The “new” Labor Affordable Housing Policy will put millions in the pockets of developers as they rip off gullible investors without solving the affordable housing problem in Sydney and Melbourne

The so-called new Labor affordable housing policy announced by over the weekend has not addressed two significant problems of a very similar policy implemented by the previous Rudd Government in its National Rental Affordable Scheme (NRAS).

As someone who was working in this area at the time, NRAS had two glaring weaknesses which resulted in it being shut down.

Problem 1 – Fixed Rebate

The first and biggest problem is that the rebate is a fixed amount ($8,500 per year in the new policy) irrespective of the property size and location.

To demonstrate the impact of this, just compare a one-bedroom apartment in Adelaide with a house in an outer suburb of Sydney or Melbourne.

Straight away you can see there is no real incentive for investors to fund affordable housing in Australia’s least affordable housing markets of Sydney and Melbourne.

If you were an investor, the smart money will gravitate to lower cost properties in lower cost locations.

Problem 2 – The Rorts that exist

And the second problem is that the whole system was rorted by many developers.

I remember looking at two potential investment properties for sale side by side on the one street.  The houses were largely identical.  One of the properties was for sale registered under the NRAS scheme and the other was being sold just for normal investment.  The NRAS property was being sold for nearly $50,000 more than the other identical property next door.  The developer was increasing their margin simply because they had registered the property for NRAS.

This extra $50,000 margin to the developer, largely took away the benefit for the investor in the NRAS property and the house next door without NRAS was a better investment.

So only the gullible or ill-informed investor would buy the NRAS property.

And these two factors alone show why the new Labor Affordable Housing Policy will put millions in the pockets of developers as they rip off gullible investors.  All without solving the affordable housing problem in Sydney and Melbourne.

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