Political wrangling over housing, rent freezes risks dire consequences

The most talked about aspect of the current housing crisis throughout Australia is its impact on the rental market.

The pandemic created approximately 120,000 extra households in Australia, where children left home to migrate to areas of employment, downsizers separated from their family group and migrated to various parts of Australia and, sadly, increases in divorce and the like very quickly created a significant need for additional households.

On top of that, many regions that were the recipients of large interstate migration saw those migrators first needing a rental property as they considered their purchase options.

Coinciding with the increased demand for rentals, there was a reasonably large pool of investors contacted by real estate agents submitting huge offers sight unseen by owner occupiers looking to purchase properties. Many who had previously no thoughts of selling, couldn’t resist taking those sale prices.

On top of this, owner occupiers will generally pay a higher price than investors, contributing to the normal supply of new investors evaporating.

So, now market forces are at work and as a result of increased demand and falling supply rentals have increased.

The number of rental properties throughout Australia had declined by approximately 15 per cent.

It’s no surprise that market forces have been driving rentals upwards.

With immense pressure on governments to address cost of living pressures, they’re wanting to be seen to be doing something to address higher rentals.

Rent freeze duel could result in new federal election

Certain political parties have subsequently pushed for the introduction of a rent freeze.

On Friday (28 July), ACT Greens Member, Johnathan Davis, released an exposure draft bill for consultation to freeze rent increases for two years in the ACT and then cap rent increases to 2 per cent thereafter. In Victoria, there has been escalating talk of two-year rent freezes and rent increase caps.

A high stakes political stand-off between has emerged between The Greens and Labor. The former want rent freezes implemented before letting the latter’s housing legislation pass. On Friday, Prime Minister Anthony Albanese said he will next week announce plans to reintroduce the government’s hotly contested Housing Australia Future Fund (HAFF) bill into the House of Representatives.

While a rent freeze may please many in the electorate, it is totally ignoring the consequences of such action.

We have already seen an increase across the country of existing landlords deciding to sell their properties because of the threat of rent freezes. This will rapidly accelerate if in fact rental freezes are introduced.

The consequences could be dire for the rental market.

While it may provide some relief in existing rental properties, the decline in the number of properties available for rent would result in a larger pool of homeless people.

Rather than discouraging investors in the market, they should indeed be stimulating investor interest. If they indeed are acknowledging that some sort of financial relief needs to be given to renters, then that is the role of government. It is not the role of private investors to provide social housing relief.

It is simply passing the buck of responsibility from government to private enterprise, which will ultimately result in a decline in the rental pool and more homelessness. Governments are in very dangerous territory at present and hopefully are approaching this from commercial reality rather than political ideology.

The opinions expressed in this article are those of the author and do not necessarily reflect any API Magazine position on the issues addressed.