11 Feb NRAS – 10 years on – what’s next? – Jason Cubit
As the federal government’s NRAS scheme began to wind down last month it is time to see what is happening with the 32,000 properties that were added to the scheme and with the subsides coming to an end if they are holding their re-sale value. Jason Cubit from Horizon Housing talks to us about that.
Kevin: Well, would you believe it’s been 10 years since the introduction of NRAS, the National Rental Affordability Scheme. Only seems like yesterday, in fact. But, we hear that the NRAS scheme has now been wound down. No new allocations being made. I’m talking now to Horizon, the Horizon Housing Company, their CEO Jason Cubit.
Kevin: Now, just by way of introduction, Horizon Housing is a part of the Community Housing Limited Company, the largest community housing provider in Australia. Jason, thank you very much for your time. I’m just keen to hear from you about how successful or otherwise the NRAS scheme was.
Jason: Yeah. Thanks for your time. NRAS has delivered some great outcomes across the country, providing housing to over 32,000 households over the 10 years, and really targeting the people in highest need. Yes, there were a few issues in the early implementation of the programme which happens with most large scale national programmes.
Kevin: What were those issues?
Jason: Just getting them delivered on time and delivery of projects in areas it’s needed and just bedding down the compliance regime, and making sure the assessment of submissions to government were done in a timely manner, so the projects were still there when they’re approved. Things like that which happen generally in building industry, but also making sure they’re targeted at appropriate tenants.
Kevin: Did it reach all the lofty goals that it was pitched at when it was first launched? I think 32,000 is quite good. But, is that a below par?
Jason: The original scheme was targeted at 50,000 and then hopefully with an extension to 100,000. So, in change of government that scheme was abandoned and no more allocations issued. So, it was disappointing to see that happen. But, the ones that were out there, they’re out there in our system certainly acheived some great outcomes for the communities and the people living in them, and investors. Let’s not forget about investors.
Kevin: Yeah. We’ll come to investors in a moment. The uptake on NRAS properties or development of them, was it particularly strong in any one state of Australia or was it pretty well right around the country?
Jason: All across the country, Queensland did well, WA. It really was dependent on the location, so inner city Sydney and different areas like that. The eligibility for clients made it very hard to achieve outcomes there because the property values were so high, the rent levels didn’t work. People that had an income eligibility required.
Kevin: Jason. Given that we’re at that 10 year anniversary in some of those properties would now be coming of the scheme. What happens to the tenants who are in there? Does that rent have to go up to normal market rent?
Jason: Well. It depends on who the properties are being managed by and who the owners are really. In reality with this scheme, this sheme ends so, no more subsidy to the owner to provide that discounted rent of 25% the market rent. So the automatic outcome would be that the tenants lease would end at that date and the rent would be then reset by the owner to whatever level they saw fit, so it wouldn’t be under any control of a government subsidised scheme. The properties we have under management, we’re working closely with the tenants and the owners to try and negotiate an outcome where hopefully the tenant can stay on and the owner is happy with that. So trying to meet half way and resetting the rent.
Kevin: And how successful have you been with that? Have you got any indication yet?
Jason: We have only had a few late last year in December, we’ve only had 5 or 6 come out. A pretty high strike rate of having an extension of the leases where they renegotiated rent outcome for both parties. So what we’re trying to work through is what’s the best option for the landlord to make sure that, to minimise the vacancy cost and the refit cost and those sorts of things after 10 years.
Kevin: Are there any, is there anything on the drawing board to replace NRAS as it is now?
Jason: Not in current policy. There’s lots of discussions nationally and the state levels looking at NRAS mark two and other options to consider for a replacement scheme, but there’s currently no approved policies or strategies on the table that we’re aware of.
Kevin: Now. Your website of course horizonhousing.com.au. There are options there for investors. Could we quickly talk about that? What are the opportunities?
Jason: The current opportunities for NRAS investment is really the turnover of current property where current investors maybe looking to exit out of the ownership of those properties and resell them and obviously our objective is to get those investors to resell to more investors that wish to retain NRAS on those properties because some might have five, six, seven years left in them, with good NRAS subsidy and solid tenant outcomes. So our aim is to work with those current property owners to on a buyer is willing to stick with NRAS.
Kevin: Any indication yet as to how they’re holding in terms of their value?
Jason: Depends on the location. It really is driven, I don’t think NRAS really has much of an impact on the valuation of properties. That was an original concern by banks and valuers, but I think what’s come through is that values are holding like the rest of the suburbs in most cases. So no major impact.
Kevin: Yeah. Speaking of the banks there, we know they’re tightening particularly with investors. What are you seeing with anyone who’s looking to resell or even to buy one of the properties? Are they struggling as well?
Jason: Yeah. Same with any investment property it’s pretty challenging to get finance at the moment. Unfortunately or fortunately for the people we’ve had a few that have sold, but they’ve sold out of the scheme and owner occupiers have purchased them. Which is good for them but not good for the tenant or the continuation of NRAS on those properties. So financing with any other project is pretty challenging at the moment.
Kevin: Yeah. My guest has been Jason Cubit, CEO for housing, sorry, Horizon Housing. Thank you very much for your time, Jason. I appreciate you giving us that explanation and good luck on your work going forward to anything we can do to make properties more affordable. I think for tenants in particular and make it a viable proposition for developers and investors is well worth it. So thank you very much for your time.
Jason: Alright, thanks a lot.