It’s a case of being careful what you wish for
Landlords leaving is making rentals more expensive through lack of supply. The scapegoat villain leaving is now exposing who should take the heat for the severe lack of housing. Governments that need stamp duty and that do not want to spend on housing because spending is death at the polls. Equally telling constituents public housing will be built next door is not a vote winner. The banks have also profited from of the housing crisis lending to investors and enjoying mega profits.
Many media outlets have not focused on these contributors. Instead, the simple ‘greedy landlords hiking rents’ mantra has been the tagline. Demonising landlords and their unscrupulous, uncaring ways has been headline ‘news’ since the interest rate hikes began. Even the Greens have suggested landlords were villains.
It would have been far more helpful to know the history of real estate investment in Australia and potential solutions going forward. It would also be useful to know how governments and banks were the major beneficiaries of the mum-and-dad real estate investing phenomena.
Primarily real estate investment has been encouraged and promoted through tax incentives and low-interest loans. It is also important to understand that the incentives of the past are no longer appropriate. Indeed, reflecting on history informs the future.
Key findings of the Australian Housing and Urban Research Institute (AHURI).
The key findings of the Australian Housing and Urban Research Institute (AHURI) highlight the changes in the Private Rental Sector (PRS).
- The PRS increased by 38 per cent over 10 years (2006–16), more than twice the rate of household growth. In 2016, 2.1 million Australian households, or 26 per cent of all households, lived in the PRS.
- There has been a 42 per cent increase in the volume of lending to investors over the 10 years 2006–16 (compared to an 8.4% increase in lending for owner occupation), with lending for investment at times exceeding lending for owner occupation.
- In 2013–14, 1,135,000 Australian households were investor landlords, with 72 per cent owning one property. The typical investor landlord is an owner-occupier, at midlife, in a household with two incomes.
The AHURI report also outlines key changes in the PRS.
- There are a relatively large proportion of landlords who are in the sector for only short periods, contributing to insecurity and a lack of professionalism across the sector.
- The volume of foreign students that need accommodation has increased exponentially;
- Changes to investor loan ratios placing heavier restrictions on investors;
- Technology changes are creating a newer version of the traditional landlord.
These changes will now inform investment going forward. A different PRS model may emerge that has less impact on a basic human need – shelter.
Not just landlords
Governments have been able to avoid building more housing that is a SPEND – voters don’t like spending. Governments also don’t want to upset voters – not in my backyard – with government housing allocations. Governments also need tax and the PRS allows government to hide behind their need for stamp duty. Banks have been enjoying massive profits – banks don’t like that limelight. Landlords are leaving because the investment variables are not there. The reality is it was a house of cards leaving many homeless and vulnerable – including landlords.