Renovation grants: Morrison government to offer $25,000 in home builder stimulus

The Australian government will fund grants worth $25,000 for eligible singles and couples planning to build or renovate homes between June and the end of December, with the uncapped program estimated to cost taxpayers $688m.

With the March quarter national accounts indicating that Australia has entered the first recession in nearly three decades, the new tranche of economic stimulus designed to create a pipeline of work for the construction sector will be unveiled by the Coalition on Thursday.

To be eligible for the grants, singles need to earn $125,000 a year or less based on a 2018-19 tax return or later, and couples need to earn under $200,000. Building contracts need to be executed between 4 June and 31 December 2020.

To qualify, people need to be intending to build a new home as a principal place of residence valued up to $750,000 including the land, or planning to renovate an existing property, with the upgrade valued at between $150,000 and $750,000.

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Existing properties need to be worth less than $1.5m before the renovation, and construction must be contracted to commence within three months of the contract date.

The homebuilder grants can be used for kitchen and bathroom renovations carried out by licensed contractors, but cannot be for used for add-ons like swimming pools, tennis courts, outdoor spas and saunas, and detached sheds or garages. The grants cannot be claimed for investment properties, and owner-builders are also ineligible.

The new stimulus program comes as the government has delayed a planned mini-budget to July, and the treasurer, Josh Frydenberg, has also signalled that the jobkeeper wage subsidy might be reduced from the current flat payment of $1,500, or paid at differential rates depending on a worker’s income, after a review.

Wednesday’s March quarter national accounts showed dwelling investment in Australia fell 2.9% in the quarter and by more than 15% over the past 12 months. The contraction is expected to be worse in the June quarter and construction lobby groups predict new dwelling commencements will decline by 50% by the end of 2020.

While government grants programs have been shown to drive up housing prices and construction costs, the government contends this won’t happen with the homebuilder package, because the slump in construction makes pricing competitive, and because the program is a short-term pump prime rather than a fixture, which makes it more difficult for developers to price the grant into their contracts.

The government has made it a rule that stimulus designed to counter the economic shock associated with the Covid-19 pandemic be delivered through existing mechanisms rather than new programs, to minimise the risk of fraud or administrative disasters.

The housing grants scheme is clearly a new program, but the government claims the same criteria will apply because it will be implemented through “existing systems, being the states’ respective revenue offices”.

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In a statement before Thursday’s announcement, Scott Morrison said the new program was about job creation, and about supporting 1 million workers in the sector, including builders, painters, plumbers and electricians.

The prime minister said the jobkeeper wage subsidy had already helped Australia’s construction sector weather the opening months of the economic shock associated with Covid-19, and “now we’re helping fire it up again”.

“This is about targeted taxpayer support for a limited time using existing systems to ensure the money gets used how it should by families looking for that bit of extra help to make significant investments themselves,” Morrison said.

Before Thursday’s announcement Labor called for the government to include social housing in the construction stimulus. On Wednesday, the shadow treasurer, Jim Chalmers, said the government needed to address flaws in previous interventions to ensure the recession wasn’t a deep one.

“We need to see in that at least these three things,” Chalmers said. “We need them to fix up their blunders with jobkeeper so that fewer workers are unnecessarily excluded and we need to see social and public housing as a key part of any package of measures to support the building industry.”

Chalmers said the government needed to deliver “a comprehensive plan for jobs in this long and patchy recovery”.