What type of tenant will rent my NRAS property?
Just because the NRAS properties will be rented at 20% lower than market it doesn’t mean that the tenants will in any way be substandard – quite the contrary.
NRAS was conceived as an entirely new program to assist the ‘key workers’ that our communities are so dependent upon, such as police, teachers, nurses and fire fighters. In an era of systemic housing shortages, many low to moderate income families have found themselves facing ‘rental stress’ merely due to the simple economic equation of undersupply forcing prices up.
Because NRAS properties will be new houses that are rented cheaper than other properties in the same area they will be in the most demand. This gives an NRAS investor a greater choice of tenant and most likely a lower vacancy rate. It must be pointed out that the NRAS investor has a choice of tenant just like any other landlord.
The one difference is that the tenant must satisfy specific household income criteria. However these criteria are not very onerous. The table below shows the income criteria for tenants renting an NRAS property. The tenant’s income must be equal to or less than the value of the income limit in the middle column when they first become an NRAS tenant (initial income limit). However, the tenant’s income can increase by 25% (to the upper income limit) while they are an NRAS tenant, and they will still remain eligible.
| Household type | Initial income limit $ | Upper income limit $ |
|---|---|---|
| One adult | 44,128 | 55,160 |
| 2 adults | 61,006 | 76,258 |
| 3 adults | 77,884 | 97,355 |
| 4 adults | 94,762 | 118,453 |
| Sole parent with 1 child | 61,049 | 76,312 |
| Sole parent with 2 children | 75,685 | 94,606 |
| Sole parent with 3 children | 90,320 | 112,901 |
| Couple with 1 child | 75,641 | 94,553 |
| Couple with 2 children | 90,277 | 112,847 |
| Couple with 3 children | 104,913 | 131,141 |
It is estimated that 1.5 million Australians are eligible to be NRAS tenants. According to the most recent Australian Bureau of Statistics figures (ABS Household Income and Income Distribution 2007-8) the average household income for households renting through a private landlord was $78,104, and the median household income (i.e. 50% of households above and below) was $64,792. Looking at the table above, it is clear that the average private tenant is going to be eligible for an NRAS property.
What if the tenant is no longer eligible?
If a tenant’s income increases above the eligibility limits, they may continue to rent an NRAS property at a discounted rate for two years. As the investor, you will continue to receive the NRAS incentives throughout this time period. This should be sufficient time for the tenant to find other housing on the private market. For example, a couple with three children could earn up to $131,141 for two years before they became ineligible for the discounted rent.
