Developers can help renters — but we have to help them too | Bruce Djite

Populist notions of rent caps and rent freezes do more harm than good, writes Bruce Djite.

The dream of owning a home has long been a cornerstone of the Australian identity, and South Australia is no exception.

However, as housing affordability continues to deteriorate rapidly, it’s imperative that policymakers adopt sensible measures to incentivise much-needed supply to preserve this dream for future generations.

The South Australian Government has recently released a discussion paper for the Greater Adelaide Regional Plan, which seeks feedback from peak bodies like the Property Council, as well as members of the public, towards a 30-year vision for Greater Adelaide with a focus on housing.

Property Council of Australia SA executive director Bruce Djite. Picture: Tom Huntley

The issue of housing is not a ‘one size fits all’ matter. Housing takes many forms to match the demands of changing demographics whose needs shift as they move through life.

It’s important that local, state and federal policy supports everyone’s ability to have a choice in the housing that suits them and removes handbrakes on those who are prepared to take risks to supply housing in its varied forms.

For example, with SA seeking to merge two universities, bespoke student accommodation won’t just ease demand in the traditional housing market where families might be seeking long-term rentals.

It also presents as an avenue for property investors to generate income.

In 2022, Student Accommodation Council research revealed the sector comprises 200 developments around Australia housing more than 76,000 students every year – not including university colleges – thereby easing affordability in the traditional housing market.

Another growing global asset class, build-to-rent developments, can also offer high-quality rental options without the constraints of ownership for those who value flexibility and amenity.

The Property Council in South Australia is in discussions with the state government on how to advance this sector locally through planning pathways and there are a few early-stage projects underway right now.

Retirement villages are also a secret weapon in keeping the Australian dream of home ownership alive.

As the mainland state with the most rapidly-ageing population, these purpose-built communities offer seniors a comfortable and supportive living environment while freeing up larger family homes for the market.

They also take pressure off the health system by reducing hospitalisation and delaying entry into aged care homes.

Builders must be incentivised to take the risks that can put homeownership within reach. Picture: iStock

As revealed in the recently released 2023 Intergenerational Report, there are 4.6 million people around Australia aged over 65 today – this number will grow to 7.1 million by 2043. The 2022 Property Council Retirement Census highlights that retirement communities provide units in metropolitan Adelaide which on average are 44 per cent cheaper than the median house price in the same postcode.

Lazy policy ideas, such as rent capping and rent freezes – which National Cabinet has wisely rejected – as well as mandatory inclusionary zoning might appeal to certain populist politicians.

However, adopting such policies will only disincentivise investment and exacerbate the housing crisis.

Rent capping and rent control policies discourage property owners from investing in new rental properties and properly maintaining existing ones due to the limited potential for a reasonable return on investment.

This causes a reduction in supply, which will cause rents to rise further.

Mandatory inclusionary zoning, while aiming to promote affordable housing, also has unintended consequences.

Forcing developers to allocate a percentage of new developments for affordable housing – especially on privately owned land – further stifles housing supply.

This can increase costs for developers, leading to potential delays and discourages them from undertaking projects altogether.

Instead, a more pragmatic approach could involve offering incentives such as density and height to developers who voluntarily include affordable housing units, thus fostering collaboration rather than compulsion.

Of course, the implementation of pro-development policies should not disregard safeguards for renters and vulnerable populations.

Striking a balance between encouraging investment and ensuring secure housing requires careful consideration.

For example, there’s a need to balance tenant and landlord protections and the state government has already introduced reasonable changes through the Residential Tenancy Act.

Achieving the Great Australian Dream of home ownership means making individual dreams possible and generating options for all Australians, no matter their stage of life.

But getting there requires investment and development, and without a sensible approach to support that work, it will remain a dream only.

Bruce Djite is SA executive director for the Property Council of Australia