The first Labor Budget in more than a decade delivered last night cemented the previously announced $2.2 billion housing affordability scheme.

The funding is aimed to tackle housing affordability and homelessness over the next four years in a bid to boost rental stocks, encourage would-be mortgage borrowers to save for their first home, lower housing construction costs and build new homes for the homeless.

As already announced, up to 50,000 new rental properties will be created by the new National Rental Affordability Scheme, at a cost of $622.6 million over the next four years.

The scheme aims to increase the supply of affordable rental housing and reduce rental costs for low-to-moderate income households.

Its two key elements are an annual $6000 Commonwealth tax credit or grant to construct new affordable rental properties and rent them at 80% of prevailing market rents and $2000 contribution per grant or credit a year by states and territories which may increase this contribution if they choose.

State and territory government can provide assistance through direct payments or in-kind by reduced stamp duty, infrastructure charges and fast-tracked development approvals.

To be eligible for a property delivered under the National Rental Affordability Scheme, tenants will need to be low or moderate income earners, earning below defined income limits.

The Housing Affordability Fund will invest $359 million in this budget period, and $512 million over the next five years, to lower the cost of building new homes, centred on proposals which improve the supply of new entry-level housing.

Minister of housing Tanya Plibersek and Jenny Macklin, minister for families housing community services and indigenous affairs, said in a joint statement the fund would address the two significant barriers to the supply of housing development - infrastructure costs, such as water, sewerage, transport and open space; and holding costs, resulting from planning and approval waiting times.

The funding will be targeted at local governments for greenfield and infill developments where high dwelling demand currently exists or is forecast to occur.

The budget also established the First Home Saver Accounts in an effort to provide a tax effective way for Australians to save for their first home through a combination of Government contribution and low taxes. The Government is providing $1.2 billion over four years to this scheme.

The ministers said the government was investing in new housing to close the current gap between requests for accommodation and the supply of secure and affordable housing for homeless Australians.

Each state and territory will receive at least $1 million a year for the initiative which aims to reduce the number of people turned away from shelters.

The ministers said the government would deliver a White Paper in September aimed at providing a comprehensive national approach and action plan to combat homelessness over the next decade.

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