RENT CAPPING

 

At 1.1 per cent national rental vacancy, where three per cent is a ‘healthy market’, there are not enough homes to rent in Australia.

 

And now, the cost of renting is rising rapidly after a decade of slow rental growth.

 

Cyclical demand drivers and apartment supply failure are the key drivers.

 

At-market apartment supply is essential for rental supply. The Reserve Bank tells us 50 per cent of approved apartments are rented on completion.

 

The four-year rolling average of apartment completions across our four largest cities in 2024 will be less than a quarter of 2018 levels. Governments have been warned about this looming, dire undersupply for several years.

 

Before we get to the solutions, we should consider one proposal that will actively harm the supply of new homes.

 

The Greens’ proposal on rent capping would hurt supply of housing across Australia.

 

The vast majority of rental accommodation is provided by the private rental market.

 

Rental caps would reduce investment in that market - the same shrinking market where completions will be so much lower than the 2018 peak due to poor state planning and populist overseas investor surcharges.

Even in markets where supply issues are less acute, like the US, the Brookings Institute tells us:

 

Rent control appears to help affordability in the short run for current tenants, but in the long-run decreases affordability, fuels gentrification, and creates negative externalities on the surrounding neighborhood. (2018)

 

What can address our national rental challenge is concerted federal and state action.

 

Let us ignore for a moment that 30-40 per cent of the cost of every new home is government taxes. Ignore too that state foreign investor surcharges partly explain the low-apartment-supply mess we are in.

 

Step one: state governments should significantly increase housing supply, mainly apartments, purpose-built student accommodation and retirement living communities. They should boost supply across the housing spectrum including at-market, social and key worker housing to buy and to rent.

 

Step two: an increase in Federal rent assistance. Also of interest, the Grattan Institute proposes states use more “head-leasing” of private rentals and subletting them to vulnerable people, that states start buying more homes and turning them into social housing among other ideas.

 

As a nation we must pursue the big three. Set proper state housing targets, improve planning system housing delivery, and back-in well located housing types for students, retirees and renters.

 

Other than that, our message to governments and parliaments is simple: Rent capping is code for housing supply reduction. Nobody wants that.

 

Postscript: Implementation dates to be resolved, the Australian Government should be commended for announcing levelling of the Managed Investment Trust withholding tax rate to 15 per cent for build-to-rent housing investment. A win for national housing supply which we will review another time.

Article supplied by Mike Zorbas Chief Executive Property Council of Australia

(from me now)

The Governments have been warned over the years we are not producing enough housing !! So if the Green's want to cap the rents then the private sector will just walk away - you cannot do that you have no right to try and interfer with the private sector people will just have to change their spending habits.  Let's face it Australia has had it good for a long long time and people generally that are working dont want for much.  It's those people that want to live in the premium areas and are currently doing that might not be able to they will have to adjust their budgets and re locate to where they can afford (look at Sydney and how far people travel to work every day, we have just been spoilt). 

Its just a reality that is going to bite alot of people and unless you adjust budgets and your spending its going to become a reality.

In the future when those fixed rates come off there will be a lot of adjusting and perhaps some people wont be able to manage their mortgage repayments, that will be very sad indeed but a lot of people have over committed themselves.

The investor is not going to endure a loss for the sake of providing accommodation that the Government should be all over.  Tread with care and for those investors out there if you are not re adjusting your rents for whatever reason and you are renting the property out yourself you need to think carefully about it perhaps you should think about getting it managed.

MAKE YOUR OWN DECISIONS AND GIVE IT A REAL GO !!

SELLING MOSMAN PARK & THE WESTERN SUBURBS!!

KEEPING IT REAL IS OUR MOTTO!!