While rent assistance covered about50 per cent of a low-income renter’s housing costs in 2000,it covered just 30 per cent by 2022,and it doesn’t stop landlords from lifting rents or tenants from bidding them up over time,if housing remains scarce. At the moment,the national vacancy rate remains near a historical low at 0.9 per cent.
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The Greens have suggested a rent freeze. That would provide temporary relief for some tenants,but when you force rents to stay down,it can discourage investment in rentals and reduce rent supply. It’s also not targeted to those struggling the most. That’s not to say some limits can’t be placed. The ACT has had a cap on rent increases since 2015 preventing rents from being increased by more than 10 per cent above the rent component of inflation in Canberra. The city has thehighest vacancy rate of Australia’s capitals.
What we really need,though,is increased supply. The more of something there is,the cheaper it tends to become.
Zoning,which discourages development and worsens inequality by placing density limits,needs to be wound back to allow higher-density developments. State or federal governments could encourage this by discounting land tax for communities that allow higher density or providing cash incentives to local councils to do so.
The government recently announced a $10 billion Housing Australia Future Fund to finance 30,000 affordable and social housing homes. But that’s over the next five years and only if the fund generates profit. Given thesocial housing stock has barely grown in two decades,there’s room for more ambition.
And although Treasurer Jim Chalmers also threw in tax breaks for investment intobuild-to-rent housing in the recent budget,that will take time to see more houses on the market.
The truth is,like many supply side policies,we are playing catch up. Policy changes should have happened years ago. The construction industry is now crumbling under pressure from cost increases and enormous stimulus-fuelled demand during the pandemic. Housing takes years to build at the best of times.
But as I’ve learnt in my own overpriced shoebox flat,no matter how unpleasant,it’s better to begin unclogging the drain late than never.
There’s also quicker ways to boost supply. About250,000 short-term rentals were registered across the country in September last year. The government could incentivise at least some of that housing to accommodate longer-term tenants. In Sedona,Arizona,for example,the city council approved $240,000 in funding for a pilot program offering stipends to short-term rental owners who lease their properties for at least one year to a local worker. It might not shift the dial dramatically,but a similar policy here could make a difference.
And lastly,while a move away from stamp duty towards land tax is supported almost universally by economists,we’ve tended to shy away from it orbacktrack on it. It’s a move that would help allocate the limited housing that we do havemore efficiently,encouraging people who don’t need as much as space to downsize,while alsoreducing inequality.
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We need immediate (if inconvenient) drain-cleaner fixes like providing higher rent assistance and incentives to bring existing housing stock onto the rental market. And although it might take time and money,our housing market needs longer-term changes,starting with loosening zoning restrictions and moving away from stamp duty. I’m optimistic politicians will find the courage to act now and with ambition – and that some of these things will happen before our drain gets fixed.
Millie Muroi is a business reporter for theSydney Morning Herald andThe Age.
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