Craig Thomson (Dobell, Australian Labor Party) Share this | Hansard source

We have an interjection from a colleague from the other side, talking about the state government. Well, we simply have to look at the record of the previous government in slashing the budget in relation to this area, which put greater pressure on the state government in terms of public housing. So the former government’s contribution to this area was indeed a negative one and made it even harder for the state government to provide the sorts of services they do provide. Compare that again to where we are today with the Rudd government: taking positive steps and putting forward proposals that actually meet the needs of people in my electorate who are seeking affordable housing.

On the Central Coast it is still relatively cheap to rent when compared to, say, Western Sydney and many of the Sydney suburbs. You would have to add around $100 or $150 a week to rent a three-bedroom home in many parts of Sydney compared to the suburbs of the Central Coast. Still, for many people on lower incomes, paying $250 to $300 a week for a place to live is a lot of money out of their budget, given that we have the lowest median income in New South Wales.

The low rental availability rates on the Central Coast are unlikely to reach the extremes of those in Sydney, but because we are now considered to be one of the outer-metropolitan areas of that city and because one in three people work in the city the Central Coast region is always going to be influenced by Sydney’s housing pressures. Solutions that assist the Sydney market clearly have a flow-on effect in terms of the Central Coast.

Just last month, the Real Estate Institute of New South Wales put out a media release highlighting growing evidence of ‘rental rage’. The institute said:

The rental squeeze is now so bad that real estate agents are facing abuse and event threatening behaviour from prospective tenants who are unable to secure accommodation.

The institute at the same time released the latest rental vacancies data which showed, over one month, no improvement whatsoever in the number of available rental properties in Sydney. Rental vacancies for August 2008 stood at 1.2 per cent, which was unchanged from July. One in three real estate agents who participated in the survey by the real estate institute said that they or their staff had been threatened or abused over the phone by potential tenants within the period of the last month. And in an indication of just how strong demand is for rental properties, nine out of 10, or 90 per cent, of those surveyed said they received between five and 10 applications for every rental property. The institute also highlighted the disparity between demand and supply, citing figures from the Australian Bureau of Statistics which showed Sydney’s population growing at more than 1,400 people per week, almost double the number of rental properties available at the time, which was just 739.

Some of the more extreme examples of rental rage reported by institute members included constant abuse from irate prospective tenants; tenants making threats and abusing real estate office staff as a result of having their applications rejected; abuse happening on a daily basis; and, tenants abusing staff because of increasing rents. One client who was in arrears threatened to hang himself in a house if he was evicted, as that would ensure no-one else would want to live in it. There was a further example of a tenant harassing reception desk staff so much that police had to be called. These are symptoms of a market that clearly is causing so much stress for people who are seeking to either find a house to live in or to afford to remain in the house that they are renting at the moment.

The Real Estate Institute of New South Wales has drawn the conclusion that it is clear that much of the rental rage is being generated by the rental vacancy crisis which continues to grip the state. According to the institute, prospective tenants have become so desperate to secure a property that institute members have been offered bribes and have even had prospective tenants break down because they cannot compete with the number of people looking for properties.

The Rudd government is committed to helping to ease the pressure on struggling families and individuals who need somewhere affordable to live. The National Rental Affordability Scheme delivers on one of the government’s key 2007 election commitments. The Council of Australian Governments agreed to implement the scheme in March 2008. As I mentioned earlier, the scheme will cost $623 million in the first four years. From this investment, though, the National Rental Affordability Scheme will create up to 50,000 new rental properties across Australia. There’s little doubt that this kind of a boost in rental stocks will go a long way towards easing the pressures of affordable housing. The scheme’s offering of incentives to participants to build new dwellings for renting to low and moderate income households at 20 per cent below market rent will help make the scheme a reality. For many struggling families and individuals in areas such as mine, 20 per cent less cost for rental accommodation would be a welcome saving.

The incentive is made up of a Commonwealth contribution of $6,000 per dwelling per year for 10 years and a state or territory contribution in the form of direct financial support or in-kind contribution to the value of $2,000 per dwelling per year for 10 years. The bill provides for the establishment of the National Rental Affordability Scheme by regulations. It is desirable for most of the administrative detail of the scheme to be in the regulations rather than in the bill. This provides the flexibility required to address changing circumstances and conditions in the rental market including, determining market rent, tenant eligibility criteria and acceptable periods of vacancy.

The regulations are currently being drafted by the Office of Legislative Drafting and Publishing and an exposure draft will be made available shortly. This will assist with understanding the scope and the operation of the scheme.

The associated National Rental Affordability Scheme (Consequential Amendments) Bill 2008 will make amendments to the Income Tax Assessment Act 1997 to provide for the refundable tax offset and to ensure that state and territory contributions to entities participating in the scheme are non-assessable and non-exempt income for taxation purposes and that there are no capital gains tax consequences from the receipt of incentives under the scheme.

It is expected that market demand will remain strong, and the Australian government in that case will make a further 50,000 incentives available from July 2012 to help build another 50,000 affordable rental dwellings. This is a long-term solution, a long-term strategy by the Rudd government to help ease the rental crisis.

The scheme will be reviewed in its early years of implementation to test whether the scheme is adequately focused on those who would otherwise be in a rental stress situation. We will also need to look at any scope for simplification of the scheme, reduction in the administrative burden and whether there are evolving issues of noncompliance that need to be addressed. The review may well indicate a need for improvements to the scheme.

On a scale of five levels of need, the local government areas of Gosford and Wyong, which fall in my electorate of Dobell, are both considered in the highest need category of affordable housing in New South Wales. This goes to the facts that I spoke about earlier about the high unemployment that we have in my area, the electorate having the lowest median income levels in New South Wales and there being a lack of affordable housing there.

Since 2004, demand for housing in Australia has outstripped supply. It is estimated that Australia currently has an annual housing supply deficit of up to 30,000 houses. The challenge of entering into homeownership has become more difficult and, notwithstanding the recent, most welcome interest rate cuts, interest rates and house prices have both increased in the past 10 years, as those on the opposite side well know. They presided over 10 interest rate rises in a row and it is only this year that we saw the first cut in interest rates in seven years.

Accordingly, prospective first home buyers are staying in the rental market much longer, increasing the demand for rental properties. This will probably partly explain why there are fewer rental properties available. Besides the increase in demand, there will always be a certain proportion of the population who prefer to rent rather than buy a property or who are in a situation where they will never be able to afford the deposit to enter the property market.

Australia has a shortage of residential rental properties. Limited access to affordable housing is constraining the ability of businesses to attract appropriate staff in capital cities and regional areas. As at June this year, rental vacancy rates were below three per cent in all capital cities. In Sydney, Melbourne, Perth, Adelaide and Darwin, they were at or below two per cent. As I referred to earlier, the drop in rental vacancies was reflected most clearly in my area, in the electorate of Dobell.

The rental component of the consumer price index increased by 7.1 per cent over the 12 months to March 2008, significantly higher than the general rate of inflation for the same period. The rate of rent increases is outstripping wages growth, making rental housing less affordable for Australians on low to moderate incomes. Data from the Australian Bureau of Statistics for 2006 indicates that, of all private rental households, almost one-third pay over 30 per cent of their income in housing costs, a widely accepted benchmark of rental stress. Given that rents have increased since then at a higher percentage than wages, those in private rentals are paying an even higher proportion of their pay packets for somewhere to live.

As these figures indicate, there is no doubt about the need to increase the supply of rental dwellings in all major real estate markets throughout Australia. This scheme is designed to make renting more affordable in two key ways: through an overall increase in the number of rental dwellings and through the fixed term rental discount of 20 per cent. But, in order to stimulate an increase in housing stock for rental, the scheme needs to be attractive for investors. Participation in the National Rental Affordability Scheme offers a number of benefits to investors in affordable residential rental properties.

First of all, there will be improved rental yields. The minimum annual $8,000 national rental incentive for each approved rental dwelling can improve rental yields over conventional residential investment properties in certain markets. The national rental incentive is income tax free, indexed to the rental component of the CPI and complemented by existing taxation arrangements, including depreciation. The scheme offers a reduced risk profile for investors. With rents set at 20 per cent below market value, and a large pool of eligible tenants, investors can expect a reduced vacancy risk.

Compliance with the scheme will offer investors certainty of contributions from the Australian and state or territory governments in the form of the national rental incentive over a 10-year period. The national rental incentive will be indexed to the rental component of the CPI.

As a result of the scheme, there will be a new asset class. The Australian government will allocate 50,000 incentives through the scheme over four financial years. As I said earlier, a further 50,000 incentives will be allocated from July 2012 if demand from investors and tenants remains strong, which we expect. These incentives aim to stimulate the creation of a new ongoing asset class and develop industry specialising in affordable rental housing. Potential applicants for incentives will be able to apply for allocations over forward rounds to allow for the staged rollout of affordable rental dwellings, providing certainty for successful applicants.

There are also opportunities for linkages with other affordable housing initiatives. Potential investors and developers are encouraged to take full advantage of possible linkages with other affordable housing initiatives, including the Commonwealth government’s Housing Affordability Fund. Under this scheme there will be a range and diverse pool of potential tenants. Up to 1.5 million individuals and families on low and moderate incomes will be eligible to be tenants in approved dwellings under the scheme. Income eligibility levels for prospective tenants include key workers and their families, who are vital to Australia’s continuing economic prosperity. It is also an ethical investment. Investing in affordable housing through the National Rental Affordability Scheme offers investment opportunities that may meet investors’ own criteria for building ethical investment portfolios.

There are clearly many positives in the National Rental Affordability Scheme, with its clear aims of increasing the supply of affordable rental dwellings and reducing rental costs for low- and moderate income households. Rural and regional areas such as mine on the New South Wales Central Coast cannot afford any delays in the implementation of this scheme. They need to start benefiting as soon as possible from possible impacts of the scheme, including increased investments, incentives to providers of new dwellings and a boost in rental housing stocks.

These bills are vital to make sure that those who are struggling to find a place that they can call home, struggling to put a roof over their heads and the heads of their families, are assisted. These are important bills, and I commend them to the House.

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