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Owners and renters help each other.

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In normal markets owners and renters help each other and everything ticks along easily.

Lately the shortage of rental accommodation is a regular feature on the nightly news and there are challenges for both owners and renters.

This week, a lead story on ABC news was the Rental Affordability Index report prepared by National Shelter, the Brotherhood of St. Laurence and SGS Economics and Planning. The report analyses the affordability of rent as a percentage of income for 10 different household types across various Australian cities and suburbs.

While the results show the obvious recent decline in affordability, Melbourne rents remain more affordable (median rent as a % of income) than what they were for 8 years from 2012 to 2020. This
suggests rents will continue to increase further. Sydney shows a similar result to Melbourne while other cities such as Brisbane and Hobart show rents at record levels of unaffordability.

The study tends to focus on the at risk and vulnerable households. However, the rental shortage is a reality for almost all renters and there is a ripple effect through all of the community.
The hardship this is putting on all sectors of our community and their need to have a safe and suitable home is very real. The state and federal government responses to date have been three-fold.

1. Increase renter’s protection
2. Build more apartments and houses.
3. Tax investment owners (more about revenue than housing)

Building more homes is a private sector function. While the government can try to facilitate it, they cannot build enough apartments or houses fast enough either directly or indirectly. We definitely need more homes, but what we really need now, is more homes for rent. Imagine if the number of apartments or houses for rent doubled. Rents would drop or become more affordable. So the drive should be incentivising the market to make more apartments and houses available to rent.

Increasing tenants protection may feel like the right thing to do and many changes have been appropriate. Unfortunately, the shift in renter rules it is partly responsible for the housing shortage. A rental property is a renter’s home, and they must feel safe, protected and looked after. However, because some investment owners are finding themselves in impossible situations with a renter or a baffling tribunal outcome, they often throw their hands in the air, give in, and sell. When they sell, the buyers are almost exclusively occupiers meaning there are less and less rental property in the market every day.

The buyers are not always former renters either. Often, they are part of a rental home or living at home prior to buying so they don’t always reduce rent seekers when they buy.

Remember the government want more rental property not less. Protecting renters is critically important but it must be balanced with incentives to investment owners to provide more rental accommodation.

During the 1930’s global depression, governments pulled back their spending. While it felt like the right thing to do because tax revenue fell, it shrank the economy further and made things worse. Through the help of Keynesian economics, governments have now learned to stimulate economies during difficult times. While spending more money may feel counter intuitive, it works.

We need in implement Keynesian theory to our housing shortage. Incentivise investment ownership. Don’t penalise it. Provide whatever incentive is appropriate by way of tax concessions or rebates to induce the private sector to buy and provide more rental accommodation. This will help renters by making more rental accommodation available and affordable.

Help owners to help renters.

Obviously, things like increased interest rates have made investment ownership harder. Most can cope with that and ride through the cycle. It is the demonising of landlords and disproportionate incentives that tip the balance and encourage them to sell.

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Written by a 4th generation real estate agent Apartments Made Easy gives you the tools and tells you all you need to know about how to buy, sell, own, lease, and manage your apartment successfully.

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