Table of contents
 - featured image
By Michael Yardney
A A A

New $450m scheme to provide essential workers with subsidised Sydney rent

key takeaways

Key takeaways

The Minns government will build apartment blocks for Sydney's essential workers, offering them cheap rent so they are not priced out of the city.

Essential workers, including nurses, paramedics, teachers, allied health care workers, police officers and firefighters, are set to benefit from the BTR scheme.

The funding will enable Landcom to acquire up to four new sites to build at least 400 new apartments in the next three years, with the aim of providing essential workers with the opportunity to work and live in the communities where they work.

The New South Wales government is planning to build homes around existing infrastructure and roll out the biggest investment in public housing maintenance to date, in order to fix the housing system and create one that is fair and affordable for everyone.

Are we in an election year?

Excuse me for being cynical, but each state seems to be bringing initiatives to help housing affordability.

Don’t get me wrong… this is a good thing.

However, when looking more closely at some of the initiatives, the numbers don’t really stack up.

Nsw

Build-to-rent scheme for essential NSW workers

The recent NSW budget announced that the Minns government will build apartment blocks for Sydney's essential workers, offering them cheap rent so they're not priced out of the city.

The budget set aside $450 million to build more than 400 build-to-rent (BTR) dwellings over the next three years for essential workers to rent at a subsidised rate.

Essential workers, including nurses, paramedics, teachers, allied health care workers, police officers and firefighters, are set to benefit from the BTR scheme, which aims to “increase the supply of well built, well located, secure and accessible rental accommodation for the essential workers who keep Sydney running but are being priced out of the market,” the government said.

Premier Chris Minns said the government was thinking "outside the square" to improve affordability.

“We're expecting big towers, and they'll be exclusively for essential workers," Mr Minns said.

The funding will enable Landcom, the NSW-owned land and property development organisation, to acquire up to four new sites to build at least 400 new apartments in the next three years.

“Landcom will select sites with a preference for surplus government land identified as being suitable for housing with the specific locations to be determined,” the government said.

“The homes will be offered to essential workers at a discount to market rent, through a separate subsidy program.

“The Government will retain ownership of the housing with rental income available to help fund a potential future additional expansion of the Government’s key worker housing program.”

While the discounts haven't been decided, the premier suggested they would be close to 20 per cent.

"We can offer competitive rates because the government will own the land. It will be the builder of the project," he said.

"Any profits that come about as a result of the project will be reinvested so that we can potentially envisage stage two or stage three of this."

The apartments will be located in metro Sydney, with the aim of providing essential workers with the opportunity to work and live in the communities where they work.

Subject to planning approvals, construction is expected to begin on the first site in early 2026 with essential workers expected to be able to move in from late 2027.

Eligibility criteria, details on how to apply and the rental subsidy will be available closer to the completion of the first project, expected in 2027.

Then there’s the $6.6 billion Building Homes Program

We know that social housing has not been a priority for state governments for several decades, so a new initiative that will be the largest-ever public housing investment in NSW history and focus on providing affordable housing for the people who need it most is set to be pretty transformative.

Here’s what we know so far.

Focusing primarily on meeting the needs of Sydney’s more vulnerable communities, the Building Homes for NSW Program plans to:

  • Build 8,400 new public housing abodes (half of which will be dedicated to women and families experiencing domestic violence);
  • Fix 33,500 public homes in desperate need of repair;
  • Deliver more than 21,000 affordable and market homes across the state; and
  • Build affordable rentals for key workers
  • The project also aims to address the issue of homelessness in the state, injecting more than half a billion dollars into homelessness services and crisis accommodation.

To facilitate the project, the government aims to leverage surplus government land and public housing construction to undertake the biggest planning reforms in a generation – with aims to build homes around existing infrastructure and roll out the biggest investment in public housing maintenance to date.

Described by Minister for Housing Rose Jackson as a “once in a generation opportunity”, the project aims to “fix the housing system and create one that is fair and affordable for everyone”

Nsw

My thoughts:

I believe rental accommodation should be provided by both the private and the public sectors.

In general, most of the rental accommodation is provided by ordinary Australians (what many call mum and dad investors) and public housing for those in need, and there will always be disenfranchised Australians, has been provided by the government.

In fact, I believe it is their obligation to do so.

However, over the last couple of decades, the state governments have been letting their constituents down and not providing sufficient social housing.

So these initiatives by the New South Wales government are very welcome.

The availability of housing, and in particular, affordable housing, is one of the biggest pressures faced by Australians.

And many essential workers just can’t find a property that they can afford close to where they work.

But let’s look at the numbers a little bit more carefully

  1.  The $1,120,000 cost of construction for each of the 400 BTR apartments for essential workers is excessive. Especially if the government already owns the land and we know the government are not really efficient at building anything, so this will not be an efficient use of taxpayer funds.
  1. 400 affordable dwellings is a drop in the ocean compared to the 494,000 projected increase in NSW’s population over the four years to the end of 2027.
  2. The government said: "Any profits that come about as a result of the project will be reinvested so that we can potentially envisage stage two or stage three of this." Clearly, the government has no idea what it costs to construct high-rise dwellings in the city, and if they offer discounted rents, where is there a profit to be made? The only profits I can see if they make the renting received a higher than holding costs, but I can’t really see that happening.
  3. And finally – it will take a number of years for these developments to get out of the ground and be completed, even if the government fast-tracks everything.

About Michael Yardney Michael is the founder of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He's once again been voted Australia's leading property investment adviser and one of Australia's 50 most influential Thought Leaders. His opinions are regularly featured in the media.
2 comments

Back in the 1990's, we lived near a public housing estate in Belconnen, Canberra. It became a hell-hole for the residents, due to the behaviour of the minority and a lack of building maintenance. It was eventually bulldozed and the land sold to a dev ...Read full version

1 reply

Guides

Copyright © 2024 Michael Yardney’s Property Investment Update Important Information
Content Marketing by GridConcepts