Housing and Economic Recovery Act (HERA) in Australia: 2025 Impact

In a year defined by economic transition and renewed optimism, the Housing and Economic Recovery Act (HERA) has emerged as a cornerstone of Australia’s 2025 property landscape. As policymakers and industry leaders look to stabilise markets and encourage sustainable growth, HERA is steering both homebuyers and investors through a maze of new incentives, regulations, and opportunities.

What is HERA and Why Was It Introduced?

The Housing and Economic Recovery Act, originally a U.S. policy tool, has inspired a wave of similar legislative efforts globally—including in Australia. In the wake of pandemic-related disruptions, surging inflation, and housing affordability crises, Australia’s 2024-2025 federal budget introduced a locally-adapted HERA framework. Its core goals are to:

• Stabilise the housing market and prevent speculative bubbles

• Encourage first-time homeownership

• Support affordable and sustainable housing projects

• Boost economic recovery through construction and lending incentives

With housing prices rebounding sharply post-2023, and rental vacancies reaching record lows in major cities, HERA’s rollout couldn’t be timelier. The Act is designed to support both supply and demand sides of the market while promoting financial stability.

Key Features of HERA in Australia (2025 Update)

HERA’s Australian adaptation for 2025 includes several headline initiatives:

• First Home Buyer Boost: Eligible buyers receive up to $30,000 in grants or stamp duty concessions, depending on their state or territory. This is paired with relaxed deposit requirements for low-to-middle-income households.

• Affordable Housing Fund: A $10 billion expansion of the National Housing Finance and Investment Corporation (NHFIC) to underwrite low-interest loans for community housing providers and green housing developments.

• Mortgage Relief Measures: Temporary support for at-risk homeowners, including interest rate caps for qualifying variable-rate loans and deferred repayment options for those impacted by cost-of-living pressures.

• Investor Lending Rules: Stricter lending standards for investors, including higher deposit thresholds and limits on interest-only loans, to curb speculative activity and promote owner-occupier purchases.

These measures are already influencing the market. For example, CoreLogic’s April 2025 data shows first-home buyer activity at its highest since 2017, while investor lending growth has moderated compared to the previous two years.

Implications for Homebuyers, Investors, and the Economy

HERA’s impact is being felt across the property sector:

• Homebuyers: Lower barriers to entry and increased grant availability are giving more Australians a foothold in the market. However, competition remains intense in high-demand suburbs, and buyers need to be mindful of new eligibility requirements for government support.

• Investors: While capital growth prospects remain strong, tighter lending rules are making it harder for speculative investors to leverage multiple properties. This is expected to slow price acceleration and improve affordability for first-home buyers.

• Construction and Economic Growth: The boost to affordable and green housing projects is fuelling construction sector jobs and supporting Australia’s net-zero targets. HIA’s Q1 2025 report points to a 9% increase in new housing starts, led by sustainable developments in outer metro areas.

• Financial Stability: By capping variable interest rates and providing relief to distressed borrowers, HERA aims to prevent a spike in mortgage arrears as rates remain elevated. Major banks have reported a stabilisation in non-performing loans since Q4 2024.

Real-world example: In Melbourne’s western suburbs, a new build-to-rent community funded under HERA’s Affordable Housing Fund has delivered 300 units with below-market rents and energy-efficient design, easing local rental stress and creating hundreds of jobs.

Looking Ahead: The Future of HERA and Housing Policy

As the Reserve Bank signals a possible easing cycle in late 2025, policymakers are watching HERA’s outcomes closely. There is growing interest in expanding green housing incentives and extending mortgage relief for vulnerable groups, particularly older Australians and single-parent households.

For those navigating the property market, staying informed about ongoing HERA updates—and understanding how new grants, lending rules, and relief measures apply—will be crucial. The next twelve months could see further tweaks as the government targets long-term affordability and financial stability.