MITs can now invest in affordable housing

By Michael Mata | 10 May 2017

Retail and institutional investors are being incentivised into investing in the nation’s growing social housing sector with discounts on capital gains, the roll out of new micro city deals, as well as the creation of a new bond market.

Managed investment trusts (MITs) will now be allowed to invest in affordable housing, and investors who purchase into these trusts will see an increase in the capital gains tax discount they receive (from 50% to 60%).

The discount, which would cost the federal government approximately $15m over two years, helps to compensate for the lower yield on social housing investments.

To further incentivise investors, the government will strengthen the rent guarantee in these homes by allowing direct deductions of welfare payments from tenants. However, to obtain the tax discount, the investor must make the property an affordable rental for at least a decade.

Aside from contributing a further $375m to extend housing funding for the homeless, the government will replace the National Affordable Housing Agreement (NAHA) with the $1bn National Housing Infrastructure Facility.

The facility, which is based on the UK model that Treasurer Scott Morrison studied, will finance micro city deals. City deals are co-operative funding projects under which different tiers of government work together to solve issues, such as urban density, planning reform, and delivering on housing supply targets. Other micro city deals will see new housing zones imposed to force supply of social housing on new developments.

The federal government also confirmed it would establish the National Housing Finance and Investment Corporation by July 2018. This initiative will provide long-term and affordable finance to developers of social housing via the issuance of bonds backed by social housing rental income streams. The bonds are expected to be purchased by institutional investors and will replace the current $500m in bank debt provided to regulate social housing developers.

Overall, the federal government said its plans would provide more vehicles for superannuation funds to invest in affordable housing.

Related stories:
Could Social Impact Investments Solve The Housing Affordability Crisis?
Rental Unaffordability Is Threatening More Aussies With Homelessness


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