For the first time in many years, an Australian government has hit on the novel concept that the way to improve the rental shortage is to encourage investors, rather than punish them.

Up to this point, state governments and councils have been demonising and deterring owners of investment properties – often by hitting them with new or higher taxes – to give the appearance of trying to solve the rental shortage, while in reality using the situation to raise more revenue from the housing market.

The impact of those negative measures has been to force many investor owners to sell their properties, thereby making the undersupply of rental properties worse.

But the State Government in Western Australia has recognised that investors are not the problem, they’re the solution to the rental shortage.

So the WA Government is providing a financial incentive for investor owners who are using short-term renting options like Airbnb, to get them to convert to long-term rentals – as part of a range of new policies to address the undersupply of rental properties.

Under the WA incentive scheme, there is a $10,000 payment for anyone who converts to long-term rental.

Now this really IS an incentive. Some state governments and councils have introduced financial penalties on investor owners and tried to call them incentives.

When owners are hit with new taxes or massively increased taxes for using short-term letting or leaving a property vacant, that’s not an incentive – it’s a punishment, a fine, for doing something that is both legal and reasonable.

If you want to change the behaviour of someone who is not breaking any laws, but you wish to create a desired outcome such as increasing the supply of rental properties, then you need to give them incentives – real ones, as the WA Government is doing.

Hopefully other government bodies across Australia will see the wisdom of the WA move and follow suit.

Providing encouragement to investors, rather than vilifying and punishing them, is the ONLY way to solve this unprecedented rental shortage crisis.

This measure by the WA government is not the total solution to the shortage in Perth and other parts of the state, but it’s a very good step in the right direction.