Is anyone really surprised that the $4.5 billion National Rental Affordability Scheme, launched by Labor in 2007, has turned into a scam-fest, gamed by dodgy developers on-selling their rights under the scheme and universities happy to see the taxpayer subsidise their efforts to recruit more fee-paying international students?
Rick Wallace of The Australian put me onto this story and, at first, I didn’t believe that international students were entitled to 20 per cent below market rents in newly constructed buildings. But when I found an application form, lo and behold, it was true. Indeed, someone on a bridging visa is also entitled under the NRAS.
The former housing minister, Tanya Plibersek, has been trying to tell us that there was nothing she could do; that she was advised that it would be illegal to exclude international students. Really? Really? We have no problem excluding international students from Medicare (although they do lob up at public hospitals) and state governments have no problem excluding them from transport concessions.
I think she might have been telling a bit of a porky. Here’s my theory. The NRAS was very slow to get off the ground, in part, because the low income tenants looked pretty undesirable (paying rent, caring for property) for potential developers, even in the context of a massive subsidy (positive gearing + tax credit = great deal as long as rent is paid).
Along comes the idea of housing students, both local and international. Better tenants, better payers. The state governments, who are generally beholden to the universities, were keen (save Queensland) and pressed for the inclusion of student accommodation. And here’s the kicker: parental income is irrelevant in terms of assessing whether or not someone is eligible for NRAS accommodation. This is a boon for some local students, as well as international ones.
Can I also point out what a laughable outcome this scheme has produced – 14,000 units built in six years. Given that we probably need somewhere in the order of 120,000 to 150,000 new dwellings PER YEAR to accommodate our growing population, 2,300 per year of NRAS accommodation just doesn’t hit the sides, let alone affect rents. And all for billions of taxpayer money (each unit costs $10,500 per year, with generous annual indexation, for ten years).
If governments are really interested in creating more affordable housing, they need to look at their land release policies, their development application processes and the taxes and charges they levy on new developments. Schemes such as the NRAS have no place.
Here’s the news story:
FORMER housing minister Tanya Plibersek’s claim that it was discriminatory and impractical to prevent foreign students accessing taxpayer-subsidised housing meant for low-income Australians has been undermined by revelations the commonwealth raised no objections to Queensland Labor closing the same loophole.
Social Services Minister Kevin Andrews also revealed yesterday his crackdown on exploitation of the $4.5 billion National Rental Affordability Scheme would extend to a “disturbing” trend of trading in NRAS entitlements, which he has referred to the Australian Securities & Investments Commission and state-based regulators.
Ms Plibersek, who under the Rudd government launched and championed the NRAS to develop cheap rental housing for low-income Australians, said earlier this week she was advised by commonwealth bureaucrats it was discriminatory and ill-advised to block foreign students from accessing the scheme.
But the Queensland government said yesterday Ms Plibersek’s department had raised no concerns about restricting NRAS eligibility to Australian permanent residents when the state, then led by Labor premier Anna Bligh, put forward the proposal.
And the head of the National Affordable Housing Consortium, a leading not-for-profit builder of NRAS units in Queensland, claimed he had also told Ms Plibersek and her department that students should not be the priority for the scheme, and if they were to be included, it should be limited to those from rural areas.
The Australian has revealed in the past week that the scheme, which provides incentives of more than $10,000 a year to developers of housing if they agree to charge rent at 20 per cent below market rates, has been used to build units for thousands of students, including many from overseas.
Queensland is the only state to prevent foreign citizens becoming NRAS tenants, closing the loophole that has seen vast blocks of taxpayer-assisted student accommodation pitched predominantly at the fee-paying foreign student market.
New figures released by the commonwealth yesterday revealed that of the 19,000 tenants of the NRAS scheme, which was originally aimed at low-paid workers, more than 1500 are international students.
Ms Plibersek said earlier this week she “investigated whether we should have exclusions for particular groups like that” but her department recommended against it because of the danger of administrative complexity and breaching discrimination laws. The Queensland government confirmed yesterday that the Department of Housing and Public Works had advised the commonwealth that it planned to impose the restriction within its borders and no objections were raised.
Queensland Minister for Housing and Public Works Tim Mander said the NRAS had played a role in creating affordable housing but there needed to be tight eligibility criteria.
“NRAS properties tend to be an ideal fit for people who don’t necessarily need public housing, but still struggle with the cost of living,” he told The Australian. “However, to be eligible in Queensland, applicants have to be Australian citizens or have been granted permanent residency.”
Robert Schwarten, who was the Queensland housing minister at the time the scheme was being introduced, said he designed the prototype for the program and it was never intended to house students. “It was for working people and people on low wages. In terms of students coming here and living in these things, no. I designed the scheme for poor people, not students,” he told The Australian.
But he defended Ms Plibersek, whom he called an excellent housing minister, saying she was probably restricted by the complexity of other states’ legislation in preventing foreign students from becoming NRAS tenants.
Mr Schwarten, now retired from politics, said Queensland’s laws were more straightforward and allowed him to block non-Australian residents from occupying NRAS units.
Ms Plibersek declined to comment on the Queensland government’s statements, saying only that the Abbott government was “trashing a good program to soften up Australians for a cut to affordable housing”.
As revealed in The Australian yesterday, Mr Andrews has commissioned a review of the scheme with a view to closing the loopholes that have seen universities and developers tap taxpayer funds to build student housing for foreign students.
Yesterday, he said the trading in NRAS subsidies by developers and real-estate spruikers would also be reviewed by the government. “We’ve discovered that there’s a trade in the licences so much so that some of them are now being traded for about $20,000 on the market,” he said.
Industry sources said profiteering could occur when developers bought a site, won NRAS incentives, then sold the site for a higher price with the NRAS incentives attached, or when developers or incentive holders switched them between sites.
“While the legislation prohibits NRAS entitlements from being sold, they can be transferred to another project, and developers are using consultancy payments and the like to get around the prohibition on selling them,” one source said. The Department of Social Services, which is auditing NRAS grants, has warned that charging extra fees for incentives could lead to the incentives being withdrawn. It has included a referral area on the NRAS website to allow investors and developers to report examples of abuse.
“Where the ‘trading’ of incentives is likely to constitute a breach of corporations or consumer law, the department has and continues to refer cases to relevant authorities, including the Australian Securities & Investments Commission and state consumer affairs commissioners,” the department said. The Australian National Audit Office confirmed yesterday that it was also eyeing an audit of the NRAS.
National Affordable Housing Consortium chief executive Mike Myers, whose organisation has built a record 2300 NRAS units, said when used properly, the program was a godsend for struggling tenants, saving them about $90 a week on rent. He said it would also generate more than 300,000 jobs, based on a Bond University study commissioned by the not-for-profit housing sector.
But he said his organisation, and others in the sector, had warned Ms Plibersek and the commonwealth about problems with the design of the NRAS, including the ability of foreign students to access properties under it. “We probably share your concern about the foreign student issue and wrote to the previous government about that,” he told The Australian.
“Me and, I’m sure, others in the not-for-profit housing sector, thought student access to NRAS was not a priority, but if it was included should be targeted to low-income Australian students, particularly those from rural and regional areas who struggle with the extra costs involved. Obviously they decided not to do that or they didn’t want to do that.”
Andrew Tyndale, the investment banker turned philanthropist who first highlighted issues with universities winning large numbers of NRAS places, yesterday urged the Abbott government not to abandon the scheme. “It is a major success in policy terms, and addresses one of Australia’s most pressing problems,” he told The Australian. “To date, NRAS has received support from both sides of the house, enabling it to be one of the few really successful social policy interventions of the last decade.”