Australian Politics
Tuesday, March 28, 2023
Developers thrown huge tax incentives to fix housing crisis
Property developers who build affordable homes will receive a slew of tax concessions
The tax concessions are attractive so developers may grab them. The fact that only one out of 10 homes has to be "affordable" is a rort. The developer will provide minimal facilities in one propery and build the rest to an attractive standard. So the poor will still get only the most basic accommodation
Property developers who build affordable homes will received a slew of tax concessions including land tax slashed in half Treasurer Cameron Dick has revealed.
Owners of build-to-rent projects will have their land tax bill slashed in half for 20 years if they make one in every 10 units an “affordable home”.
Other available tax concessions include a full exemption on the 2 per cent foreign investor land tax surcharge also for 20 years.
A full exemption from the additional foreign acquirer duty for the future transfer of a build-to-rent site will also be available.
The concessions will come in on July 1, 2023.
Mr Dick said the private construction sector was “at capacity” across Australia, and the government was “working with industry to identify innovative ideas that create new pipelines of housing”.
It comes as Premier Annastacia Palaszczuk announced hundreds more emergency hotel rooms across Queensland will be funded under a $28m boost to the state government’s housing response package for another year.
The announcement comes as the state government prepares to focus the parliamentary sitting week on housing, including the push to limit rent increases in Queensland to once a year.
The government will unveil the rent shake up as housing stakeholders gather on Tuesday to look at progress from last year’s housing summit, which the Premier called following The Courier-Mail’s Hitting Home series.
Under the changes, it is understood property owners and landlords will only be allowed to lift the rent on their property once every 12 months.
The move would bring Queensland in line with other states, such as Victoria and South Australia – where the rental price on a property can generally only be changed once a year.
Ms Palaszczuk on Tuesday morning also confirmed the state government would fund its immediate housing response package for an extra year to the tune of $28m.
The support would help “our most vulnerable Queenslanders facing homelessness and housing stress” and including funding more than 600 emergency hotel room spots, and help pay bond payments.
“Through our immediate housing response for families package we've supported more than 4000 families with over 44,000 nights of accommodation,” Ms Palaszczuk said.
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New Origin owner Brookfield ‘flexible’ on Eraring coal closure
There's a lot of persiflage below but there is a committment not to close Eraring until replacement generation is available. That may never happen. The idea that batteries could help is a laugh. A battery will only last hours and then be useless
The soon-to-be owner of Origin Energy will hold talks with incoming NSW premier Chris Minns on the future of Australia’s biggest coal plant, Eraring, as pressure grows to keep the station running longer than 2025 amid fears of blackouts.
“What’s most important to us is that it is closed down as soon as it possibly can be. So within that context we’re obviously happy to have a conversation with the government and hear what they have to say,” Brookfield Australian boss Stewart Upson said.
“But it will be important to us that whatever happens the result of our investment here is that Eraring can be closed down as soon as it can be done so in a responsible manner.”
The takeover deal includes a plan for Brookfield to invest an extra $20bn in Origin through to 2030 to build up to 14 gigawatts of new renewable generation and storage facilities in Australia.
Before the Brookfield approach Origin had given notice that it intended to close the 2880-megawatt Eraring power plant in the Hunter Valley in August 2025.
Mr Minns has said his view is to seek talks to keep the nation’s biggest coal-fired generator open past the scheduled closure date.
Mr Upson told The Australian the August 2025 date “is not a required closure date”. Any closure would also ensure there is alternative supply in place, he added.
“It’s not a commitment by Origin to close on that date, it’s the earliest possible date, it can close.
“Both Origin (now) and under our new ownership – are focused on closing Eraring as soon as we possibly can, only if we can only in a way that’s responsible and doesn’t have an impact on consumers or supply in the market.”
“That’s about ensuring that we have the replacement capacity in place before we close it down, which is something Origin has already been working on with its battery project and something we will be working on as fast as we can,” Mr Upson said.
He said he welcomes talks with the incoming NSW Premier.
“They are a very important stakeholder and I think it’s going to be important that we work closely together to ensure that the transition happens in a way that doesn’t have a negative impact on consumers, business or the economy in general,” he said.
The comments by Mr Upson shows the infrastructure giant is prepared to play the long game on politics as it prepares to take control of one Australia’s most important power generators.
Mr Upson still has some way to go to win Origin, but he has got past the biggest hurdle – securing binding scheme agreement on the $18.7bn mega power deal.
The proposal still needs to get approvals from competition and foreign investment regulators and Orgin’s shareholders are yet to vote on the deal, although it has been endorsed by the board.
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The Greens say they’ve derailed the Beetaloo gas project but proponent Tamboran disagrees
Dozens of oil and gas projects face higher costs under a Labor climate deal with the Greens, analysts said, but claims it will scuttle two of the Northern Territory’s largest gas developments were rubbished by the project developers.
Greens leader Adam Bandt said the safeguard mechanism would put a hard cap on greenhouse gas emissions from the nation’s 215 largest polluters, as well as introducing a “pollution trigger” requiring the Climate Change Minister Chris Bowen to test a new or expanded project’s impact on the cap and net carbon budgets.
Mr Bandt said the net effect of the agreed amendments to the mechanism was that “the Greens have stopped many of the 116 coal and gas projects in the pipeline from proceeding ... and we’ve derailed the Beetaloo and Barossa gas fields’’.
Credit Suisse head of integrated energy and resources Saul Kavonic said the deal represents “a far cry from a ban on new oil and gas, but certainly doesn’t indicate new oil and gas supply is welcome”.
“The new reforms agreed with the Greens are going to be inflationary and risk jobs by hindering investment and restricting offset use across all of Australia’s heavy industry.’’
But Tamboran Resources - developing the Beetaloo project in the NT - said claims its project would not be able to proceed under the new rules were totally incorrect.
“This is 100 per cent wrong,’’ managing director Joel Riddle said on Monday
“Tamboran’s progressive sustainability plan was and is doing everything already called for in these amendments.
“This is a decisive political failure for the Greens who have campaigned to destroy industry, jobs and real progress on emissions reductions.’’
Mr Riddle said the project was already aiming to be net zero across the company’s Scope 1 and 2 emissions for first commercial production of gas, and Tamboran has been marketing Beetaloo as “Australia’s largest green initiative’’.
Empire Energy, which is also targeting gas in the NT, said with less than 1 per cent of carbon contained in its Beetaloo gas resource, the challenge of offsetting the emissions of our development is significantly lower than other gas sources.
“Empire welcomes the additional clarity today’s announcement brings to regulatory requirements for the development of the Beetaloo’s natural gas resources,” Empire Energy chief executive Alex Underwood said.
Tamboran shares fell 6.7 per cent to 21c while Empire dropped 6.3 per cent to 15c.
Santos, which is developing the Barossa project 300km off the NT coast, declined to comment on Monday.
Many industry figures are still grappling with details of the agreed-to amendments. However, there is broad agreement they will make developing gas projects more costly and difficult.
While the “hard cap” did not equate to an outright ban on new oil and gas projects “it raises the bar for the resources sector in that it effectively halves the allowable emissions of new projects’’, pro vice chancellor of sustainability at Murdoch University Martin Brueckner said.
“The resultant cost increases may render many of the 116 projects currently awaiting Australian government approval financially unviable,’’ he said.
The deal includes a “hard cap” on emissions, which would not be allowed to exceed current levels of 140 million tonnes per annum, bettering the previous proposal which would have seen pollution rise to between 155-184 million tonnes by 2030, the Greens said.
Mr Bandt said the “pollution trigger” element of the mechanism “could” be used by the Minister to set allowances for Australian Carbon Credit Unit offsets at zero, “effectively stopping a project from proceeding’’.
Industry sources said this was drawing a long bow as it relied on ministerial discretion to make such a decision, and a statement released on Monday by Mr Bowen said “no limits” would be placed on the use of Australian Carbon Credit Units as offsets.
A freeze on the use of “human induced regeneration” offsets, which the Greens claimed were “the most dubious” was also a part of the deal. The Minister’s statement also said the government would commission a review into the feasibility of an Australian carbon border adjustment mechanism (CBAM).
“The review will give particular consideration to a CBAM for the steel and cement sectors,’’ Mr Bowen said.
Companies such as cement producer Adbri have been calling for an Australian CBAM, in order to stop cheaper, carbon intensive imports flooding the Australian market and undercutting them.
Adbri said it still faced a significant task to decarbonise while keeping its manufacturing plants in South Australia and Western Australia competitive.
Mr Bowen also committed to $1bn in funding for the manufacturing sector and trade-exposed industries through the Powering the Regions Fund.
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Surging migration inconsistent with botched housing plan
In the long list of ill-considered and foolish government policies that have been suggested or implemented through the years, there is little doubt that the Housing Australia Future Fund stands out as among the most imprudent.
Raised as something of a thought bubble by then opposition leader Anthony Albanese in his 2021 budget-in-reply speech, it has now found its way into a concrete proposal that is being debated by the Senate.
Given pressures in the rental housing market and the long waiting times for residents to secure a place in social housing, it’s not unexpected that the federal government is seeking to take action to alleviate some of these problems.
The most direct ways would be simply to lift government spending on social housing via the states and territories; to raise the rate of government rental assistance; and to facilitate greater housing supply in general.
But for reasons that are not completely obvious, apart from staying true to Labor’s pre-election announcement, the government has decided to press ahead with HAFF notwithstanding its glaring deficiencies.
The plan is for the government to raise $10bn in debt – which is currently not cheap, by the way – and to get the Future Fund to invest the funds. The net returns will then be invested in social and affordable housing each year.
From the expected average annual return of $500m, the plan is to invest in a total of 6000 social and affordable dwellings each year.
Affordable dwellings are deemed to be for essential workers such as nurses and teachers who otherwise struggle to find accommodation within acceptable distances from their places of work.
Let’s be clear here: these numbers are extremely modest.
At the current rate of population growth, we need at least around a quarter of a million new homes just to accommodate the extra people. It is also estimated that there are at least a half-million people on the current waiting lists for social housing.
It’s also worth doing the maths: at $500m each year – it’s unclear what happens if the returns are negative – it works out as just more than $83,000 a dwelling funded by HAFF each year. Everyone knows you can’t get anything for that sum of money even if you exclude stand-alone houses.
What is not clear is what the government thinks it can achieve by allocating just more than $83,000 a dwelling – it most certainly won’t be the full costs of construction and land. Will this sum be used to subsidise other financiers by, for example, subsidising the gap between the market and actual rents paid by low-income tenants?
What the federal government doesn’t appreciate is that it doesn’t really matter who funds the additional social and affordable housing because the cost is the cost. Any amount of financial engineering doesn’t alter this.
It may be the case that non-government entities are better at running and maintaining rental accommodation than government agencies, but it’s not necessary to establish a costly and convoluted investment fund such as the HAFF to achieve this.
The HAFF is essentially a bet on the equity risk premium that generates higher returns than the cost of the debt. If this were really a good idea, it should be extended to all forms of government spending which, of course, no one thinks is a good idea.
The only explanation seems to be the political value of cashing in on the Future Fund brand and having a perpetual entity.
In the meantime, the news on the rental crisis becomes grimmer as each month passes. The vacancy rates in many parts of the country are at historic lows and the annual rate of increase in rents ranges from 10 to 30 per cent. Rents are gobbling up higher proportions of tenants’ incomes, for those who can find suitable accommodation in the first place.
But here’s the real rub: just when it’s clear that the rental situation is dire and becoming worse, the federal government has facilitated a substantial surge in the number of migrants entering the country, particularly international students but other temporary entrants as well.
Prime Minister Anthony Albanese’s $10 billion Housing Australia Future Fund is on track to be rejected by key…
Talk about poor timing. Before the pandemic, the annual net overseas migration (long-term arrivals minus long-term departures) was 240,000 in 2019. On current trends, NOM will end up between 350,000 and 400,000 this calendar year. Combined with natural population growth, that’s more than the entire population of Canberra – although the migrants don’t live in Canberra but largely in Melbourne and Sydney.
The Treasurer has tried to justify this surging migration by making the point that there was a substantial hiatus during Covid and we are only making up for the “lost” arrivals.
What he fails to mention is that the pandemic was also associated with a substantial stalling in the building of new accommodation that is needed to accompany strong population growth. In other words, the last thing we should do is to try to make up for these “lost” arrivals. It’s a clear case of the government implementing inconsistent policies.
The HAFF, on the one hand, is ill-conceived and won’t do anything to alleviate the rental crisis any time soon. It’s also too small to have any real impact. On the other hand, egged on by pro-immigration Treasury officials and other vested interests, the government has decided to open the flood gates for even more migrants to come here and stay. This involves a substantial loosening of the conditions that are attached to the various visa categories.
Prime Minister Anthony Albanese says the Housing Australia Future Fund will make a “practical difference” to…
Needless to say, these migrants need somewhere to live and this is making the battle for accommodation even fiercer, driving up rents even further. State governments toy with various perverse policy responses, such as more pro-tenant laws, outlawing rent bidding and even rent controls, which further deter investors from putting money into residential real estate
The bottom line is that the HAFF should be jettisoned before it gets off the ground and the government should go back to the drawing board to deal with the rental crisis. It also should consider means of throttling the current number of new migrants.
There is little doubt that the labour market will soften towards the end of the year; we won’t want the migrant intake to be running at its current high level at that stage.
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Also see my other blogs. Main ones below:
http://dissectleft.blogspot.com (DISSECTING LEFTISM -- daily)
http://antigreen.blogspot.com (GREENIE WATCH)
http://pcwatch.blogspot.com (POLITICAL CORRECTNESS WATCH)
http://edwatch.blogspot.com (EDUCATION WATCH)
http://snorphty.blogspot.com/ (TONGUE-TIED)
http://jonjayray.com/blogall.html More blogs
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