Aware Super CEO Deanne Stewart: More affordable housing could be built if GST on construction costs was lifted

Aware — the main super fund for teachers, nurses, firies and police — leads on building affordable housing for key workers. Its CEO says it would do “way more” with help from government.

The super fund that’s led investment in affordable housing says it wants to do “way more” but needs incentives, such as the removal of GST from construction costs.

Aware Super, which manages $160 billion of retirement savings mainly for teachers, nurses, police and firefighters, believes taking the tax of building bills would also spur its peers to jump into the market, helping to ease the home affordability crisis.

Two months ago Canada removed GST on “build to rent” apartment developments, claiming the move would ease accommodation costs by delivering about $C25,000 ($28,000) in tax relief on a two-bedroom apartment.

Aware Super has 470 tenants in its “essential worker housing program” across seven developments – five of which are in Sydney. These tenants, who work in the local community, only pay 80 per cent of the market rent.

Aware will add to this total through new projects at Bankstown, Zetland, St Leonards and Liverpool, which will have 890 units combined. The fund doesn’t yet know what share will be offered as affordable rentals.

Aware Super CEO Deanne Stewart. Picture: Supplied

The figure will be between 10 and 50 per cent, depending on the economics of each project.

Whatever the numbers end up being, they would be higher if super funds could get the same GST exemption as social housing providers, said Aware CEO Deanne Stewart.

Such a change would also encourage Aware to substantially increase its investment in developments containing affordable housing for key workers.

“We think we could do way more than we are doing today,” Ms Stewart told The Daily Telegraph, if there were “much greater incentives”.

Ms Stewart said community housing providers don’t pay tax on construction costs.

If Canberra wanted more supply, then that exemption should be provided “more broadly to super funds”.

“That would be huge from a federal level,” Ms Stewart said, because it would help to boost returns to fund target levels, which for Aware are a minimum of CPI plus five per cent.

Many big players in the $3.5 trillion retirement savings sector hadn’t touched build-to-rent or affordable housing.

Artist's impression of Aware Super's Zetland project. Supplied

But with tax changes, “I think you’d see more super funds feeling comfortable in this space,” Ms Stewart said.

The government could ensure the community benefited by linking the GST exemption to a specific percentage of a building being affordable housing.

A federal government spokesman said the most recent budget increased the capital works tax depreciation rate, which “will benefit all investors including domestic superannuation funds”.

But it appears there is no plan to broaden access to GST exemptions.

Artist's impression of Aware Super's Bankstown project. Supplied

Property Council of Australia NSW executive director Katie Stevenson said “removing the irrecoverable GST expense on land and development costs alongside changes to state planning policy settings could help to establish a stable long-term pipeline of new build-to-rent housing supply in NSW and around the country.”

Ms Stewart said state governments could help by making it easier to obtain land tax and stamp duty discounts, increasing land releases – particularly near education and healthcare precincts – and reconsidering zonings that currently favour business use even where businesses are unlikely to want to set up.

Councils could assist by being faster and more flexible in planning, as well as by being more open to greater density.