One Australian state’s peak property body calls for investor tax incentives
As the state government weighs up ways to generate more affordable rental properties, Western Australia's peak real estate body is calling for financial incentives to encourage investors and boost rental supply.
Looking for short term answers to long term housing problems is not the solution to address issues in the Western Australian rental market.
Recent commentary about tenancy laws and the timetable for changes, fails to acknowledge the key role private investors play in the supply of houses for rent, and the need for a balanced approach to improve rental supply.
In WA, more than 86 per cent of rental homes are owned by private investors. These are largely mum and dad investors, with around three quarters of investors owning only one property and about 17 per cent owning two.
With little government investment in housing, rental properties are only available in WA because ordinary people choose to invest in property.
Ensuring a steady supply of rental homes in the market helps provide tenants with secure housing options and stability in the long term.
What we know from our recent REIWA Housing Issues Survey is that changing Government policy reduces investors’ confidence in their ability to manage and maintain their property, and when investor confidence is rattled, we risk supply drying up, and rents rising.
Removing “no grounds” as a way to end a tenancy is one area that attracts frequent calls for change. However, “no grounds” is a frequently misunderstood term and a rarely used reason for a lease to end in WA.
There are two types of residential leases used in the state.
Fixed term leases have a fixed end date. The ending of the contract is a natural end of the lease. An owner is not obligated to renew the lease and either party can give 30 days’ notice if they do not intend to renew.
If notice is not given, the lease automatically rolls over into the second type of lease, a periodic lease.
Only periodic leases can potentially end on a “no grounds” basis and it is estimated by REIWA that periodic leases make up less than two per cent of all rental agreements.
Periodic tenancies do not have an end date. They can be ended by the owner giving 60 days’ notice or the tenant giving only 21 days’ notice. Neither the tenants nor the owner need to give a reason for ending a periodic lease – either party can end the lease with “no grounds.”
Investor tax incentives needed
REIWA agrees that government changes are needed to increase the supply of rental houses coming to market and build investor confidence, but we believe government would do better to concentrate on changes that can really make an impact for a greater number of renters.
Of course there are the big issues – land supply, planning timeframes, and maintaining present negative gearing and capital gains tax settings, but REIWA also supports more direct policies to improve the rental market and options for tenants.
REIWA supports improvements such as increasing the supply of social housing for low- income households, encouraging build-to-rent projects, as well as new incentives for private investors to offer affordable rents – for example, local government rate or land tax discounts.
REIWA is also playing its part through continuing education and maintenance of high professional standards for the REIWA property managers who manage the bulk of rental homes in WA.
Our members look after more than 80 per cent of rental properties, and part of their role is to ensure the timely management of lease renewals and agreements that both owners and renters are happy to continue.
REIWA looks forward to contributing to the next phase of Residential Tenancies Act reform in WA that will focus on minimum standards for rental properties, boarding and lodging, and information.
