The National Rental Affordability Scheme (NRAS) is a long term commitment by the Australian Government to invest in affordable rental housing. The NRAS Victoria seeks to address the shortage of affordable rental housing by offering financial incentives to the business sector and community organizations to build and rent dwellings to low and moderate income households at 20 per cent below-market rates for 10 years. NRAS Victoria aims to increase the supply of new affordable rental housing; reduce rental costs for low and moderate income households; and 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 construction of up to 50,000 high quality homes and apartments, providing affordable private rental properties for Australians and their families.
NRAS Victoria is a great opportunity for property investors to have a property investment in Victoria in a high capital growth area but still receive the positive cash flow provided by the generous government grants. I believe this is a small window of opportunity where a property investor can build their asset base with no need to take a hit on their cash flow, in actual fact you will increase your cash flow position. NRAS Victoria offers a substantial annual tax-free incentive, the NRAS Incentive, for every dwelling built under its auspices. Investors making property investment in Victoria need to apply for NRAS Incentives, and if offered, must agree to rent approved dwellings at 20 per cent or more below current market rates, to low and moderate income households.
The NRAS Incentive is a funding stream not available to standard residential property investors. Each approved dwelling attracts the NRAS Incentive for 10 years, so long as investors continue to comply with conditions around tenant eligibility and rent discounts. NRAS investors can expect to benefit from the annual NRAS Incentive, rental yields and capital gain. NRAS is intended to be a commercial, profitable property investment in Victoria for participants, while also assisting Australia to increase the supply of affordable housing. It is important to understand that an NRAS approved property is physically no different to any other property in a new development - it simply has been granted the NRAS status. Taxation or any government incentive should never entirely drive a property investment Victoria decision - sure - take them into consideration, but the underlying qualities of the investment are always the most important drivers.
The same applies for NRAS property investments in Victoria - if the NRAS scheme was not there tomorrow, would the investment still make sense? The real benefit of investing in an NRAS Victoria property compared to a normal property investment in Victoria comes down to maths. The $9,524 government incentives are a flat annual amount - regardless of the property type, value and rental income. This means the incentives have a larger positive cash flow impact on properties with a lower market rent. NRAS property investments in Victoria can boost the amount of cash flow generated from a property - which is fantastic.