Nola Marino (Forrest, Liberal Party) Share this | Hansard source

I rise to speak to the National Rental Affordability Scheme Bill 2008 and the National Rental Affordability Scheme (Consequential Amendments) Bill 2008 and in particular, to support the amendment that my coalition colleague the member for Cook has proposed. The government aims in part with this scheme to address the issue of housing affordability in Australia by addressing the chronic shortage of affordable rental housing. It proposes to establish a new asset class to attract institutional investors and not-for-profit organisations to enter into a 10-year contract to build 100-lot rental accommodation that attracts a rental rate 20 per cent lower than the current rental market. For this investment outlay, a tax offset will be available to institutional investors of a $6,000 rebate, together with a state government payment of $2,000 cash or in kind, making a total tax off-set incentive of $8,000. This will apparently be available as an $8,000 cash payment to not-for--profit organisations. I would ask: will local government be considered as ‘not for profit’?

This $620 million scheme aims to provide incentives over four years for the development of 50,000 new, affordable rental accommodation units to rent to low-income earners at 20 per cent below market rates. Although the financial prospectus was drafted with the assistance of social workers, it does not address the significant undersupply of new homes across Australia, which is the dominant influence on housing prices and rental affordability. I believe there are design flaws with this system because it should have been designed to meet the demand. For what is supposed to be national legislation, the bill again is very eastern-states centric.

In the next three years it is predicted that there will be an undersupply of housing of over 200,000 homes across the country. The incentive to build 50,000 homes over four years will not alone relieve the pressure on housing affordability in this country. How can one compare rental demand shortages in Port Hedland and Karratha in northern Western Australia with the public housing shortage in Manjimup or indeed Walpole, the southern most town in my electorate of Forrest, or compare shortages and prices in Sydney with a place like Harvey in my electorate? And how can these areas have the same incentive payment when one compares the price differential of housing construction in New South Wales with the costs of construction in Tasmania?

The demand in metropolitan and outer metropolitan areas compared to regional areas across Australia therefore needs a sliding scale to take into account the variations in construction costs in all areas. The incentives are below levels which would attract investors. Any new asset class would need to yield a minimum of five per cent and would need to be nine per cent to be competitive. I am advised that other estimates put this as high as 15 per cent. The assumed passing yield under these bills for the National Rental Affordability Scheme is just 4½ per cent. This would not attract institutional investors.

The $8,000 tax offset or cash rebate as a fixed dollar amount is not sufficient for investors in high-cost areas. Therefore I believe the value of the incentives should be more closely aligned to the value of projects and forecast rents. There should be a sliding scale available for high-cost, in-demand areas in metropolitan and outer metro areas on the one hand, as well as a provision for an incentive for construction of rental accommodation in regional areas where the additional costs of transport and construction of housing can be quite prohibitive.

I agree with my coalition colleagues that state and territory governments should match the tax rebate amount of $6,000 or indeed whatever sliding scale may be finally implemented to improve the value of the incentive. After all, state and territory governments will be the beneficiaries of windfalls in stamp duty and GST revenue from these new rental accommodation projects. From a commercial perspective, the current incentive structures will only see viable projects emerge from the urban fringe and smaller cities, instead of sustained, widespread growth in all areas, including my electorate of Forrest in regional Western Australia.

Investors will have to borrow to build and structure their borrowings over, potentially, a 10-year period. Therefore they will not be attracted to the more expensive construction areas of regional Western Australia, like some of those in my electorate. There is also no provision for the 100 accommodation dwellings to be split and built over different areas. This could provide added incentive for an investor to provide low-cost rental accommodation over several regional areas.

The penalties that will be imposed on developers and investors under this proposed legislation if properties are sold within a ten-year period is also a disincentive to attract large-scale institutional investors. As the current rental market differs not only from state to state but also by location, I also have to ask: who will decide what the current market rental value in any one area is? Just as there is a variance in the national rental market, so should there be a sliding scale within this scheme.

But we should also maintain access to capital for homebuyers, and I welcome the government announcement to increase the First Home Owner Grant to $21,000 for new housing. However, we have yet to see the detail confirmed whether the $21,000 will be available for both first home buyers who are building their own home as well as first home buyers who will be purchasing their home from a spec builder. I also contend that tenant eligibility criteria should provide a pathway to homeownership; otherwise, renters under this scheme will remain on welfare and rental assistance for longer than is perhaps necessary. Also the income threshold should be raised for those trying to save to get into private housing. This scheme should not just be a proxy state housing scheme offering to bail out the majority of state Labor governments. This scheme should provide renters with a pathway to homeownership.

Many community groups who look to house people with special needs may well be attracted to such a scheme on face value. It indicates that they could develop housing for disabled people or even housing for the aged. But this activity is apparently precluded from this scheme. I note that housing projects that have already commenced construction will be eligible to be included in this scheme. Therefore this scheme will fund projects already in the pipeline, which means that fewer new totally affordable houses and rental stock will be added to the forward projections. Essentially, these bills may relieve the pressure on state governments as a result of their undersupply of public housing.

Another flaw with this scheme is that it does not assist state governments in providing an increase in the supply of affordable housing for their key workers, such as health and education workers, or provide an incentive for these workers to take up employment positions in regional communities. The proposed eligible salary levels are below those of our essential key workers and here, again, this most deserving group of skilled workers will be excluded from eligibility under these bills.

I support my colleague’s proposed amendment to this bill. The Age newspaper on 15 March reported recent data from the Real Estate Institute of Australia showing the average family could no longer afford the average home mortgage. Close to half the average family’s post-tax income, or 37.4 per cent of gross medium family income—and the affordability figure is regarded as 30 per cent—is now required to pay the mortgage. This is the worst result in the 22 years since the survey began.

In fact I was recently told by a local office of the WA Department of Housing and Works that supply public housing in Western Australia that it was acceptable for applicants to pay up to 60 per cent of their Centrelink pension in the private rental market. This is simply unacceptable. The cost of rental accommodation in Australian cities and several regional centres is very high, such as the coastal sea-change/life-change areas in my electorate in Busselton, Dunsborough, Yallingup and Margaret River. The main reason for this is an undersupply of rental accommodation that has been caused by declining building approvals and dwelling starts and, in WA, the failure of the state Labor government to release land. ABS figures have confirmed that there is a trend to fewer residential dwellings being commenced.

Rising interest rates have also seen fewer investors enter the housing market, which has further reduced the supply of rental accommodation available. The coalition certainly supports efforts to increase the supply of dwellings for both homeownership and rental accommodation available. However, the best way to ensure that housing becomes and remains affordable is creating a strong economy, with more jobs—and not more unemployment as this government forecasts—and increasing real incomes, as well as continued investment in the housing sector and adequate releases of land. One thing for sure is that rents will continue to increase if government gets this economy wrong.

According to WA Business News on 28 August 2008, a survey found demand for WA rental properties was among the highest nationally, with 37 per cent of property managers stating there was a shortfall of more than 10 per cent of total stock. WA had the highest proportion of managers reporting rent increases during the past six months, with one-fifth of those surveyed raising rents by more than 21 per cent. Most respondents said rents were likely to increase by up to 10 per cent over the next six months, while 23 per cent indicated rents were likely to remain flat. Half of those surveyed in WA took less than seven days to lease a vacant property, while 45 per cent took more than one week—slightly higher than the national average.

Local Bunbury real estate company LJ Hooker advised that rental demand is currently a lot higher than it was five years ago. The last two Christmas periods had high demands, but Christmas three years ago there were zero rentals available, and this year is looking to be the same. A few years ago, percentage rate returns were 10 per cent of house values. A house valued at $200,000 would attract a rental of $200 per week. But the price of that $200,000 rental house has now reached $300, and rentals of $250 to $300 per week are very hard to find. Potential renters present themselves every day, picking up the booklet of rentals available, but rentals usually only last a week before they are snapped up.

Likewise, another local Bunbury agent, Raine & Horne, advised of a large influx of workers to the area, such as engineers and tradespeople, who have been attracted to the area due to the large expansion projects of various mining companies, which have seen the rental market spiral. These workers are willing to pay premium rentals for properties in and around the CBD. These prices are much higher than the locals can afford or are willing to pay. These people are coming from all over the world for these mining expansion jobs and are paying prices above Raine & Horne’s listed prices for fully furnished CBD accommodation.

CBD rentals have risen over $110 per week over the last eight months. However, there are still rental properties available in the outer CBD suburbs of South Bunbury, Usher, Australind et cetera, which are priced very competitively. In contrast, these property rental prices have only increased $30 to $50 over the same period of eight months. The reason for this is that people purchasing investment properties are paying more. When interest rates were higher, the repayments on properties were higher, which required a greater rental yield. For this reason, with falling interest rates and declining rental demand, there should be a plateau or decrease over the next few years.

Despite this, the cost of housing is still increasing as a proportion of average yearly earnings. Wages have actually grown less than have rental and housing prices, which have seen more of the family’s income going into housing. Reserve Bank figures for July 2008 indicated that Bunbury suffered the highest percentage of missed mortgage payments in the state and was the only region in WA to have home loan arrear rates at 0.7 per cent—greater than the national average of 0.55 per cent. Three months ago, Bunbury was ranked 20th in the state for missed mortgage payments.

I agree with my coalition colleague the member for Cook that amendments are required to make the scheme more flexible and more attractive to private sector investment. At the present time there has been little take-up from private institutional investors such as superannuation funds, because the rates of return offer little incentive to enter the scheme. It would be more attractive to the not-for-profit organisations that look to provide community housing for low-income earners or special needs accommodation.

Budget estimates indicated that the vast majority of incentives would be paid out in tax offsets to private sector investors. However, if more not-for-profit organisations take up the scheme, the $6,000 incentive will have to be paid out in cash to charitable sectors. Estimates may then have to be revised if more funding is required, as the majority of incentives are likely to be provided in direct grants to the not-for-profit sector rather than as tax offsets, due to the expected poor take-up by private sector investors.

Limited land supply due to restrictive land-release policies of state and local government planning is one of the main reasons for rising housing costs. State planning policies, combined with government taxes, fees, excessive infrastructure levies, charges and compliance costs, not only have added to the cost of new housing—they now represent a quarter to a third of the cost of a new house-and-land package—but have also contributed to the strangled supply of land. This must be the biggest issue impacting on land supply, housing affordability and rentals across the country—essentially it is how land is being supplied to the market. If the Labor government is serious in wanting to relieve the housing affordability crisis in Australia, it should be engaging with local government to assist with the provision of basic infrastructure and services to unlock land supply right across the nation.

This scheme, over the short and medium term, must be accompanied by major long-term reforms that address the key underlying causes to house price inflation. The previous state Labor government in Western Australia was too slow in releasing land for housing supply, and that ultimately drove up house prices and rents. I welcome the recently established new Liberal-National state government alliance in Western Australia, which recognises the need to provide the necessary infrastructure and to release land in a timely manner that will result in more housing units in cost-effective areas.

It is the state governments that will benefit from this scheme by way of stamp duties and GST revenue, derived from projects that will go ahead as a result of the scheme. I believe, therefore, that it is appropriate that the state governments should match the Commonwealth’s contribution to the scheme and that this should be as a cash payment rather than as in-kind support. However, it would be more beneficial to provide a sliding scale incentive to better reflect differences in each of the housing markets. This would better affect the investment in housing projects in certain areas, be they metropolitan or regional. There is a lot of uncertainty about this scheme; therefore, the take-up is also uncertain.

The government’s National Rental Affordability Scheme, coupled with its proposal for the First Home Saver Accounts program, is a seriously inadequate response to the housing affordability crisis, given that money deposited in these accounts cannot be accessed for five years from commencement. Agreements have not been negotiated with financial organisations that may offer these accounts. Administration costs have not been calculated, and the timeline for their introduction has blown out by three months. In fact, to my knowledge, no financial institution has yet put up its hand to say it will offer the accounts or what administrative charges will be charged on such accounts.

Construction costs in Western Australia appear to be higher than in other states or in the territories. I understand that the cost of constructing an aged care unit in the eastern states is approximately $180 per square metre, whereas the cost in WA is apparently $239.

The waiting list for public housing has blown out to many years in WA under the state Labor government. For example, staff at the Department of Housing and Works office in Bunbury, which covers the south-west areas of Yarloop, Bunbury, Eaton, Australind, Dalyellup, Collie, Donnybrook, Harvey, Brunswick, Capel and Boyanup, are currently attending to applications for one-bedroom public housing that date back to 2004—that is, they are only attending to those people who applied four years ago. If you applied for a two-bedroom house, lucky you if you applied in 2002, because that is the date for which they are now processing applications for two-bedroom houses. It would be better if you had applied for a three-bedroom house, because they are now processing applicants who applied only three years ago, in 2005. Similar and indeed longer waiting periods are being experienced all over the south-west in areas such as Busselton, Margaret River, Nannup, Bridgetown, Manjimup and Greenbushes.

In my electorate of Forrest, there are over 6,200 people receiving rental assistance from Centrelink. According to the West Australian on Wednesday, 24 September 2008, the waiting list for state houses in Western Australia blew out to almost 18,000 West Australians who were in the queue for public housing at the end of August 2008. The number of applications on the list had surged by almost 40 per cent in less than three years. Quite simply, there has not been enough Labor state government investment in public housing stock and infrastructure, and the onus has been put on residential developers in the south-west to provide the one-in-eight public houses in any new estate, such as Dalyellup in my electorate. As Shane Nichols from the Australian Financial Review reported on Wednesday, 3 September, price increases on blocks of land have escalated because developers now have to pay for the infrastructure that goes with housing estates.

The full cost of all services is passed on at the start from the developer to the home buyer, a factor that is driving up costs for developers and home buyers alike. Add to this the release of land, exacerbated by the delays in obtaining extraction licences for fill materials for building pads. Building costs have escalated. Take steel, for example: the price of steel has risen by 30 per cent in the last six months. Add to this the price of fuel for transport costs to the site. They all add to time delay and rising costs.

I believe the amendment proposed by the coalition should be supported to improve the proposed legislation under these bills. I support the amendment moved by the member for Cook.

See this speech in context