Increase housing supply but don’t penalise investors

First the positive news. If, as Anthony Albanese said after Wednesday’s national cabinet meeting in Brisbane, changes to planning, zoning and land release improve housing supply and affordability, the initiatives will benefit Australians shut out of a housing market that has become too expensive and too tight. Such initiatives need the co-operation of state and local governments, which is why national cabinet was the ideal forum for tackling the issue. As Master Builders Australia chief executive Denita Wawn said after the meeting, Australia needs at least 200,000 dwellings built each year to meet demand: “We need to go to the root of the supply problem, getting projects off the ground which are lagging due to a combination of high costs, a declining investment appetite from rising interest rates, and delays in approvals.’’

The Prime Minister and state and territory leaders have put forward an ambitious target. Mr Albanese said the federal government would set up a performance-based $3bn fund to increase the housing accord from one million to 1.2 million new, well-located homes over five years, from July 1, 2024. Promoting medium and high-density housing in well-located areas close to existing public transport connections, amenities and employment makes sense. So does speeding up development approvals.

Given the patchy record of past government housing initiatives under both major parties, achieving the goal announced after the meeting will be a major challenge and would be a big achievement. Containing inflation and therefore interest rates will be important. So will maintaining favourable business conditions, including constructive industrial relations and holding down cost pressures. In July, we reported that insolvencies in the construction sector were a major problem, especially in NSW. ASIC insolvency statistics recorded 981 corporate failures in the industry during the 2022-23 financial year in NSW, almost double the number of the previous year.

While national cabinet’s move to boost supply is commendable, the outcome of the meeting also carries risks for the industry. On the negative side, some of the measures announced, especially in relation to landlords, will prompt some to think twice about retaining their residential property investments, or deter others from entering the sector. Punitive taxes on property investors in Victoria, in particular, are likely to have the same negative effect.

After a dozen interest rate rises since May last year, national cabinet’s ban on landlords raising rents more than once a year is overly restrictive, especially for mum and dad investors struggling with the higher costs of property loans. The once-a-year rule is not the absurd rent freeze demanded by the Greens as a condition for supporting the Prime Minister’s $10bn Housing Australia Future Fund but it is a retrograde step towards more intrusive government, central planning and a violation of owners’ rights. It smacks of the influence of the Greens and the influence of the welfare lobby on the Albanese government. So do other measures that emerged from the meeting, shifting the balance away from landlords in favour of tenants. These include limiting break-lease fees, imposing minimum quality standards for rental properties, allowing tenants experiencing domestic violence to have their name removed from databases due to property damage caused by such violence, and changing locks and making security improvements without the landlord’s permission. Most landlords are reasonable and would readily agree – but they should be consulted, especially if they are paying for the improvements. Such rules need to be implemented with common sense, with an eye to retaining and encouraging investment in property.