How does Defence Housing Australia (DHA) stack up?

Who and what is DHA?

Defence Housing Australia (DHA) was established in 1988 to provide housing and related services to Australian Defence Force (ADF) members and their families. This includes all members of the Defence Force, Officers and employees of the Department of Defence as well as anyone that’s contracted to provide goods or services to the ADF and their families.

DHA operates as a corporate Commonwealth entity and is one of nine Government Business Enterprises (GBEs) that has a Services Agreement with the Department of Defence. The DHA is represented in the Government by two Shareholder Ministers: the Minister for Finance and the Minister for Veterans and Defence Personnel.

DHA is one of the largest property managers in Australia, with approximately 18,500 properties under management. About 70% of Defence housing is owned by property investors.

In this blog post, we’ll take a deep dive into DHA and answer the question “how does DHA stack up?” and more importantly, is DHA a good investment strategy for you?

The Capital Properties team are passionate about empowering you to develop the best investment strategy for your situation. Whether you’re just starting out, or growing your portfolio, our FREE Capital Properties Discovery Session will help you achieve your property investment goals for future financial security.

On the go? Here’s 30 seconds of take outs:

• Defence Hosing Australia (DHA) provides housing and related services to ADF members and their families throughout Australia.
• DHA is one of the largest property managers in Australia.
• About 70% of Defence housing is owned by property investors.
• DHA generates more than $1 billion of revenue per year.
• ADF members have several housing options: Service Residence, Members Choice Accommodation, Living-in accommodation, & Rental Assistance.
• DHA leases city apartments, townhouses & free-standing houses.

There are pros and cons of investing in DHA:

Pros of defence housing investing

• Long-term lease options with guaranteed rental income
• One service fee covers property inspections, annual rental adjustment, tenant management & property maintenance.
• Monthly statements & online property management.
• End of lease cleaning with appliance checks.

Cons of defence housing investing

• Must buy/build in specific locations within 30kms of defence bases.
• DHA have higher property management fees than other managers.
• Restricted on rental rates/lease agreements.
• DHA properties are sold at market value so you may not get maximum value if selling mid-lease.

DHA’s mission

DHA’s main mission is to “provide adequate and suitable housing and related services.” So, what does that mean exactly? Simply put, DHA works with the Australian Federal Government to administer Defence housing policy and provide housing and related services to Australian Defence Force (ADF) members and their families.

These services include:

• Providing a property portfolio and managing and maintaining ADF housing.
• DHA Housing Consultants help ADF members to find housing solutions throughout Australia.
• Assist with bookings and allocations.
• Manage allowance payments for ADF members in rental accommodation.
• Meet Defence housing demands by building and purchasing properties.
• Redevelopment of existing properties to meet Defence standards.

DHA’s commitment to shareholders

DHA doesn’t receive funding from the Federal Budget, but instead makes money from commercial rent, fees, and charges from Defence services, as well as sales and lease of property investments. Older properties that don’t meet current Defence standards, or excess land is occasionally sold to create revenue. Overall, DHA generates more than $1 billion of revenue per year. These profits allow payments of dividends to the Australian Government (based on 60% of net profit after tax).

DHA services to Defence

The Department of Defence is responsible for determining pay conditions for ADF members, including entitlement to subsidised housing. ADF members who don’t own a suitable home in their posting location are often eligible for housing assistance. There are several housing options available to ADF members and their families:

• Service Residence (SR)

A Service Residence (SR) is a subsidised house or apartment that Defence provides to eligible ADF members who have Accompanied Resident Family (ARF) in a housing benefit location near Defence bases and offices throughout Australia. ADF members who don’t have a resident family (MBR) and members who have unaccompanied resident family (URF) might be eligible to live in a surplus Service Residence.

• Member choice accommodation (MCA)

Member choice accommodation (MCA) are off-base rental properties and are available in most housing benefit areas, located close to base or city centres. These properties have 24-hour maintenance services, can be reserved without inspection and don’t require bonds or fixed term leases. The rent is automatically deducted from ADF pay.

• Living-in accommodation (LIA)

Living in accommodation (LIA) are rooms that are allocated when the Defence member is in transit and needs a room for a short stay. There are 5 levels of LIA accommodation, usually single rooms with either shared bathroom or ensuite.

• Rent Allowance

Rent allowance subsidises the cost of renting a property in the private rental market. ADF members are responsible for finding a suitable rental property, and signing the lease/paying the bond etc. They will then be paid a fortnightly Rent Allowance subsidy through the Defence pay system.

What are the DHA property requirements?

DHA seeks different types of properties depending on locations, e.g. city apartments, townhouses or free standing dwellings or townhouses. Each of these properties have certain criteria. For example, a free-standing property must:

• Be within 30kms of a Defence base.
• Have at least 3 bedrooms with WIRs – at least one with ensuite.
• Must have a fully functional kitchen, dining area/room, lounge room and laundry.
• Bathroom with separate shower and bath and separate toilet.
• Lock-up garage.
• Fully enclosed rear yard.

Location of DHA properties

• ACT – Canberra & Queanbeyan
• NSW – Glenbrook, Newcastle, Nowra, Sydney, Richmond & Wagga Wagga
• NT – Darwin
• QLD – Brisbane, Gold Coast, Cairns, Ipswich, Toowoomba & Townsville
• VIC – Mornington Peninsula, Melbourne& Wodonga
• WA – Perth & Rockingham
• SA – Lefevre Peninsula, Campbelltown, Vale Park, Hewett & Adelaide Hills

Note, property criteria and locations are subject to change. See full DHA eligibility criteria here.

Is investing in DHA a good idea?

OK, now that we know how it all works, let’s investigate how does DHA stack up from an investment point of view? At Capital Properties, we know property investment is a great way to turn your disposable income into future financial

freedom. Our mission is to help you – Australian Army, Royal Australian Air Force and Navy recruits get on top of financial literacy and make the most of property investment opportunities to secure your financial goals.

Investing in DHA certainly has an appeal. It defines your market and ideal property for you, making those decisions of where to invest a little easier. It offers a secure rental yield, almost guaranteeing a long-term income. But like all investments, it’s important to explore each of the advantages and disadvantages before you make an investment decision. Let’s explore the pros and cons of investing in DHA in greater detail…

Pros of leasing to DHA

• In some cases, DHA will commit to lease before you build or buy.
• Long-term leases (usually 3, 6, 9 to 12 years), with a possibility of extension.
• Guaranteed rental income – paid in advance from the date of settlement and even when the property is vacant.
• DHA finds and manages tenants, making it easier for time-poor investors.
• Service agreements with only one service fee.
• DHA provides regular property inspections and annual rental adjustment in line with market valuations.
• Carries out property maintenance including most non-structural repairs.
• Regular independent rent reviews.
• Provides monthly statements and access to online property management software.
• End of lease cleaning with appliance checks.
• Somewhat predictable capital gains as DHA selects properties based on local amenities/access to transport etc.

Cons of DHA property investment

The main argument we regularly hear against DHA property investment is that although the monthly yield is reliable, there’s often less opportunity for capital growth, particularly in regional areas. Let’s look at other potential cons:

• You’re limited to purchasing/building in specific locations within 30kms of defence bases.
• DHA have high property fees at 16.5% (or 13% for townhouses) compared to most property managers (approx. 4-10%).
• Owner is still responsible for outgoing costs such as council, water and strata rates, land tax, insurance, termite inspections and some repairs and maintenance.
• Limited control over rental rates.
• Lease agreements include a variable extension period, potentially adding another 3 years to the lease (at DHA’s discretion).
• Being locked into long-term lease, and tenants means it’s trickier to sell mid-lease.
• Also, because of the long-term lease, the property can only be sold to investors and not owner-occupiers, limiting your buyers. This makes some banks reluctant to lend money for DHA investments.
• There may also be restrictions on marketing the property, so it could take longer to sell.
• DHA properties are sold at market value, which means the price is fixed and non-negotiable. So, you can’t negotiate lower when you buy, and you might not get maximum value if you sell mid-lease.

How does DHA stack up for you?

Investing in DHA has its merits, offering a stable income, long-term lease agreements with less stress about managing tenants and vacancies. However, it does come with potential downsides, like high property management fees, limited control over rental rates and potentially lower capital gains.

Like all property investments, whether it’s the right move for you, or not, depends entirely on your individual situation, including your risk tolerances and ultimate investment goals.

At Capital Properties, we’ll help you develop a property investment strategy that suits your circumstances. As former ADF members ourselves we know DHA investing inside and out and can help you make decisions based on our years of experience and market knowledge. Start by booking into our free Discovery Sessions.

And while you’re here, check out our FREE Property Investor Tools and Apps and download a copy of our book, Property Investment SOP  – essential reading for all property investors and first home buyers.