NRAS

INTRODUCTION

The National Rental Affordability Scheme (NRAS) is an Australian Government initiative to stimulate the supply of 50,000 new affordable rental dwellings. Successful NRAS applicants are eligible to receive an Incentive for each approved dwelling where they are rented to eligible low and moderate income households at a rate that is at least 20 per cent below the prevailing market rate.

Potential investors in investment vehicles involving the NRAS should note that the allocation or reserved allocation of NRAS Incentives does not constitute Government endorsement of the development proposal as an investment opportunity.

BACKGROUND

Governments, the business sector and community organisations recognise that housing affordability is an issue of significant community concern. The growing cost of housing is having a serious impact on the ability of many Australians to meet their financial commitments.

Under NRAS, the Australian Government is providing Incentives to:

  • increase the supply of affordable rental dwellings;
  • reduce rental costs for low to moderate income households; and
  • encourage large scale investment and innovative delivery of affordable housing.
  • The Scheme offers annual Incentives for ten years. The two key elements of the Incentive are:
  • A Commonwealth Government Incentive currently of $7,486 per dwelling per year as a refundable tax offset or payment; and
  • A State or Territory Government Incentive currently of $2,495 per dwelling per year in direct or in kind financial support.

NRAS is designed to pool significant resources from a range of participants including financial institutions, non-profit organisations and developers which, when combined with the Incentives from the Scheme, will increase the supply of lower-rent housing. These resources could include loans; equity investments; capital grants by Commonwealth, State and Territory or Local Governments; donations by charities; free or discounted land by churches; or contributions by developers in accordance with planning requirements.

The tenant eligibility criteria ensure the Scheme is open to a range of household types on low and moderate incomes.

IMPLEMENTATION & ADMINISTRATION OF NRAS

The Department of Families, Housing, Community Services and Indigenous Affairs (FaHCSIA) is responsible for the management of NRAS, in consultation with the Australian Taxation Office. The Commonwealth is working with State and Territory Governments, investors and not-for-profit housing providers in the ongoing management of NRAS, which commenced on 1 July 2008.

NRAS is short for National Rental Affordability Scheme. The NRAS scheme is a Federal and State Government backed incentive scheme creating a new investment asset class designed to:

  • encourage investors to develop additional new houses for the rental market.
  • provide an affordable rent program for average Australian wage earners as individuals, couples and families. It is not social housing.
  • yield higher than usual returns for investors in the residential property market.
  •  increase the number of rental dwellings built through the stimulation of demand and investment, while supporting the building industry and related jobs and the Australian economy.
  • The government aims to achieve this by providing a tax incentive for investors in NRAS properties in return for the properties being rented at a discounted rate.

The NRAS scheme is not housing commission or social housing.

NRAS properties are rented to private individuals and families with incomes of up to $108,169 pa. Approximately 1.5 million Australians are eligible to be NRASTennants.

There are strict guidelines for properties to qualify under the NRAS scheme. NRAS properties must be close to transport, schools, shops etc making NRAS properties desirable for tenants and property investors. There are also specified guidelines for the management of NRAS properties. The manager is responsible for ensuring that tenants meet the income criteria and that they are reviewed against the criteria every two years.

The NRAS scheme is funded for up to 50,000 dwellings but will end for new investments 30 June 2016 although owners of NRAS Properties will continue to get the tax incentives for ten years from acquisition.

The government aims to achieve this by providing a tax incentive for investors in NRAS properties in return for the properties being rented at a discounted rate. The NRAS scheme is not housing commission or social housing. NRAS properties are rented to private individuals and families with incomes of up to $108,169 pa.(And even higher upper limits of $135,212 pa. see the government NRAS documentation)

There are strict guidelines for properties to qualify under the NRAS scheme. NRAS properties must be close to transport, schools, shops etc making NRAS properties desirable for tenants and property investors. There are also specified guidelines for the management of NRAS properties. The manager is responsible for ensuring that tenants meet the income criteria and that they are reviewed against the criteria every two years.

The NRAS scheme is funded for up to 50,000 dwellings but only a percentage are available for private property investors. If you are interested in building a portfolio of secure property then now is the time to move. All investments will be built and tenanted by 30 June 2016 and the advantage is secure a property today and the owners of NRAS Properties will continue to get the tax incentives for ten years from completion and tenancy of the property commencing at the then indexed amount.