NSW Budget 2024-25: Funding and Investment Opportunities in Social and Affordable Housing

The NSW Budget 2024-25 unveiled a significant funding boost to address housing supply and affordability within the State. The Budget features an investment of $5.1 billion aimed at delivering 8,400 social homes, marking the largest single investment in social housing in NSW's history.

The Package prioritises homes for victims of domestic and family violence and subsidises rental housing for essential workers. It also includes funding to build supporting and enabling infrastructure.

This investment, supported by several additional funding measures, will provide a much-needed support to social housing in NSW. The Budget also demonstrates a willingness to collaborate with the private sector to deliver new housing, indicating opportunities for developers, Community Housing Providers and investors.

Here is our assessment of the key takeaways and the opportunities that may arise for the sector:

Building Homes for NSW Package

The Building Homes for NSW Package is set to deliver 30,000 strategically located homes, comprising:

• 21,000 new market and affordable homes.
• 8,400 social homes.

Key features of the Package include:

• $5.1 billion allocated to build 8,400 social homes (6,200 new and 2,200 replacement). At least 50% of the new homes will be priority homes for victim-survivors of domestic and family violence.
• $1 billion assigned for repairing 33,400 existing social homes.
• $655.1 million designated for key workers and rental housing, including:

- $450 million for Landcom to develop over 400 Build to Rent (BtR) apartments for essential workers within the next three years.

- $200.1 million for accommodation for key health workers in rural and regional areas of the State.

- $5 million allocated for Landcom to construct an additional 10 BtR dwellings in Bomaderry.

• An audit of surplus NSW Government land has identified an initial 44 suitable unused sites that will be made available for housing delivery by Homes NSW and Landcom in partnership with the private sector. An additional $5 million in funding has been allocated to further this audit process.

The Building Homes for NSW Package provides the following potential funding and investment opportunities for the sector:

$5.1 billion to build 8,400 social homes

The substantial scale of this funding presents a major opportunity for various stakeholders in the social housing sector:

1. Community Housing Providers (CHPs):

8,400 social homes reflect a significant opportunity for the CHP sector. Whilst a material portion of this supply may be traditionally delivered and managed, the quantum of outcomes sought will mean that targeted CHP-partnering models will have a role to play. The opportunities for CHPs include:

• Seeking to attract a portion of this funding for existing CHP-led projects. CHPs can examine existing projects and identify how this funding may be able to be added to projects for new and additional social housing supply. This may be particularly attractive to Government where supply can be accelerated over other models.
• Given the Commonwealth Government’s announcement of the oversubscription of the Housing Australia Future Fund (HAFF), there will be projects that do not get funded by that program. CHPs should keep all HAFF projects ‘warm’ and be ready to pivot those to this new funding route if they are unsuccessful for HAFF funding. The ‘readiness’ of these projects will be attractive to the State.
• Being prepared to respond to various procurement routes of Government to partner in the delivery of this supply. The State may look to various CHP-partnering models, and CHPs should leverage off recent experiences in procurement programs and be prepared to respond in an accelerated sense.
• Be positioned to activate a management role where Government seeks CHP assistance in the attraction of Commonwealth Rent Assistance (CRA) and support with the on-boarding of supply in a rapid-route.

2. Development Sector:

$5.1 billion across 8,400 social homes reflects funding of over $600,000 per dwelling available to support the delivery of new social dwellings. The opportunities for developers include:

• Where they can deliver a product within this funding envelope, developers may be able to provide the State with attractive opportunities to assist with the delivery of new housing.
• Together with CHP management, and the monetisation of future rents and CRA, the development sector may be able to provide an enhanced value proposition and also an accelerated deployment route. The sector should examine ways, solicited or unsolicited, to provide these opportunities to the State, either directly or indirectly via CHP partners.
• Where the planning framework for existing or new projects requires the contemplation of affordable housing supply (which by definition can include social housing), there is an ability to offer these mandated dwellings to the State as social housing. The payment may be below the cost of the State’s delivery method and be an attractive opportunity for both the State and the developer.

3. Institutional Capital:

Investors such as institutional capital and REIT’s will be interested in the potential for potential social investment into the social housing portfolios in partnership with developers and CHPs. With 8,400 dwellings being targeted, there is a role for capital to partner with the CHP sector.

Capital has already started forming strategic relationships with CHPs, and the opportunities that present for CHPs (those identified above), provide a need for equity-like capital. Thus, the capital should continue to work with their CHP partners and seek to coordinate and originate options that can be put to the State to assist in meeting the 8,400 homes target in an efficient and timely manner.

$655.1 million for key workers and rental housing

This announcement has a targeted outcome, being:

• $450 million for a Key Worker Build to Rent Program to be delivered by Landcom across Sydney.
• $200.1 million for key health worker accommodation across rural and regional areas of NSW.
• $5 million for Landcom to deliver an additional 10 BtR dwellings in Bomaderry.

This provides opportunities for capital, BtR and CHPs with an affordable focus to examine these opportunities. The approach to Government will be enhanced if the sector can identify models where this funding can be better leveraged to exceed the supply target.

Paxon believes that such enhancements are possible, and supply outcomes can be multiplied through appropriate structuring and financing.

The role of key health worker accommodation provides specific opportunities for capital and land owners adjacent to large health precincts to achieve the ‘tipping point’ of viability of projects. Paxon has seen many projects for health worker accommodation in regional areas achieve a material viability impact through relatively minor commitments from health service providers. Thus, opportunities exist to structure and finance projects with bankability in-mind.

NSW Government land audit

This release of surplus land could be the most significant opportunity for the sector in terms of delivering new housing outcomes. The NSW Government has announced that this land release will support the development of 21,000 new market and affordable homes in prime locations. For astute stakeholders, this provides an ideal chance to substantially expand their portfolios of well-situated market and affordable rental housing.

Other announcements of note have been summarised below:

Emergency Housing and Homelessness Support Services

Emergency Housing and Homelessness Support Services are a cornerstone of the Budget, with a dedicated $527.6 million allocation. This funding includes:

• $260 million to provide safe shelter and crisis accommodation for individuals and families in need, along with support to transition to more stable housing.
• $250 million to assist individuals who are homeless or at risk of homelessness. This funding supports various groups, including those transitioning from correctional centres and mental health services. It also secures resources for Specialist Homelessness Services and enhances support within the Aboriginal Community Controlled sector for homelessness services.

Planning System and Construct Upgrade

The Budget has allocated $555.5 million to expedite the planning system and enhance housing enabling infrastructure, which includes:

• $253.7 million to strengthen the State’s planning system, including to assess more development applications and deliver additional State-led rezonings.
• $246.7 million for enabling infrastructure, conservation activities and land acquisitions to accelerate the delivery of more housing in Western Sydney and across the regions.

Funding and Renter Protection

The Budget has allocated $20.2 million for renter protections, aimed at enhancing regulatory oversight and support for renters, including:

• $11.8 million to expand the role of the Strata and Property Services Commissioner. This funding will enable better regulation of strata schemes, particularly in apartment settings where renters are increasingly prevalent.
• $8.4 million designated for the Rental Commissioner to develop and enforce comprehensive renter protections, ensuring fair treatment and rights for all renters across the State.

Additional Housing Support Measures

The Budget also introduced several measures to support housing affordability and access:

• First Home Buyer Assistance Scheme: concessions and exemptions from transfer duty on properties valued less than $1 million for eligible first home buyers.
• First Home Owner Grant: a $10,000 grant available to eligible first home owners purchasing a newly built house, townhouse, apartment, unit, or similar with a purchase price below $600,000. The grant also applies to land and a new house with a combined total cost below $750,000.
• Private Rental Assistance: programs such as Rent Choice, Advance Rent, Bond Loan, and others provide assistance to eligible individuals, including those escaping domestic and family violence, to establish and maintain tenancy in the private rental market.
• Pensioner Council Rates Concession: eligible pensioners receive a rebate of up to $250 on ordinary council rates and charges for domestic waste management services. This concession is jointly funded by councils.

Next Steps

Housing affordability and availability represent key challenges for the people of NSW. There is an urgent need for a substantial increase in social and affordable housing, alongside a comprehensive, long-term plan to provide critical support for emergency housing and homelessness services.

We are pleased to see the extension and expansion of programs that provide vital support to the sector. These additional measures are welcomed, as they offer further avenues for advancement in the housing sector, complementing existing funding programs.

Moreover, the Budget highlights a willingness to collaborate with the private sector to expand new housing initiatives, presenting opportunities for developers, CHPs and investors. This collaboration is particularly beneficial for organisations dedicated to assisting those confronting severe housing challenges.

Paxon remains dedicated to vigilantly tracking these developments. We are committed to empowering our clients by offering innovative solutions to capitalise on these emerging opportunities.

Our Affordable Housing Experts

Paxon is a leading advisory firm providing financial and commercial advice on projects across Australia, the broader Asia Pacific region and the Middle East. With over 60 dedicated staff in offices throughout Australia, Asia and the Middle East, Paxon meets and addresses the strategic advisory requirements of our clients worldwide.

Over the past 5 years we have advised on over $15 billion of new projects, including the development of over 50 outcomes-based models across the housing continuum. Our team has extensive understanding of the strategic, policy and commercial environment for social and affordable housing in Australia.

Get in touch if you’d like to discuss what the Budget means for your organisation or how others around the country are leveraging innovative funding and delivery models to drive affordable housing outcomes for their community.