Government will go guarantor on new housing developments

As NSW treasurer Daniel Mookhey charts the path back to surplus, unveiling a budget with few boosts, a $1bn housing investment is one of the big spends.

NSW Treasurer Daniel Mookhey and Finance Minister Courtney Houssos. Picture: Rohan Kelly

Developers will be able to access up to $50 million in pre-sale financing for major housing projects, with the state government putting aside $1 billion to go guarantor on new homes.

The guarantee was one of few sweeteners in Treasurer Daniel Mookhey’s third budget, which charted a path back to surplus at the expense of delivering handouts for families struggling with the cost of living crisis.

While Mr Mookhey has kept spending under control, his budget also forecasts the government spending $2bn more on public sector wage deals over the next four years.

The “Pre-Sale Financing Guarantee,” a centrepiece of the budget, developers with planning approval and initial pre-sales will be able to apply for government cash to get projects off the ground.

The government expects to underwrite 5000 homes over the next five years, to help get a total of 15,000 new dwellings off the ground.

The housing boost is one of the few sweeteners in the budget. Picture: NewsWire / Christian Gilles

Developers will be able to apply for between $5 million and $50 million in pre-sale financing, with the government promising to buy back any unsold homes at a reduced rate.

Mr Mookhey said the financing scheme would help make low-to-medium density housing more feasible to build.

“This is a canny use of the state’s balance sheet that is carefully calibrated to bring online 15,000 new dwellings,” Mr Mookhey said, rejecting suggestions that 5,000 new homes would be a drop in the ocean.

The measure is the latest in a series of initiatives designed to turn around persistently low rates of dwelling approvals.

NSW dwelling approvals dropped 7.8 per cent in April, with 46,123 total approvals in the previous 12 months.

Housing construction is set to be the winner from the state government choosing not to pursue new major infrastructure projects.

The budget papers say investment in the housing market will benefit from the “unwinding of the large public sector construction pipeline” as projects like Metro lines are completed.

Mr Mookhey’s third budget has made a virtue of fiscal repair, paying down debt and getting the books back in the black.

While this year’s deficit has blown out to top $5.7bn, NSW is set to get back in the black by 2027-28 with a $1.1bn surplus.

Amid increasing geopolitical tensions, Mr Mookhey conceded that “a lot needs to go right” for the government to post its promised surplus, but said NSW was heading in the right direction.

The increase in the forecast deficit for this financial year is driven in part by the broken workers compensation scheme which has delivered a $2.6bn hit to the state’s books.

Mr Mookhey said he is pursuing “hard reforms” to fix the failing system which is continuing to lose money, urging the Coalition to pass legislation bringing the scheme back under control.

The budget papers show that the government will lower gross debt as a percentage of gross state product from 20.7 per cent in June 2027 to 19.6 per cent in June 2029.

Growth in government expenses is projected to average 2.4 per cent a year, down from 6.4 per cent under the previous government.

Employee expenses are set to grow by 3.7 per cent over the next four years, slightly higher than projected in the mid year budget update.

Mr Mookhey said that the government expects to “invest more than $2 billion” on public sector wages over the next four years.

The budget also includes a record $1.2bn spending package to help the state’s most at-risk kids, including boosting the Foster Care Allowance by $4,576 per year.

Originally published as Government will go guarantor on new housing developments