What sorts of properties are eligible for NRAS?
The types of dwellings that are made available under NRAS are identical to other private homes in the market. The apartments, townhouses, villas and stand alone homes are scattered within larger developments or estates and must be brand new to be considered eligible.
The design and quality of NRAS dwellings compare favourably with any private non-NRAS dwelling. Typically, they are indistinguishable from other ‘middle-market’ dwellings. Many feature a number of attractive ‘turn-key’ inclusions that mean the property is ready to rent as soon as it is purchased.
Rigorous selection criteria are applied by the Federal Government to the location, design and amenity of NRAS dwellings, all of which must also comply with State, Territory and Local Government planning and building codes and requirements.
The location of the dwellings must be in areas with high rental demand. These areas often have above average rents due to their popularity, desirable location or an under supply of rental stock. The State Governments have specified particular areas with shortfalls in affordable rental housing in which NRAS Approved Properties can be built. This is very appealing to the investor, as it means that the Government has carried out careful research on your behalf to determine which suburbs and postcodes are going to experience strong rental demand in the near future.
The Government approves NRAS properties in minimum lots of 20 approved dwellings (formerly 1,000). This means that you cannot put an existing property into the Scheme. Instead, you need to purchase a property through a company such as Onyx that works with the NRAS Approved Participants who administer the Scheme.
What exactly is affordable housing?
Affordable housing in the context of NRAS is a term that describes the sector between social housing and full priced private rentals. The scheme was created to reduce the rent payable by ‘key workers’ in the community, including police, nurses, other community working members and other eligible tenants.
Tenants are eligible to receive affordable housing as long as they earn less than a prescribed amount. Currently the maximum amount a couple with three children can earn and still remain eligible is $125,960.
Affordable housing is not social housing. In the past, investors have been tentative to invest in social housing, for a number of valid reasons. Social housing has unfortunately often been constructed in large estates or apartment towers, which creates a climate of social isolation and areas of social disadvantage. These properties become difficult to sell and are often undervalued compared to similar properties in other neighbourhoods.
In contrast, NRAS properties are scattered throughout communities, at a maximum density of 30%, and must be of a similar value to nearby dwellings. This ensures that social problems do not develop, as occupants of NRAS houses remain integrated in their communities. In short, 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.
What are turn-key inclusions?
Turn-key inclusions are additional features of a new property provided by a developer to ensure that a new property is ready for its first resident to just ‘turn the key’ and walk in. NRAS properties typically offer a number of turn-key features to ensure your investment is up and running and you are earning rental income as soon as possible. Examples of possible turn-key inclusions are:
- kitchen appliances such as a dishwasher, cooktop, oven and rangehood;
- external features such as landscaping, concreting, fencing, and clothesline;
- window blinds;
- TV aerial and points;
- air-conditioning and heating;
- carpet, tiles or other flooring;
- remote operated garage or carspace.
How many NRAS properties are available?
The Federal Government has announced it will approve 35,000 NRAS properties in the period to 30 June 2014, with support for a further 15,000 in 2015-2016. As of early 2012, 6,208 NRAS properties are already tenanted, with a further 33,713 incentives having been allocated to NRAS Approved Participants to build affordable homes. These may not necessarily have been constructed yet.
There are only a limited number of NRAS properties that will be made available, so we advise you to move quickly and avoid the chance of disappointment!
Next: Financing an NRAS Property >>
