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Could the removal of one BTR tax solve our housing woes?

By Alana Su-Navratil
01 February 2024 | 10 minute read
mike zorbas pca reb xhaskv

An additional 10,000 affordable rental homes could be created by lowering a single tax on build-to-rent (BTR) housing, according to new data.

An EY research commissioned by the Property Council of Australia has shown that lowering the managed investment trust (MIT) withholding tax rate to 10 per cent for BTR projects (including affordable housing components) could fast-track the building of 10,000 affordable homes over 10 years.

According to the research, this would enable the allocation of at least 5 per cent of apartments in projects for affordable housing at a 25 per cent discount to market rent.

Property Council chief executive, Mike Zorbas, said that by reducing the rate to 10 per cent from the current rate of 15 per cent, “the government can boost the delivery of affordable homes in an asset class that offers well-located, secure, customer-led and community-oriented housing”.

He further commented: “This change won’t cost the budget a cent.”

Build-to-rent is considered a “vital component” to the country’s “housing puzzle” as it offers tenants security and enhanced amenities.

With Mr Zorbas acknowledging housing supply as the challenge of the decade, he stated: “We need to pull every budget lever we have to hit our housing targets and build the homes Australians need.”

According to the report Build to Rent Housing Advice: Affordable Housing Modelling Assessment – Property Council of Australia, BTR assets provide investors with stable returns and therefore stability of cash flow.

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These developments also allow for investors to have a diversified income stream by incorporating “opt-in/ancillary services and retail/commercial opportunities”.

The Property Council of Australia is of the belief that by reducing the tax rate, there will be no disincentive for developers not to include affordable housing elements in their BTR buildings.

Melbourne is in the lead as the city having the most BTR accommodation, with just under half (45 per cent) of the nation’s BTR accommodation currently within metropolitan Melbourne suburbs.

As of May last year, 63 per cent of the planning applications under assessment in Melbourne’s inner-city are BTR projects, according to Gilbert + Tobin. Meanwhile, the Allan government has also unveiled a 500-unit project that will add to the state capital’s growing pipeline of BTR projects.

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