4 ideas to unravel the Australian rental crisis

There is a dire shortage of rental properties around Australia, meaning we have historically low vacancy rates and skyrocketing rents.

The rental landscape in Australia is experiencing unprecedented challenges, but in a recent article in The Australian, Robert Gottliebsen offered four radical ideas to solve our rental crisis.

Gottliebsen explained that an intricate weave of well-intended but counterproductive political decisions across all government levels is significantly to blame.

Federal Government's Intervention: A Double-Edged Sword?

Gottliebsen astutely points out that the Federal government's remedy to the crisis, involving large investments in the share market, may not be the silver bullet solution.

Their objective, to generate funds that can finance more rental accommodations, appears sound on the surface.

However, Gottliebsen contests,

"If the rules are set properly, there is no shortage of money to build more rental accommodation."

The real solution, he argues, lies in understanding the origins of the problem and adjusting the policies that led us into the quagmire.

Politics Over Problem-Solving

One of the reasons politicians and local councils find the idea of a financial market investment appealing, Gottliebsen notes, is its ability to mask past mistakes.

It's a strategy that avoids addressing the root causes and, as a result, may fall short of its intended results.

It's essential to remember that many experts had seen this coming and predicted the looming rental shortage due to unfavourable political decisions.

Concrete Steps to Mitigate the Crisis

Gottliebsen's article isn't just a critique of past and present actions but also a blueprint for the future.

He emphasizes the importance of leveraging the current situation, where there's adequate capital to address the problems if past mistakes are rectified.

The rental crisis isn't a monolithic issue - it spans from cottages and small apartments to vast apartment complexes.

While the problems in these sectors differ, they also share many similarities.

As a proactive measure, Gottliebsen suggests incentives for landlords and encouraging them to remain in the market.

He suggests this can be achieved by:

• Cap or reduce property taxes and government charges (at all three levels of government)
• Rollback legislation hostile to landlords until appropriate consultation with the industry (real estate agents and landlords) that protects both tenants and landlords.
• Guarantee no changes to negative gearing or capital gains for the parliamentary term.
• Have a tiered structure of rental agreements (instead of one size fits all). For example, most renters move within two years, so this market should have customised contracts. Some 15 per cent of landlords rent because they relocated, they should be able to move back in when they get back with appropriate notice.

Gottleibsen says:

“Fundamentally, all landlords want the rent paid on time and the property returned in good condition.”

Some more radical ideas

Gottleibsen also suggests:

“The problems in the apartment complex sector overlap but require another set of actions.

The good news in this area is that overseas institutions want to invest in building complexes and have already started in Victoria”.

He says the local developers will follow, but the sector requires these actions:

• Simplifying the approval processes by removing redundant bodies and committees.
• Do not compromise with safety but make sure that bureaucrats do not think up rules to boost the cost. In NSW, this is an art form.
• Work on ways to improve and lower the cost of the building process.
• Standards for rental accommodation should not be higher than standards for owner-occupiers — which is the Victorian situation.

Essential Workers and Vulnerable Populations

The provision of affordable apartments for essential service workers and individuals with severe income and social issues is challenging.

Here, Gottliebsen's innovative suggestions like the government guaranteeing rent payments and introducing compulsory rental insurance stand out.

The bottom Line

The Australian rental crisis is a convoluted issue born out of a series of political missteps.

It requires a multifaceted approach, targeting both policy revisions and innovative solutions.

Addressing these challenges head-on will, as Gottliebsen optimistically notes, lead to the end of the crisis in due time.

About Brett Warren Brett Warren is National Director of Metropole Properties and uses his two decades of property investment experience to advise clients how to grow, protect and pass on their wealth through strategic property advice.