NSW Treasurer Daniel Mookhey has handed down this year’s State Budget, with a focus on building more homes and measures to help to manage the ongoing housing crisis.
However, investors could be worse off on the back of changes to property taxes and foreign investment.
The Budget has outlined the government’s plan to build 30,000 homes, including 21,000 new market and affordable homes, which will be built on government-owned land.
At the same time, they will also allocate $5.1 billion over four years for new social housing.
The money is earmarked for land purchase and construction of 8400 new social homes, of which 6200 will be new homes and 2200 will be replacement homes.
Many of those social homes will go to people fleeing domestic and family violence.
“NSW needs more homes,” Mr Mookhey said.
“More homes for renters. More homes for key workers. More homes for people escaping violence at home. More homes in metropolitan NSW. More homes in regional NSW. More homes close to public transport. More homes in the neighbourhoods people love living in.”
Essential worker housing
Under the Budget, paramedics, nurses, teachers, police officers and firefighters will be able to access affordable inner-city housing.
The government has put aside $450 million to build more than 400 build-to-rent homes in the next three years.
The homes will be built across four sites by public developers Landcom.
While the locations are yet to be determined, once built, they will be offered to essential workers at about 20 per cent below the market rate.
More than $200 million will also be used to purchase about 120 homes in regional areas, including motels and units, which will be used as temporary housing for health workers moving to the country.
Mr Mookhey said the decision to release surplus government land for housing was sustainable and repeatable, as it would create more infill sites for the government’s density push.
“We would much prefer to use land near transport than continue to expand the footprint of our city, which leads to higher electricity and water bills,” he said.
“Homes NSW and Landcom have first call, and they can decide whether it’s suitable for their needs, which shows we’re being pragmatic – having found this land, we’re now looking to immobilise it and Homes NSW and Landcom have the certainty to begin that work.”
Investors and overseas buyers could be worse off under this year’s budget.
Land tax
NSW has also scrapped annual indexation on land tax rates, instead freezing the tax-free threshold for land tax at the 2024 level of $1.075 million.
The tax applies to holiday homes, investment and commercial properties, but not primary residential homes and farms.
Real Estate Institute of NSW Chief Executive Officer, Tim McKibbin, said the government is already overly dependent on tax from property consumers and changes to land tax indexation amount to a “tax grab by stealth”.
“To expect property owners to now carry an even greater burden, as they will through Government’s land tax reforms, is unfair and reckless,” Mr McKibbin said.
“The property industry has for many years been the engine of the NSW economy as consumers in other asset classes escape the exorbitant amount of tax property consumers are routinely slugged with.”
CPA Australia spokesperson, Gavan Ord, said the decision to freeze the state’s land tax threshold could have negative repercussions, but the government is limited in its options for increasing revenue.
“It’s very plausible that freezing the land tax threshold will have a knock-on effect to renters as property owners pass on the extra cost,” Mr Ord said.
“Some will also consider selling their investment, which would further reduce supply in the rental market.”
Taxes on foreign-owned homes
Fees placed on foreign investors will be increased from 2025 from 8 to 9 per cent, and the foreign owner land tax surcharge will also increase from 1 per cent to 5 per cent.
About 20,000 homes in NSW, about 0.6 per cent of the state’s housing stock, are foreign-owned.
Mr McKibbin said that while increasing the tax burden on foreign investors may be politically popular, deterring investment in the state’s rental market may likewise not be in the best interest of tenants.
“For people struggling simply to find a home to rent, whether the landlord is local or foreign seems largely irrelevant, and if only 0.6 per cent of NSW housing stock is foreign-owned, reform in this narrow area is immaterial,” he said.
Support for housing approvals
New funding of $253.7 million will be used to hire more planners and invest in technology to speed up the assessment of development applications, to ensure the state can build its planned 375,000 homes by 2029.
The government has also flagged a financing guarantee pilot to support the construction industry to build homes amid challenging market conditions including high labour and material costs.
This could include acting as a guarantor for some development loans and pre-purchasing homes in high-density builds.
Mr McKibbin said at face value, the investment in better planning and technology to expedite development approvals is a positive move which recognises the unacceptable delays plaguing the housing supply response.
“But in reality, it ignores the root cause of the problem,” Mr McKibbin said.
“Government needs to impose service level standards on councils rather than treating them as an unaccountable monopoly.”
Emergency housing
The budget also included $527.6 million for emergency housing and homelessness support services.
This includes $260 million for crisis accommodation and $250 million to support people at risk of homelessness, including those leaving correctional centres and mental health services.
NSW Rental Taskforce
A total of $8.4 million will be used to establish the NSW Rental Taskforce, which promises to be one of the biggest teams within NSW Fair Trading.
The group will be overseen by NSW Rental Commissioner, Trina Jones, and staffed with investigators, inspectors and support teams to target real estate owners and owners leasing poor-quality rentals, and breaching rental laws.
Ms Jones said the taskforce is an essential part of the work towards achieving a fair, quality and affordable rental market.
“We are listening to the needs and concerns of renters, landlords and industry, and working together to create a better renting experience in NSW,” Ms Jones said.
“The Taskforce made up of specialists will support our work across Fair Trading to better enforce rental laws and bolster public confidence in the state’s rental protections.”
