National Rental Affordability Scheme What Is It And How Can You Benefit From It?

With rent increases outstripping wages growth and inflation

, it is becoming increasingly difficult for low to middle income earners to enter the private rental market. To address this problem, the federal government has launched the National Rental Affordability Scheme (NRAS), for the purpose of providing assistance and funding to increase the supply of affordable rental dwellings.

The scheme aims to provide more affordable housing, by offering generous incentives for investors, developers and not-for-profit groups who participate and offer rental properties at 20% below the current market rate. The scheme reduces rental cost for low and middle income earners, whilst encouraging large scale investment to provide affordable housing.

The two primary reasons for the implementation of the NRAS are:

1. To increase the supply of new rental housing directly into the housing market

2. To improve affordability for the eligible target groups

By offering substantial investment benefits, the scheme aims to assist institutional investors, developers and not for profit groups to deliver 50,000 rental dwellings over the next two financial years, and a further 50,000 post 2012.

The introduction of the scheme has opened up a substantial new investment opportunity within Australia. The NRAS Scheme will provide tax free incentives of $623m for 50,000 new affordable rental dwellings to be occupied between January 2009 and June 2012, with provisions for a further 50,000 incentives after 2010 if demand remains strong.

What are the benefits to Investors?

The scheme provides a Commonwealth incentive of $6,000 along with a state incentive of $2,000 for eligible purchases. With rebates valid every year for 10 years, there is a potential $80,000 in tax credits available to investors and developers. Target rental groups are professions which are essential to the community, including police, fire-fighters, teachers and nurses.

Other benefits include:

Improved Rental yields

-receive a minimum $8000 incentive for each approve dwelling tax free)

Reduced Risk Profile

-with rental rates at 20% below market value, demand will be very high, resulting in reduced vacancy risk

Linkages with other affordable housing initiatives

-It is encouraged that potential investors take full advantage of other affordable housing initiatives

Ethical Investment

What payments will I receive?

Payments to approved applicants include:

- A tax free incentive of $8,672 per dwelling/year for 10 years.

- Payment to be made as a $6,504 tax rebate in July, and $2,168 cash in September

How long should you be a part of the NRAS?

Investors, developers and not-for-profit groups that apply and receive the NRAS incentive must be prepared to remain in the scheme for a minimum of 10 years. If selling within the 10 year period, provisions must be made for the properties to remain on the scheme, or to replace them with similar properties in the same area. Penalties apply for early termination of the scheme.

by: NRAS Scheme

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