With the axing of the National Rental Affordability Scheme (NRAS), many negatively impacted rental areas may return to normal, according to a leading economist.
Speaking with Residential Property Manager, senior economist at Australian Property Monitors (APM) Dr Andrew Wilson said some areas had seen damaged rental markets since the introduction of NRAS.
“NRAS was an initiative by the Rudd government to improve accessibility to affordable housing. It provided a bonus to builders who provided less than market-based properties for rental.
“We’ve seen some markets where this has had an effect on overall market activity,” said Dr Wilson.
“With smaller markets, tenants usually gravitate toward more affordable subsidised NRAS properties, which has affected the private rental market.”
Dr Wilson said government interference in the property market is never welcomed, and that schemes such as NRAS typically cause more damage than they fix.
“I’m never a big believer of government interference in the property market - they general follow the rule of unintended consequences and they can tend to have a flow-on effect," he said.
“I’m not quite sure NRAS provided the outcomes it was supposed to. I don’t think its [removal is] a negative for rental markets, but more so for the developers who are taking advantage of those government subsidies.”
In the May 2014 Budget, the government decided to not go ahead with the fifth round of NRAS funding.
Incentives already allocated through the scheme will continue to be paid for up to ten years as long as eligibility requirements are met and homes in the construction pipeline are built according to agreed timeframes and in agreed locations.
Investors in dwellings that are currently rented as part of the scheme will not be impacted. For dwellings not yet delivered, investors should discuss the progress of the project with the developer.
Current NRAS tenants and existing tenancy agreements will not be impacted by the decision not to offer any incentives under Round 5. Homes currently rented through the scheme will continue to be paid NRAS incentives, subject to the requirements of the scheme continuing to be met.