Rudd’s housing scheme – who will build the new units?

A shortage of skilled construction workers presents a key hurdle to the success of a beefed-up housing affordability scheme announced by Prime Minister Kevin Rudd yesterday.

Rudd has boosted by $600 million his election promise to subsidise developers who build lower cost housing.

Under the plan, developers receive a tax credit of up to $6000 per year over 10 years for each new property they build, provided they let them to tenants for 20% below the prevailing market rent.

The hope is that the scheme, which will now be funded to the tune of $1.2 billion over 10 years, will help bring rents down by increasing the supply of new housing, unlike previous programs that simply gave more money to home buyers and increased prices.

But questions are now being raised about whether a shortage of capacity in the construction industry to build the new properties may mean the subsidy will instead flow into builders’ pockets.

Housing Industry Association industry policy senior executive director Chris Lamont says the Government may need to consider increasing the skilled migration quotient for the construction industry to meet the new demand.

“In the short term targeted skilled migration to build capacity in the industry may be needed,” Lamont says. “Because of the housing downturn in the states there could be an opportunity to source some skilled workers from there that could fill the void.”

Another question that remains open is how the market value of new properties will be assessed under the scheme, but Lamont says existing valuation activities undertaken by state agencies could form the basis of suburb-by-suburb assessments.

If effective, the scheme will result in an additional supply of rental properties on to the market, but Lamont says low income earners will not necessarily be the ones who move into the new apartments the scheme applies to.

“It will be a mix. In some cases mixed developments will see lower income people go into new housing, but even where higher income people take subsidised property that will exert down pressure on the market as a whole, so lower income people will still benefit,” Lamont says.