A fantastic article by Ian Ugarte of “Small Is The New Big” fame on tax and government incentives to provide affordable housing. We will be meeting with Ian Ugarte next month to discuss his mission to deliver 1,000,000 micro apartments in the next 10 years.
“As the Australian population continues to increase, so too does market pressure to provide appropriate and affordable accommodation. Governments across all levels, Federal, State and Local, and are offering the private market great incentives to help address the housing shortage.
Effectively, they are saying that if “you build this style of accommodation we will give you financial reward and, we will give you tax and time approval exemptions.”
These incentives provide the perfect avenue for Investors and Developers to adjust their traditional approach of providing 4 bed, 2 bathroom homes and focus on this emerging demand from singles and couples wanting only 1 or 2 rooms (which is now sitting at 80%).
There are two important points to take note of here. Firstly this is an UNTAPPED MARKET and secondly, there is much more to come!
In this article, I will concentrate on the fast-growing Eastern States, and the types of housing developments Governments are encouraging through their policies.
Starting in New South Wales, the government is encouraging the development of New Generation Boarding Houses. Using this State policy, you can apply to your local council who can’t refuse your application as long as you can tick all the required boxes for example location to services, zoning, room sizes and parking provision.
In New South Wales, if you lodge an NGBH application and it’s approved, you will pay zero land tax. None, whatsoever! This is such a great incentive, which can be accessed as long as you charge less than a certain rate for a single or a double room.
Also, for each new fully self-contained room with its own bathroom and kitchenette, you can apply for a government incentive that will pay you $2,000 per year, for the first five years that you make that room available. Do your calculations!
In Queensland, Brisbane City Council has its own policy allowing you to build and operate Rooming Accommodation. This type of accommodation fills a neglected and long-standing hole in the market.
Their policy allows you to have five unrelated parties in one property and provide self-contained rooms as long as there is a communal area; the living standards, fire and safety criteria are met, and the building classification is 1B.
You can purchase a block of land and demolish the house and replace it, or convert the existing one without needing council approval. You can submit your application to a certifier for 2-week approval.
The beauty of this policy is that it can be in a low-density zone anywhere in Brisbane City Council area. Also, you can have self-assessable approval through engaging a Private Certifier (a.k.a building surveyor).
Victoria, hands down, has the best policy in the country for rooming accommodation. There are two state Government exemptions, and legislation stating that you can currently provide 10 habitable rooms in a dwelling with a 1b building classification.
The exemption allows approval through a building surveyor (private certifier) within as little as two weeks.
In Victoria, you can purchase a property – any house in a low-density zone and convert it to up to 9 bedrooms, plus a main living- kitchen- dining area and have the residents on separate rooming agreements.
As in all of these projects, there are certain things you need to do and specific criteria to address, like universal access, linked fire and smoke detectors, emergency lighting and special handles for emergency exits and resident’s doors.
One thing for sure is that Victoria gives you a fantastic ability to earn extra cash flow, create more wealth and address an urgent social need. It’s a win win win.
In Tasmania, there is a huge demand for different models of housing: in particular, small quality spaces that aren’t currently available. The supply of new homes is failing to keep up with the population growth in areas such as Hobart experiencing an increase of 4,000 in the past18 months.
Tasmania has the best opportunities for High-Income deals mixed with capital growth. As there isn’t a land shortage in Tasmania, housing is not substantially overpriced. The new planning schemes are more progressive across the state, permitting greater density.
Once you understand the types of demographic that are moving into the market, you will see why this alternative strategy works brilliantly, and that now is a perfect time for you to adjust your approach. By acting now, you will be coming in at the right time to achieve amazing returns on your investment.”
By Ian Ugarte, Property Educator