'Nonsensical' policies only diverting attention from real causes of rental crisis

As the rental crisis gets worse by the month, it is no surprise to see nonsensical proposals put out by various sectors of our community.

Commercial realism is what is needed to deal with the plain and simple equation that our population has been growing at record levels while our supply of rental properties fails to keep up with the construction levels needed to house this increased population.

Worse, no significant new supply will come online for another five or more years and likely exacerbate the rental crisis.

What we need to do is encourage more investors to buy existing properties that are being built and to particularly encourage institutional and high wealth Australians to invest in build-to-rent and similar types of large-scale residential properties.

However, there are segments of our community that simply don’t understand this and the nonsensical things we have seen include state governments in Queensland and Victoria upping land tax, which just caused many investors to simply sell their properties.

The Queensland government at least moved quickly to reverse that decision.

We have heard others talking about rent freezes, which of course will only add to the unattractiveness of investing and cause many investors to sell.

The latest conversations have been about negative gearing.

It has been one of the major attractions to encourage investors to buy rental properties. Tamper with this and we will again see investors turning away from real estate.

Fortunately, at present our federal government has stated publicly that they will not support any rent freezes nor any changes to negative gearing.

Most state governments other than Victoria have realised putting land tax up only causes an exodus of landlords from the market.

Even if some measures are introduced, as we saw in Queensland, there will be a reaction that will ultimately cause governments of the day to reverse those decisions.

I understand why some believe landlords are somehow overly supported by government programs and that they can afford to be taxed more heavily but right now, and probably for the next ten years, what is actually needed is greater incentivisation to encourage more people to invest in rental properties.

A prime example is that many tenants can’t afford the property that they would like to buy but can afford to buy in other less expensive areas that they perhaps don’t want to live in but could choose to buy and get into the real estate market and become landlords themselves.

They could then sell those rentvestment properties at a later stage, pick up the capital gain and buy the home of their choice.

Incentivising private sector building

So, what should not be lost sight of is that we need to house not only so much of our existing population but also the additional people that we will need to attract through immigration to fill critical jobs through just about every sector of our economy.

If the means to achieve the greater good, that is significantly more rental accommodation which will then create market forces to keep rental rates more affordable, then incentivising investors and providing the platforms necessary to encourage them to buy is a small price to be paid for the greater good.

It is plain and simple.

Either the government gets into the rental market and develops and builds the tens of thousands of rental properties required (and history shows they are not good at this) or they need to incentivise the private market to do so.

Let’s stop the nonsensical discussions that turn potential investors away from the market and trigger existing investors to sell their properties, and establish the critical incentives needed for more investors to enter the market.