The National Rental Affordability Scheme
WHAT IS NRAS?
The National Rental Affordability Scheme (NRAS) is a long term commitment by the Australian Government to investors prepared to build affordable rental housing.
NRAS seeks to address the shortage of affordable rental housing by offering tax-free financial incentives to the business sector and not for profit housing providers to build and rent affordable dwellings.
NRAS is an Australian Government initiative to:
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stimulate the supply of up to 50,000 new affordable rental dwellings in Australia, by June 2012
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reduce rental costs for low and moderate income households
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encourage large scale investment and innovative management of affordable housing.
The incentive, payable either as a grant or refundable tax offset, is paid annually for up to 10 years. The investor must:
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rent dwellings to eligible tenants
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charge rent at least 20% below the market rent
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provide the dwelling for participation in the scheme for 10 years.
NRAS is not a public housing program; it is a tax incentive to induce more private investment in the lower price range of the residential construction market. NRAS tenants are typically key workers such as childcare workers, nurses, police officers, fire-fighters and paramedics. Approximately 1.5 million households are currently eligible to rent NRAS properties, ensuring a strong ongoing demand for NRAS properties and a large pool for investors to choose from.
The Department of Families, Housing, Community, Services and Indigenous Affairs (FaHCSIA) is responsible for the implementation and ongoing management of NRAS, in consultation with the Australian Taxation Office.
http://www.fahcsia.gov.au/sa/housing/progserv/affordability/nras/Pages/default.aspx#nras_1
WHY NRAS?
While house prices have fallen globally over the last two years, the Australian housing sector has shown resilience, due to strong fundamentals – low vacancy rates, high population growth, insufficient housing stock, high employment and prudent lending practices.
Because of this, the Australian rental market represents a good long-term investment with the opportunity for significant capital gains.
NRAS offers great flexibility, with investors encouraged to develop portfolios with diverse dwelling types across different locations. With more than 1.5 million households eligible to rent NRAS properties, the vacancy risk in any location is negligible.
From an investment prospective, NRAS can counterbalance the risk and volatility of equity markets and assist in providing a balanced portfolio.
Financial modelling of the NRAS Incentive shows that it can provide rates of return at levels that are highly competitive with other asset classes.
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