NRAS and the Abbott Government's 2014 Federal Budget


There has been some pre-budget ‘noise’ regarding the potential scrapping of the National Rental Affordability Scheme (NRAS).

From a policy perspective, my view is that NRAS is a good concept against the backdrop of affordable residential dwelling shortages across the country.

In Queensland, according to Government sources, about 7,000 dwellings have been built under NRAS, which has benefitted about 9,000 households across the state; 30% of these households were previously on the social housing waiting list.

This is certainly a great outcome. In addition to this, the scheme provides a flow-on benefit to the property and construction sector – more properties means more economic activity, which is precisely what the sector needs as mining activities that have underpinned the Queensland economy in the last few years continue to subside.

Alongside these positives, there appears to have been some execution and implementation issues associated with the scheme to date, which may have detracted from its perceived value.

For instance, around 40,000 NRAS allocations have been made across the country to date and an additional 10,000 allocations are still under consideration as part of the Round 5 NRAS roll-out; out of the 40,000 allocations, only about 14,500 homes have actually been built. There have also been allegations that NRAS may have been rolled out too hastily, which has resulted in opportunistic exploitation as reported in the media.


So should NRAS be scrapped?

In my view, some of the reasons for the introduction of NRAS may no longer be compelling.

There have been signs of life in the residential property sector of late, especially in the Sydney and Melbourne markets, and a lot of the stimulus measures introduced by various governments to combat the impact of the Global Financial Crisis on the property sector have since been removed.

Coupled with the Federal Government’s inevitable cost cutting in the upcoming federal budget, NRAS may seem to be a soft target.

But what remains an issue is the social and affordable housing shortage, which is an entirely different issue from a general housing shortage in Australia, the latter of which continues to be hotly debated and arguably inconclusive.

As economic conditions continue to improve, together with record low interest rates, investment activities will continue to increase which will ultimately drive housing prices up and put further pressure on housing affordability. This affordability issue will need to be addressed, whether or not NRAS continues as an ongoing scheme.

Rather than reinventing the wheel, perhaps keeping NRAS but bolstering the eligibility criteria to weed out opportunities for exploitation, clearing any red tape that may be causing delays, and improving the accessibility of the scheme to targeted stakeholders, may be some of the ways to address this social and affordable housing shortage.

Having said that, scrapping NRAS for expanded Rent Assistance is also a viable alternative, albeit it may have a less direct effect on increasing new housing stock.

After years of relative inactivity, the property and construction sector could do with a hand to help it start firing on all cylinders again.


Eddie Chung is a Partner, Tax & Advisory Private Clients for BDO, one of Australia's largest associations of independently owned accounting practices, with offices in Adelaide, Brisbane, Cairns, Darwin, Hobart, Melbourne, Perth, Sunshine Coast, and Sydney.

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