The Federal Department of Families, Housing, Community Services and Indigenous Affairs (FAHCSIA) developed and introduced the scheme in July 2008 to entice institutional and private investment to fill the gap in rental affordability.
The NRAS aims to:
- Increase the supply of new affordable rental housing;
- Reduce rental costs for low to moderate income households
- Encourage large scale investment and innovative delivery of affordable housing.
The Australian Government has committed $1 billion to the scheme over four years to stimulate the construction of up to 50,000 homes and apartments, providing affordable private rental properties for Australians and their families.
Visit the Federal Government website for more information or to view the NRAS Act and Policy documentation:
How it works
Applications to participate in the National Rental Affordability Scheme (NRAS) require a submission of a high volume of dwellings and are therefore not open to individuals.
The scheme has a competitive selection process and successful applicants (Approved Participants and their related consortia) are allocated or reserved NRAS Allocations to specific Approved Rental Properties.
For a dwelling to qualify as an Approved Rental Property under the NRAS scheme it must meet the Mandatory NRAS Conditions including that the property is newly built and has not been lived in as a residence; and the property must be rented to eligible tenants at 20% below the market value rental rates each year for 10 years.
Approved Participants are eligible to receive NRAS Rental Incentives for the Approved Rental Properties. The incentives are credited directly to the Approved Participant who in turn passes on the incentives to the end investors of the Approved Rental Property.
The NRAS Rental Incentive is contributed annually by the Federal and state/territory Governments. The two key elements of the NRAS Rental Incentive are:
- A Commonwealth Government Incentive currently at $6855 per dwelling per year as a refundable tax offset or payment
- A State or Territory Government Incentive currently at $2285 per dwelling per year in direct or in kind financial support.
The NRAS Rental Incentive is indexed annually on the 1st of May in accordance with the rental component of the Housing Group of the Consumer Price Index (CPI) for the year.
When the property owner is lodging their tax return the incentive is used as a tax offset. The NRAS tax offset can reduce the overall tax payable or can be received as a cash refund should there be nil or insufficient tax debt for the income year.
Determining NRAS Rental Rate
The Approved Rental Property's annual NRAS Rental Rate is calculated at 80% of the market rental rate. Independent, qualified and registered valuers determine what the market rental rate is by performing valuations in years 1, 4 and 7 of the NRAS 10 year term.
A 'desk-top' valuation is used to calculate the market rental rate for years 2, 3, 5, 6, 8, 9 and 10. 'Desk-top' valuations consider many aspects of the property including location, dwelling type and comparable rental properties in the area. At a minimum, NRAS Rental Rates are indexed annually according to the rental component of the Consumer Price Index (CPI).
NRAS Eligible Tenants
Approved Rental Properties must be rented to eligible tenants that fall within a specific income threshold. The eligible income levels are specified in the NRAS Act and the initial tenant income levels are assessed against the gross household income (See Table 1 for eligible tenant income profiles). Eligible tenant households can earn up to 25% above their initial income limit and still qualify under the scheme.
Often described as the key-worker demographic, eligible tenants are typically low to middle income earners such as office administration staff, blue collar workers, police, military, hairdressers, nurses, retirees and students.
There are currently large databases of eligible tenants in each state, with the number of prospective tenants growing rapidly as they seek to benefit from the discounted rental rates. At the commencement of the scheme the Australian Government identified 1.5 million households nationally who are eligible under the NRAS.
Table 1. Eligible Tenant income profiles
|Household type||Initial-Income limit $||Upper-Income limit $|
|Sole-parent with 1 child||58,638||73,298|
|Sole-parent with 2 children||72,695||90,869|
|Sole-parent with 3 children||86,752||108,440|
|Couple with 1 child||72,653||90,817|
|Couple with 2 children||86,710||108,388|
|Couple with 3 children||100,768||125,960|