both members of a couple will be able to take advantage of this measure for the same home, and they will be exempt from the existing age test, work test and the $1.6 million balance test for making non-concessional contributions.

Managed Investment Trusts to build affordable housing

The Government will encourage investment into affordable housing by enabling Managed Investment Trusts (MITs) to invest in affordable housing. The housing must be available for rent to low to moderate income tenants for at least 10 years, with rent charged at a discount below the private rental market rate.

Expanded tax incentives for affordable housing investments

The Government will increase the capital gains tax discount from 50 per cent to 60 per cent to resident individuals who invest in qualifying affordable housing.

To qualify for the higher discount, affordable housing must be provided to low to moderate income tenants; rent charged at a discount below the private rental market rate; be managed through a registered community housing provider; and the investment held for a minimum period of three years. The higher discount would flow through to resident individuals investing in qualifying affordable housing Managed Investment Trusts.

Rental property deduction changes

From 1 July 2017, the Government will not allow deductions for travel expenses related to inspecting, maintaining or collecting rent for a residential rental property. Investors can engage third parties such as real estate agents or property management services to do these tasks for them and deduct those expenses.

From 1 July 2017, the Government will limit plant and equipment (i.e. mechanical fixtures or those which can be easily removed from a property such as dishwashers and ceiling fans) depreciation deductions to outlays actually incurred by investors in residential real estate properties. Investors who purchase plant and equipment for their residential investment property after 9 May 2017 will be able to claim a deduction over the effective life of the asset. However, subsequent owners of the property will not be able to claim deductions for plant and equipment purchased by a previous owner of that property.

Foreign investment restrictions

The Government will introduce a 50 per cent cap on foreign investment approvals for new developments and apply an annual charge to foreign owners who leave their properties unoccupied or not available for rent for six months or more each year.

The Government will deny foreign and temporary tax residents access to the capital gains tax (CGT) main residence exemption—however existing properties will be grandfathered until 30 June 2019. The Government will increase the CGT withholding rate for foreign tax residents from 10 per cent to 12.5 per cent and reduce the CGT withholding threshold for foreign tax residents from $2 million to $750 000.

Release of Government land

The Government will establish an open data land registry to provide more detailed information about Commonwealth land to external parties, allowing and encouraging proposals for higher-value land use, including housing development proposals. The Government is also releasing 127 hectares of surplus Defence land in Maribyrnong, which is less than 10 kilometres from the Melbourne CBD and could support up to 6000 new residential dwellings.

Western Sydney housing

Under the Western Sydney City Deal, the Government will offer incentive payments to state and local governments to support planning and zoning reform, accelerate housing supply and deliver affordable housing outcomes in Western Sydney.

The funding will support the trial of incentive payments in the Western Sydney City Deal region, which is facing above average population growth and housing affordability pressures.

Social Impact Investments

The Government will provide $10.2 million over 10 years from 2017–18 to partner with state and territory governments to trial the use of Social Impact Investments. These will fund a small number of innovative programs aimed at improving housing and welfare outcomes for young people at risk of homelessness, including those supported by specialist homelessness services, exiting the out-of-home care system or exiting institutions such as juvenile detention.

Support for the Homes for Homes Initiative

The Government will provide $6 million over four years from 2017–18 toward the national roll out of the Homes for Homes initiative, which encourages property vendors to donate 0.1 per cent of the sale proceeds of their property to fund social and affordable housing projects across Australia.

Security for renters

As part of the Budget, the Government has announced that they want to provide more security for renters by working with State and Territory governments to standardise the use of long-term leases.

You can find out more about these housing and homelessness initiatives at the official Budget 2017-18 website.