Finding a suitable, affordable rental property has been an ever-increasing challenge in recent years. And retirees who rent – about 16 per cent of over 50-year-olds, according to the YourlifeChoices Insights Survey – make up a big proportion of those on the poverty line. But rent freezes are not the answer, according to investment homeowners.
They have come out swinging against plans to implement and extend rent freeze measures across Australia. The Victorian government has already introduced a one-year freeze on rents for agreements started from June 2019. That was replicated by the Queensland government earlier this year.
Now, Victoria wants to restrict rent rises to no more than one every two years – and the increase would be capped.
Investor advocates say that is a step too far and will force many investors to sell, putting further pressure on an already tight rental market.
What the investment owners say
Simon Pressley, head of research at buyers’ agency Propertyology, believes rent freeze measures will only exacerbate the rental supply problem.
“The pressure on rent prices is entirely due to consistently discouraging property investment participation,” Mr Pressley says. Such policies “discourage everyday Aussies” from investing in real estate, he adds.
Patrick Durkin and Larry Schlesinger say that is already happening. “The proportion of properties being sold by investors has risen steadily through the year,” they wrote in the Australian Financial Review. It reached 40 per cent in Sydney in June and a near-record 36 per cent in Melbourne, up from about 30 per cent a year ago.
The pair wrote: “Each of these properties sold to an owner-occupier reduces the already tight supply of rental properties.”
Aidan Hartley, mortgage broker and owner at Blue Owl Finance, says renters should think longer term. “It’s possible that at some point in the near future they will become homeowners or investors themselves, so it can be short-sighted for those to want to back it,” he says.
Jess Wilson, Victoria’s shadow housing spokesperson, calls for “coordinated reforms … to increase the supply of new homes”. That would put downward pressure on house and rental prices, she says.
Are they right?
Untangling the rent freeze arguments is not easy. However, Mr Pressley’s claim that “pressure on rent prices is entirely due to consistently discouraging property investment participation” seems fanciful. Most would agree that the events of recent years and a general cost-of-living spike have played a part.
There’s no reason to doubt the assertion that investor selling has increased. But as for each investment property sold reducing the rental supply, that’s not necessarily the case. If the new owner-occupier was previously a renter, there would be no net change in supply.
Mr Hartley’s suggestion that it’s possible renters could become homeowners in the future may well be true – for some. It’s unlikely for the vast majority of renters, though. Not all “everyday Aussies”, as Mr Pressley calls them, will be able to buy. If they were, who would rent those properties.
Ms Wilson’s call for an increased supply of new homes seems reasonable. Governments, both state and federal, have taken an axe to social housing.
Mr Pressley says: “The government-funded rental pool is a piddly 300,000 out of 3.2 million nationwide. Three decades ago, they owned 400,000 rental homes, so they’ve sold off 100,000.”
Solutions
The Australian Greens have called for a nationwide rent freeze, but that has clearly met with stiff opposition.
Tenants Victoria has just released its submission to the inquiry into the rental and housing affordability crisis in Victoria. Rather than a freeze, it argues for what it calls a “fairness formula”, which would effectively work as a cap. The formula would ensure fairness for both landlord and tenant, the advocacy group says.
With about 175,000 households nationally on the waiting list, social housing also needs to be a priority. Many of those waiting are aged 50-plus.
For those struggling with rent rises, there is potentially some relief available through the federal government Rent Assistance program. To find out if you qualify, check the Services Australia page. The amounts are small, but could make a crucial difference for some.
Rent freezes or not, the rental crisis doesn’t appear likely to end any time soon.
Are you an over 50-year-old renter or landlord? How have you been affected over the past few years? Is a rent freeze a good idea? Let us know via the comments section below.
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