NSW Budget: State government to go guarantor on new homes
Aussie first-home buyers are accustomed to going to the ‘bank of mum and dad’ to go guarantor, but in one major state the government will soon do the same for developers.
The NSW government will act as guarantor on up to 50 per cent of approved housing projects in a budget day announcement aimed at getting much-needed building works underway.
NSW Premier Chris Minns and Treasurer Daniel Mookhey are delivering the Labor government’s third budget on Tuesday morning amid a worsening housing crisis.
It comes after the bruising failure of the Rosehill racecourse “mini-city” project, which would have delivered 25,000 new homes but was rejected by the Australian Turf Club.
While Mr Minns’ much-touted “Plan B” did not feature in Tuesday’s budget, the government did reveal it would splash millions on getting housing developments off the ground.
As part of the budget, the government announced a Pre-Sale Finance Guarantee for developers in which the state will go guarantor on up to 50 per cent of approved projects.
The Australia-first program will guarantee residential pre-sales for up to $1bn of housing projects at a time through a revolving fund, with between $5-$50m per project.
Applications for the guarantee are expected to begin by the end of 2025, and would require a developer to begin construction within six months of signing the documents.
After the projects are completed and the dwellings sold, the government will issue further guarantees for up to $1bn of projects at any one time for a five-year period.
If a dwelling remains unsold, the developer will be able to “call” on the guarantee and the state will purchase it at a discounted rate, to then on-sell, rent out, or use for social housing.
Treasurer Daniel Moohkey said in the state government saying it would guarantee the sale of 5000 dwellings, businesses “can get the confidence to built 15,000 more”.
He denied that figure was a “drop in the ocean” or that it was the state government’s “Plan B” following the failed sale of Rosehill, but was realistic about the challenges ahead.
“A housing crisis that was decades in the making will not end overnight,” Mr Mookhey said.
He went on to add: “So, let us all resolve to keep building. To keep reforming. To make sure that NSW never turns into a state that cannot afford to house its grandchildren.”
The scheme was widely welcomed by industry leaders, including the Urban Development Institute of Australia, though many still called for more to be done.
“The pre-sale finance guarantee will see many apartment projects get underway faster,” UDIA NSW CEO Stuart Ayres said.
“It’s good policy and a great example of government listening and responding to industry.”
The NSW Opposition was less glowing, with Liberal leader Mark Speakman claiming the budget was evidence Labor was “neither visionary nor competent”.
Mr Speakman cited increases to payroll tax and stamp duty and said there was nothing in the budget that helped NSW families with cost of living pressures.
“This government is investing less in the future, but letting debt spiral, and in the meantime, it’s ordinary families who are suffering,” he said.
“There’s nothing in this budget to address the fundamental problem with housing affordability and availability and that’s the lack of financial feasibility to build.”
Asked about the guarantee scheme, Mr Speakman said the resulting homes were a “drop in the ocean” and said builders still faced “crippling state taxes and charges”.
While a nationwide problem, housing has become an increasing hot button issue in Sydney, one of the world’s least affordable cities, after the failure of the Rosehill project.
Mr Minns is yet to reveal the state government’s so-called “Plan B” amid concerns about the feasibility of a possible housing project at Glebe Island on Sydney Harbour.
In announcing the guarantee program, the state government said securing finance was one of the most common issues cited by developers in getting housing developments moving.
Across the board, Labor’s third NSW budget focuses on assisting or incentivising developers to build in the state, as well as boosting regulatory bodies and build-to-rent schemes.
The state government has already said it will extend the build-to-rent land tax concession scheme indefinitely, and will release its draft guidelines for the Works-In-Kind scheme.
The 2025-26 budget also revealed plans for a further $122m to streamline housing delivery, in particular housing approvals, including $84.4m for additional planning resources.
Of that, $10.6m will go to continue the work of the Housing Delivery Authority, $20.9m to support regional councils to bring forward critical infrastructure, and $10.1m for water connectivity.
A further $145.1m will go towards the state’s Building Commission to empower regulators, while tens of millions will be splashed on TAFE and other apprenticeship schemes.
The state government said a lack of skilled workers remained a key issue, with regulators also needing to be empowered, including through $7m earmarked for the land audit.
It comes after the Low and Mid-Rise Housing Policy, which sets a target of 112,000 new homes across NSW, and the Transport Oriented Development’s target of another 230,000.
The state government said planning approvals were already 17 per cent faster than in March 2023, with applications to build up 28 per cent on last year, with 70,000 under construction.
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