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How Politicians have Created The Rental Shortage And Continue To Make It Worse

The rental crisis throughout Australia is receiving a lot of media air time at the moment.

And that means many politicians are determined to be the person or party credited with finding a solution to the problem.

That’s a big concern for me, because every time politicians meddle with property markets with the excuse of providing a solution to things like housing affordability or the rental shortage, they generally make the problem worse.

In some parts of Australia, particularly where the Greens have got some sort of presence at a State Government level, they are threatening to address the problem by placing caps on rents, therefore preventing rents from rising according to the market forces of supply and demand.

In South Australia, for example, there is a bill before State Parliament to allow rents to rise only once every two years and then only by the rate of inflation.

If the bill were to pass into law, landlords wouldn’t be able to increase their rents in line with market demand or their rising costs of holding a property, including rising interest rates.

Putting a cap of rents doesn’t help tenants who can’t find a rental property at any price.

In many parts of Adelaide, vacancies are near zero. Tenants just can’t find anywhere to live. For them, a rental cap is worthless.

This is, sadly, a typical response from politicians who have no real understanding of the problem.

What they should be doing is examining how and why we got into this situation in the first place and address that.

What we’re getting is a knee jerk response – which addresses the symptoms rather than the root cause of the problem.

These sorts of responses are part of the reason for the current rental crisis.

We’ve had over regulation of the property market for the past five years whether that has been through APRA restrictions on lending to investors or the various levels of government making decisions that make property ownership less and less attractive.

Every time state governments pass laws to address issues between landlords and tenants, they invariably place the blame on property owners and make changes that favour the tenants.

Over the past five or six years, there has been a series of these measures which, step by step, have made property ownership onerous.

They include the threats by the Labor Party at the 2019 Federal Election to scrap negative gearing and increase capital gains tax.

They also include moves by the Queensland Government to charge investors land tax on properties they own in other states and recent decisions by the Brisbane City Council to punish owners who use short-term rental with outrageously high rates.

There are also new measures by the Queensland Government forcing owners to allow any tenants who want to have pets in the property to do so – and other policies which prevent owners from giving notice to tenants who are on periodic leases.

All those measures, collectively, have created a major disincentive for people to buy investment properties.

Many investor owners have sold – and fewer and fewer people have bought investment properties. In recent years, the market share of investors in the housing market has been well below historical norms.

That is real reason why we have a rental shortage crisis and rapidly rising rents – because fed up investors have been selling more than buying in recent years.

And ridiculous measures like rental caps will only exacerbate the problem.

What we need is policies which will address that shortfall.

We need to be providing incentives for people to buy investment properties and make them available for rental.

Putting caps on rents will just result in even more investors selling their properties and therefore make the real problem – the shortage – worse.

It is sadly the typical sort of response we get from politicians to issues in the housing market.

They don’t understand the real issues and they always – always – make decisions which make the existing problems much worse.


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