By Michael Yardney November 28, 2024

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Will Labor’s International Student Cap Help Solve Australia’s Housing Crisis?

Property Market News
Will Labor’s International Student Cap Help Solve Australia’s Housing Crisis?

Key takeaways

International students are not the primary drivers of housing shortages. They occupy a small segment of the rental market, often unsuitable for the broader population. Blaming them shifts focus away from the real issue: Australia is not building enough homes.

International students contribute over $40 billion annually to the economy, supporting universities, businesses, and local communities. Limiting their numbers could harm the economy without offering meaningful relief to the housing market.

A failure to build sufficient homes over decades is the core issue, exacerbated by restrictive planning laws, local opposition to developments (NIMBYism), and a lack of federal leadership.

Policymakers must prioritize bold, systemic changes to close the housing supply gap. Solutions should balance housing needs with economic contributions, fostering a sustainable future for all Australians.

Australia’s housing shortage is the elephant in the room no one can ignore.

With sky-high rents, a squeeze on supply, and frustrated tenants battling for every available property, the housing crisis is a cocktail of systemic issues that’s been brewing for years.

Amid this turmoil, the federal government has floated the idea of capping international student numbers.

But will this approach really help?

Or is it just another example of political optics that fails to address the root causes of the problem?

International Students: Scapegoats or Solution?

It’s no secret that international students are a significant part of Australia’s population.

They contribute billions to our economy, enrich our culture, and boost our universities’ global reputation.

But they also need somewhere to live, and the influx of students has undeniably added pressure to already strained housing markets in cities like Sydney and Melbourne.

Critics argue that capping student numbers could ease the rental crisis by reducing demand for inner-city apartments and share houses.

On paper, it sounds logical: fewer people competing for rentals means less pressure on prices.

But is it really that simple?

The Numbers Tell a Different Story

According to a Property Council of Australia report, limiting the number of international students would barely make a dent in our housing supply woes.

International students predominantly occupy a specific segment of the rental market, such as studio apartments and student accommodations near education institutions.

These properties are often unsuitable or unaffordable for the broader population struggling with housing.

In fact, a report by the TAPRI (The Australian Population Research Institute) highlights that international students only occupy a fraction of Australia’s overall rental market.

Blaming them for the housing crisis diverts attention from the real issue: we’re not building enough homes to meet the needs of a growing population.

What About the Economic Impact?

It’s not just about housing.

International students contribute over $40 billion annually to the Australian economy through tuition fees, living expenses, and tourism.

A cap on student numbers could have a domino effect, leading to financial shortfalls for universities and businesses that rely on their spending.

Would a marginal easing of rental prices be worth the economic hit?

Many experts argue it wouldn’t and I definitely don't think it is worth the economic hit.

The Core Problem: A Chronic Housing Under-Supply

The heart of the issue isn’t about who’s renting; it’s about how many properties are available.

For decades, Australia has failed to build enough homes to keep up with demand.

Whether it’s due to restrictive planning laws, NIMBYism (Not In My Backyard syndrome), or a lack of federal leadership, the result is the same: an ever-widening gap between the number of people who need housing and the number of homes available.

Capping international students is like putting a Band-Aid on a broken leg.

It might temporarily mask the pain, but it won’t fix the underlying issue.

To truly address the housing crisis, we need bold policies that incentivize construction, streamline approvals, and prioritize affordable housing.

A Better Way Forward

Rather than capping student numbers, we should focus on solutions that benefit everyone:

Build More Student-Specific Housing
Encourage private developers and universities to invest in purpose-built student accommodation.
This would free up regular rentals for families and workers while providing affordable, tailored options for students.
Streamline Planning and Approval Processes

State and local governments need to work together to speed up the approval process for new housing developments. Reducing red tape could unlock thousands of homes in high-demand areas.
Incentivize Build-to-Rent Projects
Build-to-rent developments are a way to boost supply and provide long-term rental options.
The federal government recently passed a bill to offer tax incentives for developers to accelerate this emerging sector.
Boost Funding for Affordable Housing
Address the severe shortage of social and affordable housing by increasing federal and state funding. This will support vulnerable Australians while relieving pressure on the private rental market.

Let’s Keep Perspective

Capping international student numbers might sound like an easy fix, but it risks undermining a vital sector of our economy without delivering meaningful housing relief.

Instead of targeting students, policymakers should focus on the systemic issues driving the housing crisis: not enough homes, slow approvals, and underinvestment in affordable options.

There is no doubt that the housing crisis is complex, and there’s no single solution.

But by keeping our eyes on the real problem—under-supply—we can start making decisions that will create a better future for renters, investors, and our economy as a whole.

Let’s stop pointing fingers and start building homes.

About Michael Yardney Michael is the founder of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He's once again been voted Australia's leading property investment adviser and one of Australia's 50 most influential Thought Leaders. His opinions are regularly featured in the media.