There have been big headlines around Australian in the wake of the new Federal Government’s first Budget.
They’re going to build a million new homes in five years to solve the housing shortage crisis.
There’s been widespread – although not universal – applause, because it looks and sounds great at first glance.
And, as you can imagine, the organisations that represent builders and developers are expressing considerable glee. No surprise there – it sounds like a windfall for them.
But that’s at first glance.
At second and third glance, it looks to me like a spectacular failure by the new Federal Government and by Treasurer Jim Chalmers, who is Federal Labor’s bright-eyed boy and no doubt their future leader.
It’s a spectacular failure because it shows that the Government does not understand the real issues here, how the problems were created and where the genuine solutions lie.
This Budget measure, if implemented, could (potentially) be great for anyone looking for a place to rent in 2025 or 2026.
But it does nothing for all those people who need a place to rent right now – or those who will need a rental home in the next 12 months.
And let’s be clear – there ARE solutions available which could be implemented today which would increase rental supply, improve vacancy rates and pause the cycle of escalating rents.
But this Budget hasn’t made those obvious decisions.
And it doesn’t provide answers to key questions that will arise from the big building program they’re proposing, such as: Where will the bricks and the bricklayers come front?
They say they will build a million new homes – but starting in 2024. That’s too late for the people who are homeless today.
And what about all those extra migrants you say you will bring in this financial year – an extra 35,000 people? Where are they going to live?
The Australian building industry is suffering from shortages of everything right now.
Shortages of materials, shortages of trades people, shortages of service providers.
The time it takes to get a home built in Australia has doubled.
And because of all that, costs have escalated.
There are delays and cost increases right through the system – not helped by the number of building companies which have gone broke this year.
There was no word from the Federal Treasurer on how those issues will be resolved.
And there’s another problem.
The Federal Government can facilitate the construction of a million new homes – maybe – over five years – possibly – BUT if property investors don’t buy a big share of them, then the rental crisis won’t improve.
In the current climate, investors are exiting the market. Many of them are fed up – and I’ll explain why in a moment.
Essentially, the Federal Government has failed to address the core issue – the chronic shortage of rental properties that exists NOW.
That’s because politicians – who collectively are notorious for being out of touch with realities at street level – don’t understand how we got into this mess in the first place.
Here’s how the rental market works.
A third of households in Australia rent their homes.
And more than 90% of the homes they rent are provided by private investors.
Most of those private investors are ordinary mum and dad households on average incomes. The typical property investor in Australia owns just one property.
For the past five years, there has been a series of decisions by state governments, the federal government and regulatory authorities like APRA which have been onerous to those mum and dad investors.
Every new piece of legislation has favoured tenants, to the detriment of the property owners.
A recent survey indicated that many people who own an investment property feel they have lost control over their asset. And they’re fed up with being treated as a cash cow.
So they plan to sell.
Indeed, investors have been selling for the past several years.
In the recent property boom, more investors sold than bought.
And every time an investor sells their property, the number of homes available for rent diminishes.
That’s been happening in large numbers for the past five years.
The recent Housing Summit organised by the Queensland State Government was guilty of the same failure as the Federal Budget – the organisations that represent the people who are the solution to this crisis, private investors, weren’t even invited to the talkfest.
So now we have a situation where vacancy rates are the lowest ever recorded.
Rents are rising – 10% or 15% or 20%, depending on the location.
But for many people, it’s not the rental level that’s the biggest problem.
It’s that they can’t find a place to rent at any price.
And this Federal Budget does nothing to help them.
Instead, it’s provided a headline about what might happen in two or three years’ time.
My reaction to the Federal Government’s headline policy announcement?
In a word – hopeless.