Lowering a single tax on build-to-rent housing could protect 150,000 new homes and create a further 10,000 affordable rental homes over the next decade, according to new modelling.
EY research, commissioned by the Property Council of Australia, showed easing the managed investment trust withholding tax rate to 10 per cent for BTR projects, with an affordable housing component, could accelerate the building of 10,000 affordable homes over 10 years.
Importantly, this would come at no cost to taxpayers.
Property Council Chief Executive Mike Zorbas said the research highlighted a simple, budget-neutral measure to boost national investment in affordable homes.
“Housing supply is the challenge of the decade,” he said.
“We need to pull every budget lever we have to hit our housing targets and build the homes Australians need.”
The call comes after NSW Premier Chris Minns admitted the state had “no chance” of meeting its first 12-month housing target as part of the National Housing Accord.
Under the accord, announced by the Federal Government in its October 2022 mini Budget, 1.2 million new, well located homes were to be built across the country over five years, starting this July.
But Mr Minns told The Daily Telegraph NSW will fall short of building its target of 75,000 new homes this year.
“The 75,000 (new homes) target will be very difficult to meet in the short term,” he said.
Mr Zorbas said the new modelling showed how one single cost-neutral government policy improvement could have a significant impact on creating more affordable rental properties.
“Build-to-rent is a vital component of the country’s housing puzzle, offering tenants security of tenure, enhanced amenities and properties managed by professionals,” he said.
“Without every extra dollar of institutional investment Australia can harness, hitting our national target of 1.2 million new homes will be a Herculean task.
The research revealed lowering the MIT withholding tax rate to 10 per cent would enable the allocation of at least five per cent of apartments in projects for affordable housing at a 25 per cent discount to market rent.
The recent modelling expands on EY’s 2023 research, also commissioned by the Property Council, which showed a 15 per cent managed investment trust withholding rate could result in 150,000 apartments by 2033, a change announced in the May 2023 Federal Budget.
Mr Zorbas said the specifics of this budget measure were yet to be finalised, but the Property Council warned that forced affordable housing elements at the 15 per cent tax rate for build-to-rent housing would jeopardise those 150,000 new apartments.
Incentivising affordable housing at a separate rate of 10 per cent would avoid that investment disincentive.
“Adjusting the managed investment trust withholding tax to align with other property types was the right choice and it should remain that way to maximise the number of new homes built,” Mr Zorbas said.
“The states already have well developed plans for affordable housing as part of future development and no double up is needed.
“By reducing the managed investment trust withholding rate to 10 per cent, the government can boost the delivery of affordable homes in an asset class that offers well-located, secure, customer-led and community-oriented housing – and this change won’t cost the budget a cent.”