Scott Morrison (Cook, Liberal Party, Shadow Minister for Housing and Local Government) Share this | Link to this | Hansard source

I welcome the opportunity to comment on the government’s proposed National Rental Affordability Scheme to be established by the bills before the House. The scheme was put forward as one of the government’s ‘big rocks in the jar’ to address the issue of housing affordability in Australia. More specifically, the scheme was put forward as a measure to address the supply of affordable rental housing in Australia. A central component of the government’s strategy in this initiative is to seek to facilitate the establishment of a new asset class for institutional investors in the form of affordable rental accommodation.

The opposition will not seek to oppose these bills in terms of denying them a second reading; however, we will be moving an amendment in the House to highlight what we see as the design flaws in the scheme which, unless addressed, will serve to undermine the effectiveness of the scheme. Before I do that, though, I think it is important to provide some context in terms of what is happening in our housing markets and the environment that this scheme and these bills are seeking to address.

As housing costs have risen above 30 per cent of household incomes, there has been much discussion and debate about the impact of increasing rents and house prices on the affordability of housing for people and families across Australia, particularly in our major capital cities. There can be no doubt that these increases represent a fundamental change from what Australian households had been used to in the past and have put families under stress. However, one must be careful of one-dimensional analyses in this area. There can be no doubt, as I said, that there are major changes that Australian families are having to deal with, but one-dimensional analyses of housing affordability, when framing housing policy, can be very dangerous. This was an issue that was highlighted by the Reserve Bank’s Assistant Governor (Financial Markets) when he said that these types of indicators can be misleading as the bulk of household debt in Australia tends to be owed by those with the highest incomes who are most able to service their loans.

To understand better the issue of affordability, the Reserve Bank provided a new analysis that goes beyond average measures to look more specifically at the experience of those age groups looking to purchase homes. In a speech in March, the RBA’s head of economic analysis noted the findings that 30 to 35 per cent of transacted dwellings would have been accessible to median households in the homebuying age groups in 2006-07. This compares to a long-run average of 45 per cent. These figures also would suggest that housing has become less affordable, although the decline is not as drastic as the more superficial measures have indicated. The RBA actually went further to examine what the impact of increases in real incomes had been on affordability—more specifically how the disposable income available to younger homebuyers after meeting mortgage repayments had changed over time.

Their analysis revealed—and this was noted by Rismark International in their analysis of home affordability—that, despite strong growth in real house prices over the last 25 years, the income younger homebuyers had left after paying their mortgages was actually higher in 2007 than it had been at any other point. That is not a finding of the coalition; it is not a finding of any interest groups; it is the finding of a study undertaken by the Reserve Bank of Australia. The virtue of this analysis is that while prices have been rising—and that point is acknowledged; it is plainly obvious—so have incomes, in particular real incomes. Real wages, increasing under the coalition government by more than 20 per cent over our term in office, had a major impact—assisting people and families across Australia to deal with the issue of rising rents and rising home prices.

A further analysis is provided by the Australian Bureau of Statistics survey of income and housing in 2005-06 released in October 2007. This survey shows that there has been a relatively small increase in the average homeowner-occupier’s housing costs as a proportion of gross real income. That rose from 18 per cent in 1994-95 to 20 per cent in 2005-06. For first-time home buyers in 1995-96, 26 per cent of gross real income was spent on housing costs, while in 2005-06 it had risen to just 27 per cent. Rismark in their analysis also noted a further study by Deloitte on mortgage stress in the Australian mortgage market. The study involved a national survey of 1,200 persons across Australia. Deloitte found that, for those households that paid between 30 and 40 per cent of their income on mortgage repayments, less than 15 per cent defined themselves as being stretched. These findings led Deloitte to conclude that 40 per cent may now be a more reliable indicator of mortgage stress than the previous 30 per cent threshold.

I raise these issues simply to say that there are many figures bandied about on housing affordability and each of those figures, when you look underneath them, reveal interesting information and insights into this issue, but we should be cautious about simply grasping at figures here and there, or selectively, when trying to understand the true extent of the issue we are seeking to address through these bills.

Another issue raised in this debate is what actually constitutes housing stress. In June, the Age reported that 900,000 households were suffering mortgage stress. I suggest that these types of alarmist claims can be extremely dangerous for public confidence in our housing markets. Last Sunday—and, indeed, also in this place—we saw the outcome of that. The Prime Minister announced new measures—following the earlier suggestion of the Leader of the Opposition—to raise the level of guarantee on bank deposits. As stated, this measure was all about increasing public confidence in our banking system.

Likewise, in the current credit crisis we must be careful not to undermine confidence in our housing markets. The Australian housing market is performing solidly in the current economic conditions and is well placed to weather the storm. Vacancy rates are at between one per cent and two per cent in virtually all major capitals. Prices, except for in discrete areas and for specific reasons, have remained stable and there are no credible forecasts that our housing sector will suffer the collapse in prices experienced overseas, especially in the United States.

These points are important for those who are sitting in their homes right now and seeing what is going on around the world. Just as our banking system and our economy have been left in excellent shape by the previous government, so our housing market—at least in terms of its economic performance and its robustness in relation to overseas markets—is also in strong shape. So those sitting in their homes, those looking to buy homes and those with investments in Australian real estate, particularly in the housing sector, have reason to have a sense of confidence about the current position of the Australian housing market and should be encouraged by that fact.

One of the reasons for this lower level of mortgage stress in Australia compared to overseas markets, particularly in terms of our performance currently, is our extremely low level of exposure to subprime mortgages, with non-conforming loans comprising around one per cent of mortgages outstanding in Australia compared to 15 per cent in the United States. Unlike the US, our loans are full recourse, protecting our markets from distressed housing stock being dumped on the market. Another factor is our relatively low level of foreclosure. According to RBA statistics for August, the figure for delinquent home loans on bank balance sheets in Australia was 0.4 per cent. This compared to 2.2 per cent in the US and 1.3 per cent in the UK. There are also significantly less 90-day arrear rates experienced by Australian banks now than in the late eighties and early nineties. I also note that in early 1996, before the coalition came to office, arrears levels were more than 50 per cent higher than they are today. The RBA informed the House of Representatives Standing Committee on Economics that the figure of ‘90 days past due’ represented fewer than 25,000 households in arrears. That is significantly less than the 900,000 figure quoted in the Age. Other figures suggest that this figure could be as low as 17,000, although it is taken for granted that those numbers have been added to in more recent times.

The most significant risk to these figures is the prospect for increases in unemployment. Key objectives in the current credit crisis are to do all we can to keep people in their homes and to do all we can to keep people in their jobs. This means keeping them in their jobs and ensuring that interest rate cuts are passed on in full. There can be no doubt that Australian banks are far better placed to absorb increases in borrowing costs than families seeking to pay mortgages to keep them in their homes and small businesses seeking to meet their payroll costs to keep people in their jobs. The contrary argument has simply not been made by those who seek to dismiss the position put forward by the coalition as populism. They fail to understand the serious economic point that is being made about the need for banks to pass on the full interest rate cuts which have been made and those cuts which, I suspect, will be made in the future.

Rate cuts must go to those who need them most, and these are people who cannot afford to give banks a 20 per cent hardship commission on these rate cuts as they are passed through by the Reserve Bank. For those who take the contrary view, I look forward to their explanation as to why our banks cannot afford to pass on rate cuts but can afford, within days, to buy another bank. I look forward to their explanation when the next round of bank profit figures are announced and they contain the word ‘billion’ in them or when bonuses are paid on share prices which are being maintained as a result of offsetting funding costs by failing to pass on the rate cuts in full. I look forward to the explanation of those opposite as to why they are prepared to provide excuses for banks which do not pass on those rate cuts to where they will have an even better and more beneficial input to the Australian economy.

A further factor, and one that represents the dominant influence on housing prices and rental affordability, is the significant undersupply of new homes across Australia and especially in New South Wales. The Housing Industry Association estimates that across Australia annual housing demand will increase from around 170,000 new homes and units in 2007-08 to more than 195,000 by 2009-10. At the same time, forecast completions will fall from just over 145,500 to less than 140,000. This represents a ballooning in the annual undersupply of homes from around 25,000 a year to over 55,000 a year and a cumulative undersupply of more than 200,000 homes by the time of the next election. This has been forecast not only by the Housing Industry Association but also by respected economists, in particular the ANZ Bank. These forecasts are also supported by recent ABS housing approval figures which show that the trend estimate in the number of dwelling units approved across Australia has fallen every month for the 10 months since the Rudd government was elected. The trend estimate for August was down 8.2 per cent on the same time last year, with the worst declines in New South Wales and Queensland.

To address housing undersupply requires action across a broad range of fronts. I suggest there are five key fronts. Firstly we need to maintain access to capital for homebuyers and the housing industry throughout this capital drought, keeping liquidity in the system and people in their homes. To this end, I welcome the government’s now $8 billion investment in the mortgage securities market, first flagged by the Leader of the Opposition, and the increase in the First Home Owner Grant to $21,000 for new housing. I sincerely hope that it will mean new construction. The most recent ABS housing finance statistics are from August and show that fewer and fewer people are taking out loans to buy and build the houses needed to meet increased demand across the country. Compared with July 2008, there was a four per cent decline in the number of finance commitments for the construction of new dwellings for owner occupation and, with the trend series falling by 2.8 per cent, the ninth consecutive monthly decline. There was also a six per cent decline in the number of finance commitments for the purchase of new dwellings for owner occupation. The trend series fell by 2.8 per cent, the 14th consecutive monthly decline.

I will not say the opposition has concerns, because the coalition will not be quibbling about the package the government announced yesterday. These are very serious economic times, and the government has made some decisions; 8 December will be a very big day. We are not seeking to quibble on these matters, but I reflect today on some concerns that have been raised in the public, particularly about the affordability of housing, and by ANZ economists about the impact of the first home owners grant and what it might mean for house prices, particularly for existing dwellings, where it has been raised to $14,000 for first home owners. What might that mean for rental affordability and the price of housing across our capital cities and right across the country?

There is always benefit in helping Australians to buy their first home. The government needs to respond to the issue of the role of the increase in the first home owners grant for existing homes that has been raised out in the community. I look forward to their explanation of what it means, why it is part of a stimulus package and particularly why, when they are putting forward a policy which should seek to support first home buyers to get into their first home, they are in the same breath excusing banks from passing on their full rate cuts.

Secondly, in terms of access to capital we need to look at unlocking land supply in our cities from the core to the fringe, not just on the fringe. Often, when we talk of land supply issues we think of greenfield sites on our urban fringes. I think it is far more significant that as time goes on we ensure that we have infill sites, the release of land and the conversion of land from other uses to housing supply at affordable levels right across our cities. In understanding that, we need to understand how state urban consolidation and planning policies, combined with excessive infrastructure levies, have strangled the supply of land. This, without doubt, is the biggest issue impacting on land supply, home affordability and rentals across the country. It is how land is being supplied to the market.

Particularly in New South Wales, this has been the most chronic of problems. Some years ago the then Premier of New South Wales, Bob Carr, basically put up a ‘house full’ sign. In putting up that house full sign he strangled housing supply in that state. As a result, homeowners, those renting accommodation and those right across the housing market in New South Wales have paid a great price for the lack of foresight by the former Premier of New South Wales in making that fairly ill considered decision.

Thirdly, we must calibrate how local, state and federal governments work together with the private sector to deliver infrastructure to support land releases so amenity is maintained in established areas and new communities are made viable. This must be backed up by the need for accountability and transparency at every level. We must not allow funds to sink into the abyss of state government treasuries. The government has made much of their nation-building agenda and their edifice projects. They have claimed that they will be bringing these large-scale projects forward. The reality is that large-scale projects cannot be turned off and on like a tap. The suggestion of bringing forward these projects to stimulate activity has, I think, been questioned. If the government really wants to do something about bringing forward infrastructure projects, they should engage with local government on the provision of basic infrastructure and services to unlock land supply right across our cities.

Fourthly, we need to keep a lid on building and site development costs, particularly in the face of the government’s Carbon Pollution Reduction Scheme. A recent master builders survey in Victoria found that steel prices for housing construction have on average risen by more than 30 per cent in the last six months. Imagine what the impact of the government’s Carbon Pollution Reduction Scheme will be on these prices going forward. The Leader of the Opposition has made a right argument that the government’s 2010 timetable for the CPRS should be shelved and replaced by the coalition’s more responsible 2012 schedule.

These issues impact on housing affordability across our country. These issues of when we decide to bring in a CPRS and what we decide to do with rate cuts passed on by banks amount to an equation that determines whether people can afford the cost of being in their homes. The debate around the CPRS is not just about the environment; it is very much about affordability of accommodation right across our country. We also need to be mindful that outbreaks of union activity threaten building costs. I remind those opposite to find the steel to resist union pressures to abolish the ABCC. I also warn them that they should not allow a corrosion of the ABCC from within. Fifthly, we must understand the impacts of immigration and population policy on housing demand and our demography, most notably the ageing of our population.

It is against this backdrop and what is occurring in our housing sector that I believe we must evaluate the scheme put forward in the bills before the House. The purpose of these bills is to establish the National Rental Affordability Scheme, providing over $600 million, including administrative costs, to be invested over four years in incentives for complying applicants for the development of 50,000 new, affordable rental accommodation units to rent to low-income earners at 20 per cent below market rates. The objective of this program is to foster the development of a new, affordable housing asset class for institutional investors. The scheme offers a $6,000 per year indexed flat rental incentive in the form of a refundable tax offset for 10 years to taxpaying entities, supported by a $2,000 incentive from the state or territory government and direct financial assistance for each successful project. Registered charitable organisations, non-taxpaying entities, will receive their Commonwealth incentive as an annual cash grant.

The primary bill deals with the establishment of the scheme. The secondary bill deals with the refundable tax offset and other taxation measures. Of the more than $600 million allocated for NRAS in the May budget, over four years almost $500 million has been allocated to fund the tax offset and the balance is spent on direct financial grants and administrative costs. More than half of all the funds are allocated in the final year of the scheme. That is four years away.

NRAS was officially launched by the Treasurer early this year and was announced as ALP election policy in October. I make that point because this is a measure that has been put forward, I think, to make massive inroads into the housing undersupply issues that I mentioned earlier. This is a scheme that is being held up as one that is going to be a ‘big rock in the jar’, but I fear that this scheme may only end up being a very, very gentle drip in a very, very large pond. It is part of other measures being introduced, such as the first home savers scheme, and later in this place we will see the Housing Affordability Fund. A consultation and application process has been underway since May and allocation of the first 3½ thousand incentives from round 1 for projects to be delivered this year will be made once passage of these bills is completed. There will be a further 7½ thousand incentives available for round 2 and 39,000 incentives will be available under the third round for projects to be completed in 2010-11 and 2011-12, which is beyond the forecast period that I was referring to earlier. We will already, by that time, because of cumulative undersupply in the next three years, have an undersupply of over 200,000 homes across the country.

The coalition does not wish to delay the allocation of incentives from round 1 and is therefore not seeking to oppose the bill or to refer the bill to a Senate committee necessarily, as industry and interested parties have already had an opportunity to make submissions on the scheme as part of the technical discussion paper process. It is now time for the scheme to face the test of the market. The government has built up high expectations about the scheme. We will now see how effective it is in addressing the challenges I have outlined. That said, the coalition believes there are some significant issues relating to scheme design.

Firstly, I believe the scheme fails to address major undersupply issues in the housing market. In total the scheme will deliver less than five per cent of the projected shortfall, but, as I just noted, the vast bulk of that will not even come until after 2009-10. The department has confirmed through the application process that projects already under construction will be eligible for this scheme. So there is not even a guarantee that this scheme will be out there funding the construction of yet to be conceived projects or projects that are not already approved. In fact, it is going to approve projects that are already under construction and already built in to the supply pipeline, which is showing a high level of undersupply. As a result of that, I think there are reasonable question marks about this scheme’s ability to be that ‘big rock in the jar’ that the government has claimed this bill will provide.

Secondly, I would argue that incentives are rigidly structured and insufficient to make investments viable for institutional and commercial investors. The government says it wishes to create a new institutional investment asset class, supported by the forward estimates, I note, which assumes that the vast bulk of these incentives will be provided in tax offsets. I fear this may prove to be little more than a romantic notion on the part of some social engineers, who appear to be behind the design of the scheme in this bill. For a start, there is currently negligible institutional investment in Australia’s existing residential stock. Australian institutional investors currently do not invest in Australia’s residential housing market as long-term capital investors. There are many reasons for this: the lack of scalability, higher transaction costs, unwieldy asset management arrangements—and the list goes on. Yet it would seem there is an enthusiasm to try to recruit some of Australia’s superannuation funds to the cause. The problem is that this requires more than good intention; it requires a competitive rate of return and an understanding of how institutional investors price risk.

Figures provided by the residential property council highlight that any new asset class of this type would need to achieve passing yields of a minimum five per cent, with total returns of at least nine per cent to be competitive. Other estimates put this as high as 15 per cent. The assumption of the passing yield under NRAS is just 4½ per cent. It is no wonder that John Sutton, a CFMEU comrade of the Labor Party but of greater relevance as a director of the Cbus super fund, was quoted in the Australian Financial Review in September this year as saying:

I can’t see any evidence yet of industry super funds picking this up … on at least two occasions I’ve asked a couple of the main investment advisers and my inquiries don’t reveal any take up yet … I don’t know whether the incentives are going to be enough.

The first part of the problem is that, by fixing the value of the incentive at $6,000 per annum, the value of the incentive will be far greater for locations in South Australia or Tasmania but far less for the major metropolitan markets in Sydney, Melbourne or Brisbane, and equally far higher in outer-ring areas and far lower in inner-ring areas. The value of the incentives should be more closely tied to the value of the project and projected rents, with a sliding scale offered for the incentive, as suggested by the AHA, to make the project viable.

Secondly, tax offsets are confined to those parties participating in the development who will derive rental income. In the US, their tax credit scheme enables the transfer of tax credits to financing parties involved in the project, who are then able to make better use of the offsets and pass on lower costs of finance in return. This scheme ties the offsets up in knots. Thirdly, state and territory governments must be called on to at least match the Commonwealth’s contribution to the scheme to improve the value of the incentive, as they will enjoy windfall benefits in stamp duty and GST revenue from these new projects proceeding. For example, according to the Residential Development Council, conveyancing duty on a 2-bedroom apartment in Melbourne is estimated at $26,500, while GST paid on the completed unit will be approximately $42,000. These revenues will be derived from an outlay of around $20,000 worth, in net present value terms, of cash incentives delivered over 10 years. In short, state governments will make a profit from this scheme and should be asked to do more to make the scheme viable.

Fourthly, penalties ranging from potential withdrawal and suspension of incentives for vacancies or completion delays, as well as turnover created by tenants moving out of the income bands, all constitute risks that must be priced as they ultimately detract from the viability of a proposal. In short, the scheme’s conditions and regulations are too tight. While those who designed them may feel a sense of comfort that they have avoided all potential abuses, in the process I fear they may have cut off the scheme’s nose to spite its face. If incentives are left as currently designed, viable projects are likely, from a commercial perspective, only on the urban fringe in major cities at best and in smaller metropolitan and rural areas. Furthermore, it is more likely incentives will be more commonly taken up by the not-for-profit sector, which would require a reworking of the financial estimates contained in the budget papers.

Fifthly, new dwellings and lot size requirements will further deny inner- and middle-ring suburbs access to the scheme. The requirement that dwellings must not have been previously zoned for residential purposes, must not have been previously occupied or habitable or must be subdivided to provide more dwellings than previously available on the same block or section significantly reduces the opportunities to create new affordable housing in established inner-ring and middle-ring urban areas. To this end, the scheme is conflicted in its purpose. If a development is designed to convert existing residential stock in an established urban area to affordable housing stock based on a new design and layout that caters for specific disability groups or the aged, this project should be worthy of consideration by this scheme. Such proposals are excluded by this scheme. While initial rounds relax the 100-lot requirement, I suggest that this requirement also be relaxed and be made a permanent feature of the scheme to provide opportunities for smaller lots in middle-ring and inner-ring areas.

Sixthly, tenant eligibility criteria, I believe, are too constrictive and ignore key workers. The scheme should be part of a series of measures to provide people with a pathway to home ownership. However, tenant eligibility criteria imply that it is largely seeking to buttress the tenant base of public housing. If the purpose is to attract commercial investors then there must be an attempt to source tenants that provide a reliable form of income security for those investors at 80 per cent of market rents. Such persons may be those who are seeking to save to buy their first home or who may have recently lost their home and are back in the private rental market. If our objective is to deal with rental stress for those in the private rental market then we should be targeting those persons who are currently struggling in the private rental market. A submission by the Residential Development Council highlights this point and makes special reference to the plight of key workers, noting that many key workers, such as teachers, childcare workers, nurses, police, fire fighters and ambulance officers, may well be ineligible under this scheme. In fact, they show that the award rates for police officers in New South Wales and Victoria are above the upper threshold for single persons, yet the government claims in their prospectus that the scheme provides for key workers.

Finally, the government must provide some real commitment to ensuring these projects take positive steps toward sustainability. This commitment should be achieved not by placing further costs on the developer but by providing as of right entitlement to government schemes, most significantly, the solar panel and solar hot water rebate schemes. I therefore seek to move the amendment in my name on the Notice Paper. I move:

That all words after “That” be omitted with a view to substituting the following words:“while not declining to give this Bill a second reading, the House calls on the Government to make such amendments to the National Rental Affordability Scheme as would:

(1)

provide for incentives to be given on a sliding scale to take account of the different development and land costs in different locations;

(2)

provide for successful applicants to transfer their tax offsets on a once only basis to project financiers in return for a lower cost of funds, including providing such tax offsets to not for profit entities for this purpose;

(3)

require that State and Territory Government match the incentives provided by the Commonwealth under the Scheme;

(4)

extend project eligibility criteria to include conversions to affordable housing from existing residential stock, particularly where such projects involve substantial redevelopment to provide for specific needs groups such as aged or disabled accommodation;

(5)

extend the upper level income limits for tenant income eligibility criteria by 30% in each band to ensure greater access for key workers and those seeking to save to buy their first homes;

(6)

provide ‘as of right’ eligibility for the Federal Government’s solar panel rebate and solar hot water rebate schemes; and  

(7)

extend the establishment phase criteria that approximately 20% of incentives be available for projects of not less than 20 dwellings, to the entire Scheme”.

Bruce Scott (Maranoa, National Party) Share this | Link to this | Hansard source

Is the amendment seconded?

Sophie Mirabella (Indi, Liberal Party, Shadow Minister for Early Childhood Education, Childcare, Women and Youth) Share this | Link to this | Hansard source

I second the amendment as moved by the member.

Mark Butler (Port Adelaide, Australian Labor Party) Share this | Link to this | Hansard source

I am very pleased to speak in favour of the National Rental Affordability Scheme Bill 2008 and the National Rental Affordability Scheme (Consequential Amendments) Bill 2008. Together, they form the second, important wing of the Rudd government’s package to rescue Australians from the housing affordability crisis we find ourselves in. Can I say at the outset that, from the perspective of the national interest, it is pleasing to see that the coalition has started to take housing, and particularly housing affordability, seriously by giving the portfolio to someone of considerable talent: the member for Cook. Although, so enthusiastic is the member for Cook to be on the frontbench finally after his short number of months of this parliament, he, by my count, stomped on the jurisdiction of no fewer than five of his frontbench colleagues, so he might not be long in the portfolio of housing if he has his way. Notwithstanding his considerable talents and capabilities, the member for Cook, unfortunately for him, will continue to wear like an albatross around his neck a terrible legacy of neglect in this area by the previous government.

The previous government’s only trick in this area was the lump sum payment for first homebuyers, which undoubtedly serves a useful purpose within housing and more generally within the economy but is completely inadequate and insufficient to deal with the complex factors at play in the area of housing affordability. Relevant to this bill in particular, there was no attempt by the previous government whatsoever to deal with the difficulties faced by renters. In the area of housing affordability Australia in recent years has by no means been alone in the developed world. After the dotcom burst in the share market in 1999-2000, with low interest rates, a whole lot of money flooded into the residential property market around the developed world.

The Economist magazine says that in the developed world, between 2000 and 2005, housing prices in American dollars rose by $30 trillion. That price rise is equivalent to about 100 per cent of the combined GDP of those countries—100 per cent; the largest asset bubble in the history of humanity. We know that Australia’s price rises were right at the top of the table of OECD price rises. As a result Australians now have to live with a seriously overvalued housing market. While that is okay if you managed to get over the rope bridge and pay off a house before 2005, for younger generations and other Australians trying to buy into the housing market it presents very significant challenges.

The standard measure of valuation of housing is the price-rent ratio, the equivalent in the housing market of the price-earnings ratio used in the share market. By 2005 the price-rent ratio—that is, comparing the price of the house to the rent able to be achieved through it—was some 70 per cent higher than the 25-year average to that year. Again, that price-rent ratio in percentage terms saw Australia right at the top of the table in the OECD, with a price-rent ratio even higher than other overheated residential property markets such as the United States and the United Kingdom.

Logic and experience dictate that when you have a price-rent ratio so far from the historical average one of three things will happen: prices will decline, rents will increase or a combination of those two things will happen. We have seen in overseas residential property markets, particularly in the developed world, prices coming down—in some countries, coming down in a fairly calamitous way. But as Australian housing prices started to moderate some years ago, Australians began to be hit with the first, the second, the third and up to the 10th straight interest rate rise under the previous government. For that reason, although we have seen some moderation in housing prices in Australia, we have seen the measure of housing affordability continue to decline.

The most recent index published by the Commonwealth Bank and the Housing Industry Association—not the newspapers that the member for Cook cited but the most recent index published by the HIA and the Commonwealth Bank for the June quarter—saw housing affordability in that quarter decline further. The average repayment in that quarter for a house in Australia had increased to $2,827 per month, which on my calculations is in the order of $33,000 or $34,000 of after-tax income per year. Although in that quarter there was some improvement in housing affordability in the Perth and Brisbane markets, which had been seriously overheated in the previous quarters, housing affordability in the June quarter declined in all other capital cities and in some regional areas including regional South Australia and regional Queensland.

As one would have predicted from looking at the price-rent ratio in 2005, we have seen since those years very significant increase in private rents. In the last consumer price index published for the June quarter—the September quarter is due out in the next several weeks—rents went up by 2.2 per cent just for that quarter, around nine per cent at an annualised level. That was well above any increase in incomes, whether through wages or government payments. Those rent increases, which we have seen over the last several years steadily outstripping wages, growth and growth in government payments, impact on two groups: firstly, and most obviously, long-term renters and, secondly, those Australians who follow the traditional path of renting in the private rental market while they save their deposit to buy a house. The Australian National University department NATSEM published in December 2007 figures that showed that some 700,000 families in low- to moderate-income households were suffering rental stress, defined as paying more than 30 per cent of their income in rent.

The member for Cook, in his contribution to this debate, queried whether 30 per cent was now the right threshold to use, and we on this side accept that, if you were talking about very significant incomes, paying 30 per cent of your income on either house repayments or rentals might leave a very significant amount of income left over for other essential items of expenditure and other discretionary items. But for low- to moderate-income households, 30 per cent is still a very meaningful threshold. For 700,000 families to be paying more than 30 per cent for private rental demonstrates, in our submission, the level of rental stress being suffered in Australia.

In my own electorate of Port Adelaide some 38 per cent of renting households are paying more than 30 per cent of their income on rents. There is a very significant level of rental stress in my own electorate. It is an electorate in South Australia. The member for Cook—as I guess he might, being from New South Wales—concentrated on some of the larger property markets in Australia. But over the last decade we have seen prices converge around Australia. There have been very significant price increases in the more medium-sized capital cities like Adelaide and Perth, and those are starting to have impacts on Adelaide families, including Port Adelaide families, that might more historically have been seen as restricted to Sydney and Melbourne.

The level of rental stress being suffered in Australia really came home to me when I happened to see a piece on the BBC World News earlier this week. For about five minutes, BBC World News carried stories of Australian families having to move out of the private rental market into caravan parks—the trailer park phenomenon that we used to think was restricted more to the United States of America.

This bill, as I said in my opening, constitutes the second plank to the government’s housing affordability plan. It fills a space that we need to say was left completely vacant by the previous government: boosting the supply of affordable rental properties in Australia. These bills see some $623 million being spent over the next four years to create up to 50,000 new affordable rental properties. That will be done by way of incentives to investors at the rate of $6,000 per year for up to 10 years, combined with a contribution of $2,000 per year by relevant state and territory governments.

I noticed that the member for Cook spent some time talking about whether or not there would be institutional investors willing to come into this market. The government hopes that that will take place. But I know that in my own electorate significant residential property developments by companies like Lend Lease, Urban Pacific and a range of other developers are taking place. We are confident that those developers will be interested in opting into this scheme, along with governments and along with a whole range of community housing providers and other NGOs that are very interested in being a part of this solution.

Those incentives are conditional upon properties being rented to low- to moderate-income households at rental rates that are 20 per cent below market rates. Obviously, that will require some continuing adjustments to the thresholds by way of regulation.

These bills, as part of a broader package, constitute a 21st century solution to a very real problem and crisis facing Australian families and Australians more generally. We are confident that it will see innovative partnerships emerge between business, government and the community housing sector. If demand remains strong after the $623 million is exhausted, another 50,000 packages will be released from 2012. The Minister for Housing has presented a strong and comprehensive package to deal with the crisis of housing affordability. This is not a new crisis, but a crisis that has confronted Australians for several years. Not only is there this rental affordability scheme but the first home savers accounts have also been put in place by this government.

Although I know that the members opposite, including the member for Cook, like to concentrate on supply-side measures within the bailiwick of state governments, this government—unlike the previous government—has put in place measures to do what it can to boost the supply in this area firstly by reviewing Commonwealth land holdings to identify new housing opportunities and secondly through measures in this year’s budget totalling some $500 million over five years to cut a range of other supply-side costs. After 12 years of the previous government watching from the sidelines while this crisis of housing affordability got worse and worse, finally Australians get some action from the nation’s government. I commend the bills to the House.

Alex Hawke (Mitchell, Liberal Party) Share this | Link to this | Hansard source

I rise to support the National Rental Affordability Scheme Bill 2008 and the National Rental Affordability Scheme (Consequential Amendments) Bill 2008 but I also want to raise some of the concerns that the shadow minister and the member for Cook raised in relation to the workability and practicability of the scheme that the government has proposed.

We indeed have a rental affordability crisis facing us at the moment. Coming from an electorate in metropolitan Sydney, I am patently aware of the problems with rents at the moment. It is very interesting to see that the government is proposing measures in relation to the housing market at the moment that address and attempt to tackle the symptoms of a problem but they are fairly silent on what is causing this problem and how we can fundamentally turn around the housing and associated rental affordability problems in our country.

I am happy to look at this measure before the House today, a national rental affordability scheme to address the symptoms of a problem that has been a decade in the making, as the member for Port Adelaide pointed out. But in all of the analysis that we hear from members opposite about how there is a series of comparisons to be made between the rent-income ratios in Australia, the United Kingdom and the United States of America, there are some obvious things missing—some glaring failures in their analysis. We live in a country with 20 million people. That is a very small population in a large territorial land mass. We do not have the population and the land availability problems that they have in London and the United Kingdom generally and that they have in the major cities in the United States. We could afford to give everybody who does not own a house in this country five acres of land without even blinking.

The situation that has been created in the affordability of housing and the availability of rental stock is completely artificial in a number of ways. It is artificial because the government has pursued policies that have been environmentally driven. These policies say that our cities are bursting at the seams and that we have somehow run out of room in this country. It is a complete and utter furphy to suggest that we have run out of room in Australia. Those comparisons that the member for Port Adelaide was making between Australia and the United Kingdom and the United States are not the central reason why we have a rental and housing affordability crisis—something that I will be addressing shortly.

In all of the expert analysis we hear a lot about the problem as it is today: a situation in which people cannot get rental stock and when they do there are rental auctions or bidding, with people turning up offering a year’s or two years rent in advance or higher rents—whatever they can do to secure the rental property. That is certainly one of the pieces of feedback that I receive from my own electorate and from surrounding electorates. That is a problem. That is why we in the coalition are happy to support these measures, which will do something to address the urgent situation that we have been put in.

But if we as a parliament do not look at ways of stopping this problem, altering its course and changing its nature, then we are not doing the right thing by the people who can afford it least. If we are to do something meaningful to rebalance the property markets around the country, we need to look deeper. The object of this bill is to encourage the large-scale investment in new housing by offering an incentive to participants in the scheme in order to increase the supply of affordable rental housing dwellings and to reduce rental costs of low- and middle-income households.

I accept the amendments that have been proposed by the member for Cook in that many of the people in these income scales that the government has produced are ordinary workers—people such as teachers, firemen or policemen. They all fall outside the income thresholds that have been provided by the government, so in some ways the design of this scheme is not going to achieve what it is supposed to achieve, purely in its inception from the design of the income levels.

I think the incentives that are offered under the National Rental Affordability Scheme will be in respect of rental dwellings let to eligible tenants, and I understand that the rent charges at all times during the year are to be at least 20 per cent less than the market value rent for the dwelling. There are some flaws in the design of this scheme that we are concerned about. I think that incentives ought to be on a sliding scale. In my view it is a compelling argument against offering the same amount of money for all of the rental and housing markets around the country that there is a great difference between the rental market in Tasmania and the rental market in Sydney, so to offer the same amount of incentive in Tasmania and Sydney will see a flood of capital and development to areas where you can get a greater rate of return, such as Tasmania and other places including South Australia. That is a logical and common-sense position, and I think the coalition’s amendment in relation to seeing a sliding scale of incentives is a practical and workable idea that should be taken on by the government.

The 20 per cent amendment that the member for Cook has suggested for projects of 20 dwellings or more is also sensible. By having a 100-dwelling minimum lot size, you are ruling out any investment in the city and in major urban areas. After a decade of urban consolidation policies in Sydney, it is very hard to think of where you would see a minimum 100-dwelling size, as proposed in this legislation, that would be taken up by developers in the middle of an urban area, where often there are rental problems.

Before I address many more of the specific provisions of this bill, I think it is relevant to examine the climate that we find ourselves in at the moment with housing in Australia. We now know that, after the election of the Rudd government, we have ended the blame game in Australia, so that nobody is to blame for the policies that have produced the situation with the housing sector, rental affordability and the availability of housing stock in Australia, and everybody is to blame under the ending of the blame game and the position that we are now fortunate enough to find ourselves in. But I take the view that, if you look at the facts and the data in relation to New South Wales, where I come from—the electorate of Mitchell in particular—and metropolitan Sydney, you will see a cause and effect that require addressing by government and this parliament. The member for Port Adelaide said, ‘We’re doing what we can to assist at a federal level; don’t worry about the states.’ I am happy that he mentioned the state governments, because often you do not hear about the states anymore from members opposite. You do not hear: ‘What can the states do? What should the states do? What have the states done that has caused the problem?’

Affordable housing and the shortage of rental stock in Sydney are connected. It is interesting to note—and I want to record here—that there have been five consecutive years of falling house starts in Sydney. Australia has the unfortunate distinction, I guess, of having cities that are now amongst the most unaffordable in the entire world. All of our major cities fall into that category. There have been declines in rental and housing markets around the world, but they were easier to get into to start with. In Australia, with a tiny population and a massive continent, we have cities that are amongst the most unaffordable to live in in the entire world. What is causing this problem?

One of the major factors is the failure of successive government policies in this area, mainly by state governments. I do not think we ought to be afraid of saying that. If current government policy is failing and hurting people at the margins who need affordable rental properties, we ought to come out and say so and have a frank discussion about it. It is hardly surprising to me—and, I think, to this place—that one of the direct results of increased regulation, tighter and tighter controls on land releases, urban plan after urban plan and increased taxes and charges from the state government has been to make housing more unaffordable. When you institute new taxes and tax at a higher rate, you create a disincentive to do whatever you are taxing, so with increased taxes and charges on property and increased levies on development you are creating a disincentive. If you add disincentive after disincentive, you will create a major disincentive, which is what is happening in Sydney.

This week it was interesting to note an academic report by Dr Gabrielle Gwyther, and another report that said that the amount of land released in Sydney has dropped from 9,000 plots to 3,000 and that there are dwindling amounts of cheap land. The second report’s author is quoted as saying:

This has resulted in new dwelling construction in Sydney falling to levels not seen since the 1950s.

It is really surprising when we take a step back and have a think about this. We have a vast amount of land available to us. We have a very small population in world terms; let us be realistic. We do not have the populations of the cities in the Asia-Pacific region, the UK or the US, yet when you listen to urban planning departments it is as if we have reached the edge of human expansion in Sydney. There is a line. They have drawn lines on maps; if you cross that line then you cannot live there anymore. There is no more room. We are bursting at the seams, we keep hearing. But the fact of the situation is that we have enormous amounts of land. We have governments that are unwilling to release that land, and that is creating a major supply problem. I think all of the urban experts are starting to understand that this has become one of the key blockages to affordable housing and subsequently to available rental properties in Australia.

Supply and demand, whatever your view, is no doubt distorted at the moment in Australia. It has certainly been noted in recent times that we had underbuilt by about 10,000 homes in Sydney during the period of the Carr government. My electorate is home to one of the proposed growth corridors of Sydney. The new Rouse Hill Town Centre and the North Kellyville land release areas are premised on massive growth, yet there is no developer as yet that is willing to take up those developments. The disincentive to invest in property at the moment is one of the main blockages to that.

I think that one of the main contributors to unaffordable housing and lack of rental affordability in Australia is state and local government taxes and charges, and this is one of the less understood reasons for why we are here today. If you take, for example, a tax like land tax, which was imposed by the Carr government shortly after its election, it sounds great. It was an easy tax for Labor to put in because you are taxing wealthy people who allegedly have numerous properties and are somehow making a lot of money out of these properties, and therefore we need to tax them and that is a great thing; they can contribute to hospitals, roads and police. But what we have actually found is that taxes like land tax, stamp duties and the vendor duty tax—which indeed was the subject of major controversy in recent times in New South Wales—have added about 30 per cent to the cost of a new home, and that is not including many of the other hidden taxes and charges. After a decade of operation of a tax like a land tax, what you have done is to create a major disincentive for people with capital to invest in the property market. I hear this from people in my area all the time; they have got out of their second properties and given up their rental property. People used to have their own home; they would buy a property to rent and receive an income.

The new land tax regime is a major disincentive and therefore after a decade of this scheme is it surprising that we have seen a flight of capital out of property investment in New South Wales? That is what government policy has been designed to do: you tax something and you create a disincentive to do it. You keep taxing it and you create further disincentives to do it. That is what has happened in New South Wales. One of the conclusions of Alan Moran in his address to the Housing Industry Association some three years ago was that the restraints on supply together with the imposts placed on developers have clearly been the major, if not the only, factors in pushing up the price of housing.

One of the objects of this bill is to encourage large-scale investment in new housing by offering an incentive to participants in the scheme to increase the supply of rental housing dwellings and reduce rental costs. It is anticipated that the scheme is going to provide 50,000 new affordable rental dwellings. It does seem that that is a high expectation to set and a very high bar for the government to put out there when they are offering a 4.5 per cent return and incentives that are a standard $6,000 in the Sydney property market. The design of the scheme certainly needs to be rethought if it is going to achieve that very lofty aspirational goal of 50,000 new affordable rental dwellings.

I am also concerned that the scheme can apply to constructions that are already underway. If this is to attract large-scale investment in new housing, then the developments that are already underway have already been assessed as acceptable for a rate of return and they have already been assessed as suitable development. So why don’t we limit this to those new developments to encourage that large-scale investment back into the new housing market? Fifty thousand does seem to be a very difficult threshold to set, but we support this bill in the hope that there will be 50,000 new affordable rental dwellings built. But it is difficult to see that happening.

The incentives that are mentioned within this bill are rigidly structured and I think there is an argument to say that they are insufficient to make these investments viable. We have spoken about the 4.5 per cent yield, whereas I guess the real threshold is about five per cent minimum to make it acceptable to investors today. I do not think that the value of the incentives is adequate to make the scheme attractive in those expensive residential markets such as Sydney, Melbourne and Brisbane. The value of the incentive, I think, should probably be more closely tied to the value of the project and projected rents. If you are really talking about making this scheme workable, you have to consider the value of the project and the projected rent that you will receive from the rental property. If you are not considering those factors, then you are seriously failing in your ability to ensure that these things are viable and that these places are built. A sliding scale, as suggested by the member for Cook, is probably one of the best ways to achieve this and it is certainly something that I support.

There is a real sense in this legislation that the contribution that is made to the incentives by the states and territories is inadequate. This is not blame game but the state governments are benefiting from the windfall stamp duties and GST revenues from the projects that will be developed. For a small contribution in terms of the National Rental Affordability Scheme incentive the state governments will reap significant profit from the property taxes and all of the other taxes that are applied to the completed developments. It does seem sensible and logical that they make a contribution in addition to the Commonwealth contribution to the incentives.

I do think that we are now seeing what happens in Australia when government oversteps its proper authority in relation to land release and spends too much time regulating a sector and not enough time considering how we get the balance right in terms of land release and sustainability in the housing market. The system may work for a little while but the people who really suffer in this whole debate are the people at the margins, the people who can afford it the least—the first-time home buyers, the people who desperately need access to affordable rental properties but who can least afford them. As for rents in my own electorate of Mitchell, sometimes people are receiving $50 or $100 increases in one hit. This has been a major issue for elderly people, people on low incomes and those suffering family stress. Hills Community Aid and St Michaels refuge at Baulkham Hills have all indicated to me the great problems suffered by aid agencies in Sydney finding affordable properties and placing people in affordable rental properties, and that is a great concern to me. While it will achieve something, if we cannot get more affordable rental properties into Sydney, then really we are failing a lot of people who are hidden in Sydney who are having a very difficult time. Indeed, because the system is set up to not provide an extra incentive to do that in a major city like Sydney, it is probably going to be one of its most significant weaknesses in the final analysis when this is implemented unless the coalition’s amendments are examined. It has been widely reported that at rental auctions in Sydney people are offering years of rent in advance and I can anecdotally report to this House that from my own electorate’s experience there is a shortage. It is very difficult to find a property in Sydney at the moment.

I am very disappointed in the government’s responses at a state level. The most significant proposal that the New South Wales government came up with in recent years was fairly tokenistic. They should already have allowed property owners to rent their granny flat at the back of their house to people. It sounds like a commonsense thing to do, but under previous zoning rules and restrictions most of that was not allowed in urban areas in Sydney. Again, this is a tokenistic response at the margins of the symptoms rather than looking at how we ensure that the housing market is affordable in the future. Again, I believe that it is at the expense of those who can least afford it.

I do not think it is compelling to say that we ought to wait for an economic downturn or be thankful that we have had an economic downturn to reduce demand in the property market. Reduced demand in the property market leads to many more flow-on consequences that are quite serious, so that is not an answer that inspires me. But there is almost a sense of relief from this government and from state governments that there has been an economic downturn in relation to property or that the problem is going to dissipate a bit because we are going to see a downturn in demand for the housing and rental markets in Australia because people cannot afford them. As I said, I do not find that a very inspiring argument.

I know it is a challenging concept to explain, but if you do not get the supply and demand balance right in the housing market you are setting yourself up for failure. We can pass as many resolutions and as many bills into law in the House as we like, as we have with the first home owners scheme and as we are doing today with the Rental Affordability Scheme, but that is addressing the symptoms of a broader problem and ignoring the elephant in the room, which is a fundamental failure of state governments to get their housing and land release policies right. We do need to start playing the responsibility game and sheeting home responsibility to state governments, where appropriate. I do not think we should always tinker at the edges. I would say to the government that, while we support this initiative to provide relief in the interim to those people who are suffering, we do need to examine ways in the long term of improving the situation in housing markets all around this country and ensuring that people do not suffer. (Time expired)

Chris Hayes (Werriwa, Australian Labor Party) Share this | Link to this | Hansard source

This government understand that rents have been rising strongly and that today we have more than half a million people who are living in rental stress—that is, paying more than 30 per cent of their income on rent, getting caught in the trap and not being able to save properly for the future. The latest rental vacancy figures indicate that vacancy rates are down to 1.2 per cent, and that has been unchanged since July. Recently there have been a lot of reports in the media about the rental squeeze. It is now so bad that real estate agents are experiencing incidents of rental rage, with many of them facing abuse and threatening behaviour from potential tenants who are unable to secure accommodation for their families. Much has been said about rental auctions, and I understand they occur in the capital cities. But we are now seeing increasing competition for rental places in my electorate of Werriwa, in the south-west of Sydney. So it is appropriate that I inform the House about what is actually happening out in the south-west of Sydney. There is insufficient affordable private rental accommodation available to meet the needs of residents in my electorate. This is a genuine and intense crisis.

This morning, in preparing for my contribution to this debate on the National Rental Affordability Scheme Bill 2008, I decided to ring one of our real estate agents down at Ingleburn. I contacted Ken Barnard, the Principal of Richardson and Wrench Real Estate, in Ingleburn. Ken comes from a long line of real estate agents—this has been the family business for about 50 years. He has had 35 years of continuous service as a real estate agent and is an expert in his field in my electorate of Werriwa. He informed me that currently there are up to 60 people viewing one house for rent at any one time and from those 60 people he will receive 30 applications. That is extreme competition for rental accommodation in my area. When I asked Ken about the rental crisis he enlightened me about two specific instances recently which had had a profound effect on him. Disturbingly, he went on to say that he had never experienced anything like this in all his time as a real estate agent in Ingleburn. He also said that what really stands out for him is that he believes the media reports about the rental crisis at the moment are in fact underplaying the severity of the crisis—and that is not something you would normally say when talking about our media.

The first incident he recalled, and I was very moved by, had an impact not only on him but on his staff. He said staff from his office had recently been in the position of having to deal with a person who was desperate to maintain his accommodation. He went to considerable lengths to explain why he was having difficulty finding another home and the staff were trying to assist this client to find another dwelling. He was not able to meet the rent in his existing dwelling and Ken’s staff had to evict the client. People talk about real estate agents, but this is one of those things that they have no inclination to do and they will work overtime to try to find alternative accommodation. They gave the client notice that they would have to move in to evict him. Unfortunately for the staff that Ken sent in with the sheriffs to do the eviction, they found the client had suicided there that morning. That happened in Ingleburn, in my electorate. It is a real situation that occurred. This poor unfortunate person had genuine fear about the eviction because, as he had explained his real estate agent, he was not able to secure alternative accommodation. Ken and his staff are still undergoing counselling because of this event.

The other incident that Ken brought to my attention this morning was about a fellow, a big bloke, who came to see him and burst into tears in the foyer of his real estate agency. This man had only 10 days left to find alternative accommodation for himself and his family. He had made many applications, all of which had been rejected. He had been to many other agents and Ken was trying to help him secure something in what was found to be an impossible market. Ken said that what stays with him is the incredible look of despair on this fellow’s face.

They are just two incidents. I did not make them up; they were put to me directly this morning by a real estate agent right in the middle of my electorate. If we did a survey of what was occurring in agencies right across metropolitan Sydney or Melbourne, or anywhere else, I would imagine those sorts of stories would be replicated. They give us some idea of the degree of the crisis in rental accommodation.

Between September 2002 and September 2007 median rents in Campbelltown for a one-bedroom dwelling increased by 22.2 per cent; for a two-bedroom dwelling, by 17.6 per cent; for a three-bedroom dwelling, by 20 per cent; and for a four-bedroom dwelling, by 24 per cent. Much of that growth has actually occurred in the last 12 months. That does reflect the tightening of the rental market that we are experiencing—and it is not simply in the middle of Sydney; this is in the outer metropolitan areas of a capital city. That is the scope of the crisis that is occurring here and now. There is certainly no overnight solution to housing affordability, and it cannot be simply left to the fluctuations of the market. This is unlikely to improve in the Sydney rental market as it stands, and that is why the government has acted. It is the responsible thing to do; it is the right thing to do.

We know that saving for a deposit is a major barrier to first home owners. We have only recently indicated two aspects of how we are trying to help in that regard. Firstly, there is the First Home Saver Accounts policy, which was launched only recently. Under that scheme, the first $5,000 of an individual’s contribution to such an account will attract a 17 per cent federal government contribution, providing assistance to average income earners, like many of the people that I represent in my electorate. The earnings will be taxed at a low rate of 15 per cent, and the withdrawals from it will be tax free when used to buy or build a first house. I think that is certainly a valuable contribution to assisting people into the property market. Secondly, only yesterday the federal government announced a doubling of the First Home Owner Grant, from $7,000 to $14,000, while those able to purchase a newly constructed home will receive a grant totalling $21,000. Again, that is tangible assistance to help people into the property market throughout the country.

But the reason for this particular bill is that, even with those initiatives, not all people will be able to purchase housing. Some will still, either by desire or by circumstance, be locked into the rental market. So with this piece of legislation the government is recognising that the National Rental Affordability Scheme will play a key part in providing much-needed assistance in the rental property area. The government will provide $2.2 billion under its housing affordability package, and much of that will be dedicated to generating growth in the private rental market. It will provide some relief to the low- to moderate-income families within my electorate, which is important to me, considering 50 per cent of workers in my electorate are in clerical and administrative positions, are technicians or are working in trades or labouring, and the median household income in Werriwa is $1,096 per week.

Federal Labor’s National Rental Affordability Scheme will cost $623 million in its first four years and will be responsible for creating up to 50,000 new rental properties across the nation. In the lead-up to the last election, Labor promised we would make this a priority and we are now delivering on that vital promise we made.

The bill before us, the National Rental Affordability Scheme Bill 2008, will provide the principal legislation relating to the Australian government’s new Rental Affordability Scheme. The object of the bill is to encourage large-scale investment in housing by offering an incentive to participants in the National Rental Affordability Scheme so as to increase the supply of affordable rental dwellings and reduce rental costs for low- and moderate-income households.

The scheme offers incentives to providers of new dwellings on the condition that they are rented to low- and moderate-income households at 20 per cent below the market rate. The two key incentives are, firstly, the Commonwealth government incentive of $6,000—which will be indexed—per dwelling per year in the form of a refundable tax offset or payment; and, secondly, the state or territory government incentive of $2,000 or more per dwelling per year. State and territory government assistance will be provided through cash payments or in-kind financial support. The incentive will be provided each year for 10 years to complying participants, whose payments will be indexed in line with the rental component of the consumer price index. It is expected that we will see the first homes opened under this scheme during this financial year. This is great news for the many young Australians who are facing the stress of finding a place to rent or hanging onto a place they have already found. For many of them this is a critical first step.

The associated bill, the National Rental Affordability Scheme (Consequential Amendments) Bill 2008, will amend the Income Tax Assessment Act 1997 as a consequence of the substantive provisions in the National Rental Affordability Scheme Bill 2008. It will essentially provide for the refundable tax offset and 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 will be no capital gains tax consequence from the receipt of incentives under this scheme. Additionally, this scheme will be reviewed and, if the market demand remains strong, the Australian government will make a further 50,000 incentives available from July 2012 with a view to building another 50,000 affordable dwellings.

Coming from an area where rental stress is at crisis level, coming from an area where I see firsthand the competition that is taking place for people to secure properties for themselves and their families and having regard to the two examples that I just gave from a real estate agent in Ingleburn today—two very tragic circumstances that have been witnessed only in recent times in my electorate of Werriwa—I think this legislation is a critical first step. I commend the bill to the House.

Debate (on motion by Ms Hall) adjourned.