The Property Council of Australia has commissioned new EY research. It highlights that lowering the managed investment trust (MIT) withholding tax rate to 10% for Build to Rent projects with an affordable housing component could accelerate the building of 10,000 affordable homes over ten years.
This would enable the allocation of at least 5% of apartments in projects for affordable housing at a 25% discount to market rent.
“Housing supply is the challenge of the decade. We need to pull every budget lever we have to hit our housing targets and build the homes Australians need. This new modelling shows one cost neutral government policy improvement will throw the weight of new institutional investment behind the creation of 10,000 affordable rental homes. Build to Rent is a vital component of the country’s housing puzzle, offering tenants security of tenure, enhanced amenities and properties managed by professionals. Without every extra dollar of institutional investment Australia can harness, hitting our national target of 1.2 million new homes will be a Herculean task.”
Mike Zorbas, Chief Executive, Property Council of Australia
The recent modelling expands on EY’s 2023 research, which indicates that a 15% managed investment trust withholding rate can result in 150,000 apartments by 2033, a change announced in the May 2023 Federal Budget.
“Adjusting the managed investment trust withholding tax to align with other property types was the right choice and it should remain that way to maximise the number of new homes built. The states already have well developed plans for affordable housing as part of future development and no double up is needed. By reducing the managed investment trust withholding rate to 10%, the government can boost the delivery of affordable homes in an asset class that offers well-located, secure, customer-led and community-oriented housing – and this change won’t cost the budget a cent.”
Mike Zorbas, Chief Executive, Property Council of Australia
The specifics of this budget measure is yet to be finalised, but the Property Council of Australia has warned that forced affordable housing elements at the 15% tax rate for Build to Rent housing would jeopardise those 150,000 new apartments.
Incentivising affordable housing at a separate rate of 10% avoids that investment disincentive.
