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Private investors key to unlocking rental crisis

A Brisbane rental property draws a long line of viewers. Picture: Liam Kidston
A Brisbane rental property draws a long line of viewers. Picture: Liam Kidston

Roughly speaking, at any given time, one in three Australian households rents where they live. People rent for all sorts of reasons, and not just because they cannot afford to buy. They might be interstate for work, trying out a new area, or in a changed family situation. Over the years, and up until now, the private rental market was unremarkable as a topic – rents were reasonable and there was sufficient availability to satisfy demand.

Over the past few years, though, everything has changed. Landlords and landladies became fed up with being financially gouged, disadvantaged by over-regulation, and demonised in the media. An “us against them” culture developed and property owners were subject to unpleasant resentment. Property managers found themselves stuck in the middle, and it is now extremely hard to find people to do that job.

Whether it was due to ideology, envy or greed, those belting owners did such a good job that those providing homes for others vacated the market in droves. Now there are now not enough places for people to rent, and rent has gone up by significant amounts. Sadly, it was all predictable and indeed, predicted.

As we have seen in the news and on the telly, things are so grim that people are living in tents. This is not the Australia anyone wants, and people expect governments to fix it.

Federal Housing and Homelessness Minister Julie Collins has been reported in the press admitting the situation is dire.

Housing Minister Julie Collins. Picture: Linda Higginson
Housing Minister Julie Collins. Picture: Linda Higginson

Collins was housing minister briefly in the Rudd-Gillard years. The minister has “noticed in the decade since, particularly in my electorate office, more people coming through the door who are in housing stress or at risk of homelessness”.

We call it a rental crisis, or a housing shortage, but this isn’t an accurate description. What we have here and now is a landlord drought, an investor shortage, a strike by capital. The private investor is no longer willing to spend their time and money and take risks just to put a roof over somebody else’s head.

Homeowners are either selling up, using the house themselves, leaving it empty, or putting it on the short-stay market. Due to all this, all tenants are vulnerable – anyone at the end of a lease is at real risk of homelessness, even those in stable employment with good rental records. It is not just low-income people who are struggling to find somewhere to live. Double-income families are finding themselves in crisis scenarios.

The Albanese government is working on a plan for housing and homelessness. The minister is consulting with the states and territories, local governments, other stakeholders and superannuation funds. There is money for social housing and talk about “build to rent” developments.

It will take many years for all these talks to come to fruition. Large developments only suit the low-income market, and anyway, for institutions, the prospect of being a landlord has to be made viable. Taxes and regulations need to be reduced or amended, and the states and territories need to make big concessions. All of this takes time, and we need action now.

The Albanese government seems keen to incentivise superannuation funds, but not private investors. This is regrettable, because the solution to our problem is immediately available. If “mum and dad” investors were better treated, the private rental market would correct quite quickly.

The folks at Propertyology have some great suggestions. Here are just some of the ways we can end the landlord drought and make it rain with rental property.

Banks charge a higher interest rate for property that is rented, mostly around an extra 1 per cent. There is no justifiable reason. It seems they do it just because they can, and they don’t need to do it any longer. Banks can help with the housing crisis by charging the same interest rate on investment property that they charge for property that is owner-occupied.

Local governments charge investors a loading on rates; again, for no justifiable reason. Whether a house is rented or lived in by the owner makes no difference to rubbish collection and so on. Councils need to drop these charges, and could even offer rate discounts to people willing to rent their houses out to needy tenants.

State governments have brought in many layers of compliance. Some were justified and some are harsh. These need to be examined and, where appropriate, undone. Increased powers have been given to tenancy authorities, but they haven’t been funded properly, and there are long waiting lists in some states for dispute resolution services.

The federal government diluted depreciation deductions a few years back. These changes added pressure to cash flows and should be reversed.

Finally, we all need to drop the idea that landlords exiting the market is a good thing because it means a first-home buyer is buying. This is simplistic nonsense, and recent history has proved it wrong. We will always need a rental market, with diverse categories of accommodation, spread throughout our cities and regions. Superannuation funds might be part of the answer, but they will never be the whole solution.

Private investors need to be enticed back into the market. The houses are there already, they don’t need to be built, and the owners need incentives to make them available.

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Original URL: https://www.theaustralian.com.au/inquirer/private-investors-key-to-unlocking-rental-crisis/news-story/3777b4581619dfc5b6ef5b3b14175be5