NRAS PROPERTIES

ABOUT NATIONAL RENTAL AFFORDABILITY SCHEME PROPERTIES

With returns on residential property proving higher than returns on office or industrial property over the last ten years, residential property has proved a profitable investment.

Many developers and investors see the opportunity for good returns on a low-risk investment and are keen to invest in NRAS using the most appropriate structure, including debt.

The Australian Government supports mixed NRAS developments owned by different parties. A debt portfolio of NRAS properties is arguably less risky than an average loan to an individual property investor, or to a commercial property developer, because the properties are often spread across different developments, and have strong demand by tenants.

NRAS Properties must:

• comply with State, Territory and Local government planning and building codes and requirements
• be rented to “eligible tenants”
• be rented at a rate that is at least 20% below the market rent
• not have been lived in as a residence.

The Federal Government does not select tenants or maintain a waiting list for homes supported by NRAS. This is done by the State and Territory housing departments or the tenancy manager of the particular property. Tenants need to contact the tenancy manager directly to register their interest.

The allocation of NRAS properties or dwellings to tenants is assessed by, and at the discretion of, the tenancy management organisation. As long as NRAS eligibility requirements are met, decisions will be made in line with their usual policies and processes.

An independent written valuation of the market rent is required for each dwelling when it first becomes available for rent under the NRAS and at the end of the fourth and seventh years of the approved rental dwelling’s 10 year participation in the Scheme. Rent must be charged at no more than 80% of the market rent valuation.

http://www.environment.gov.au/housing/nras/requirements.html

If an investor decides to sell an NRAS property, there are many options for tenants. Many tenants who have lived in an NRAS property for some years will no longer require the assistance NRAS offers and will be renting on the open market or have purchased their own home.

Some consortiums will want to retain NRAS properties after the expiry of the 10 year NRAS period, and keep tenants on without the obligation of offering discounted rent. Other tenants will be on the books of not for profit housing providers, who may wish to purchase the property or assist in transitioning tenants.

NRAS PROPERTY MANAGEMENT

NRAS investors must appoint a tenancy and/or property manager. There are a range of services that need to be conducted, from selection of tenants and periodic assessments of their ongoing eligibility to rent an NRAS property, as well as property maintenance.

A tenant manager can be contracted on a fee-for-service basis by an investor, or be part of the consortium which applies for NRAS Incentives. Standard State and Territory residential tenancy laws apply to NRAS properties just as they do for any private residential investment. This includes laws applying to legislation and licensing requirements for tenant managers.

NRAS tenants will have normal leases under State and Territory tenancy laws.  Exactly the same rules regarding evictions, maintenance obligations and responsibilities of tenants will apply to NRAS tenants as apply to other tenants in the private market.

Tenants for NRAS properties are chosen by investors or their appointed tenancy managers. The only requirement imposed by the Government relating to NRAS tenant selection is that they meet a household income test. Eligible tenants' gross income must be equal to or less than the initial income limit when they become a tenant of an NRAS dwelling. Income may increase up to 25 per cent (the upper income limit) before their eligibility is affected.

For example, a couple with three children, earning a gross income of $104,913 per annum, is eligible to rent an NRAS dwelling. With the income increase allowance of 25%, this family could earn up for $131,141 for two years before they become ineligible to remain in an NRAS property. Tenant managers are expected to maintain adequate income records to ensure compliance.

Household income limits are indexed annually on 1 May in accordance with the NRAS tenant income index.

http://www.environment.gov.au/housing/nras/faq/eligible-dwellings.html

http://www.environment.gov.au/housing/nras/requirements.html

http://www.environment.gov.au/housing/nras/investors.html

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