Government Makes Key Issues Worse

Hotspotting

The most concerning thing about the unprecedented shortages which afflict Australian real estate markets is not that they are driving up rents and prices across the nation.

Alarming though that is for tenants and for first-home-buyers, the truly concerning thing is the myriad ways in which our elected representatives keep making those problems much, much worse.

Every time a state or territory government passes legislation or announces a policy move or hands down a budget which impacts on the rental shortage and housing affordability issue, they make it worse – not better.

This is the unsung scandal of Australian politics – that, at a time when the cost of living is such a big issue for so many people, the biggest single cost in the budget of most households (the cost of accommodation) keeps getting worse because our politicians keep making decisions that make it more and more costly.

In recent weeks we’ve witnessed the delivery of the Federal Budget and state and territory Budgets– and there’s not a single measure in any of those budgets which deals with the high cost of building and buying houses, or with the chronic shortage of rental properties which is causing residential rents to rise and rise.

But there are numerous measures in those state and federal budgets which, directly and indirectly, make those core housing issues worse.

And the big-spending pre-election vote-buying handouts in some of those budgets have added fuel to inflation which is likely to keep interest rates higher for longer.

If Australia had a news media worthy of its place in society, there would be headlines screaming about this every day.

What we do have, every day, is articles and commentary reminding us that there’s a shortage, items on the plight of tenants and on the lack of affordability in real estate – but there is little or no coverage of the steady flow of measures from politicians which continue to make all the problems worse.

And there has been little or no commentary on the reality that none of the budgets handed down in recent weeks contain any measures to directly address the shortage of homes available for rental.

Some state budgets have policies to build more social housing over the next 4-5 years, but nothing to address the immediate shortage of tenancies.

There has not been a single measure to provide encouragement or incentives to the people who provide over 90% of the homes people rent – private mum-and-dad investors.

What there has been, notably in the state budgets from the governments of New South Wales and Victoria, and in other policies they have announced, is a series of measures which increase the costs on the people who provide the product that’s in short supply, particularly with new or increased taxes.

The industry has sought to warn governments that measures like these will likely worsen the dire shortage situation by forcing investor owners to sell up – or further worsen the plight of tenants by forcing landlords to increase rents.

Investors owners have experienced massive increases in their costs recently, with higher interest rates, higher council rates, higher insurance premiums, higher maintenance costs – and, in the case of Victoria and NSW, major hikes in land tax and other taxes.

This has meant that rental properties that previously paid their own way are now in a serious loss situation. This forces owners to either sell or increase the price of the product they provide, which is a home for rent.

Victoria has exacerbated the problems in that state by introducing new requirements on the standard on the dwellings which will force owners to spend between $5,000 and $10,000 on upgrades.

This will tip many owners over the edge and force them the sell – and their tenants will lose their homes.

This is already happening. A new report has found that over 3,000 investors sold their Melbourne properties in May alone – and, across Victoria, almost 4,000 rental properties are listed for sale, according to Suburbtrends.

Given the strong anti-investor stance of the Victoria state government, the properties being sold are unlikely to be bought by investors, so they will be lost from the pool of rental properties – and vacancy rates will continue to fall, which puts further upward pressure on rents.

One of Australia’s most respected property analysts, Simon Pressley of Propertyology, has said his business will not recommend Victoria to investors until there was a change in attitude from the state government.

The firm is instead steering would-be investors to specific locations in other states.

He has warned that the lack of new investment in Victoria had made the situation for tenants “ugly”.

But it’s not only Victoria. It’s also happening in New South Wales, with thousands of investor-owned properties currently listed for sale.

The state budget in NSW includes significant increases in land tax – and, according to multi-award-winning buyers ‘agent Rich Harvey of propertybuyer, the changes will cause more investors to sell in NSW and will also prompt intending buyers to avoid NSW.

The NSW state budget also imposes a major Emergency Services Levy burden on property owners - and increases taxes on foreign investors, which will also have the impact of reducing rental supply.

The Property Council said the NSW budget bombshell “beggars belief”.

The Council’s NSW executive director Katie Stevenson says: “It’s a massive cost for property owners facing a once-in-a-generation housing supply and affordability crisis.”

The Australian’s wealth editor James Kirby commented that Sydney’s “prime position as the nation’s hottest property investment market is now in jeopardy”, with investors likely to be driven away from the city.

The national president of PIPA, Nicola McDougall, said about NSW: “This has come out of nowhere. It’s going to drive rents higher and it’s going to force investors to sell up, just like it has in Melbourne – I really wonder: does the NSW Government understand this?”

And my answer would be: No, they really haven’t got a clue. Or, if they do understand, they don’t care about the plight of the one-third of households in NSW who rent their accommodation.

In Queensland, where the State Government faces an upcoming election, the State Budget has thrown lots of electioneering cash at Queensland families to help them pay increasingly high electricity bills and for car registration fees, and there was a renters relief package – but there was nothing to increase the supply of rental properties and reduce the cost of building new homes.

The Queensland Budget stated the ridiculous objective of building a million new homes by the year 2046 – ridiculous because it’s based on the current government remaining in power for the next 22 years, when the polls suggest they won’t survive in government beyond the state election in October this year.

And, like other states, Queensland has slugged foreign investors with higher taxes – which will have the impact of further reducing rental supply and preventing the construction of major apartment buildings.

And so the process continues.

The rental shortage has been created from years of politicians discouraging, demonising and disincentivising investors – and they continue to make the situation worse for tenants with ongoing measures which punish investors and exacerbate the shortage.

The high cost of building new homes, whether they be houses or townhouses or apartments, has been largely, though not entirely, caused by imposts from various levels of government, including local councils, but in particular by state governments.

They keep changing the guidelines in ways that add to those costs and they keep slugging builders and developers with taxes, fees and charges – as well as mind-numbing bureaucratic delays which also add to the costs in times of high interest rates.

The result is that the standard house-and-land package is so costly as to be increasingly unaffordable for young buyers – and they keep adding more and more layers of cost, including the new construction code which adds up to $40,000 to the cost of building your standard brick and tile house.

As a society, we should be outraged by this. Our elected representatives have made housing increasingly unaffordable, both for purchase and for rental, and each passing month they make it worse, while blaming others for the problems.