Research commissioned by the Property Council has found that a reduction in the managed investment trust (MIT) withholding tax rate paid by developers could result in an additional 10,000 affordable dwellings in the next decade.
Currently sitting at 15 percent, the EY research indicates that just a five percent reduction would provide more housing supply from now until 2034. Property Council Chief Executive Mike Zorbas believes the adjustment is a straightforward one the government should enact.
“Housing supply is the challenge of the decade. We need to pull every budget lever we have to hit our housing targets and build the homes Australians need,” he says.
“This new modelling shows one cost neutral government policy improvement will throw the weight of new institutional investment behind the creation of 10,000 affordable rental homes. Build-to-rent is a vital component of the country's housing puzzle, offering tenants security of tenure, enhanced amenities and properties managed by professionals.
“Without every extra dollar of institutional investment Australia can harness, hitting our national target of 1.2 million new homes will be a Herculean task.”
The Property Council believes that having the affordable housing MIT at 10 percent as opposed to 15 as it is for other dwellings will ensure the 150,000 new apartments are completed. THe 15 percent MIT withholding rate was announced in the 2023 Federal Budget.
Zorbas believes incentivising affordable housing at a separate rate of 10 percent avoids investment disincentive.
“Adjusting the managed investment trust withholding tax to align with other property types was the right choice and it should remain that way to maximise the number of new homes built,” he says.
“The states already have well developed plans for affordable housing as part of future development and no double up is needed.
“By reducing the managed investment trust withholding rate to 10 per cent, the government can boost the delivery of affordable homes in an asset class that offers well-located, secure, customer-led and community-oriented housing – and this change won’t cost the budget a cent.”
