Trying to find a rental property is probably as tough as I have ever seen it in 25 years.
In the past six months the stories I have heard, even from those that work within the industry about tenants begging, pleading, working their networks just to try and get a foot in the door and put a roof over their heads, has been nothing short of heartbreaking.
If you wind the clock back to 2010, I was a property manager working in the Gold Coast market where renters were able to negotiate $50 and $100 per week rent reductions when their lease came up for renewal, because there were so many other rental options available for them.
While there are many factors at play, the predominant reason is supply.
It’s fundamentally pretty simple – if there is a greater supply than there is demand, then prices come down and choice broadens. If demand exceeds supply, then the prices go up, and vacancy rates come down and we’re seeing the very extreme end of that spectrum at the moment.
In my opinion, two popular narratives need to evolve.
Narrative one – all investment property owners are wealthy
This one is particularly problematic, because it’s largely inaccurate but hugely politicised.
Australian Bureau of Statistics figures reinforce my own research done while working in large scale property management businesses.
The vast majority of investment property owners will only ever have a single property, and having managed rental properties for most of my working life, I can say that not many properties cover their own costs.
Owners are tipping in additional funds to service the financial obligations of their rental property each month, while also needing to put a roof over their own head, feed their own family and so forth.
Yes, there are a small proportion of people that amass considerable wealth out of property, but that is far from ‘the norm’.
In Australia, the amount of renters able to obtain accommodation through a state or territory housing authority has halved since 1997, and caters to only about 10 per cent of the people that need to rent a home.
The other 90 per cent of the renting population are relying on availability provided by private investors.
In the absence of the government dramatically increasing their provision of rental accommodation, there’s a need to stimulate the supply of privately owned investment properties available for rent if we are to tackle the shortage.
In the past six years, things like negative gearing have been firmly in the political cross hairs, changes have been made to taxation laws to reduce investment property tax deductions in a number of ways.
Combine this with the financial fallout of rental moratoriums through Covid, recent tenancy legislation changes which have contributed to backlogs in tribunals that take sometimes more than six months to address, and the unfortunate reality is that many owners are struggling to meet their obligations, and the current booming property prices are the ideal time to exit.
But the stock is not being replaced as people are shifting to other asset classes.
Narrative two – the solution to the rental crisis is to buy a home
For a whole variety of reasons, a significant proportion of renters will not buy a property and will rent for their lifetime.
Renting is an embedded and critical part of society. It also gives flexibility that ownership doesn’t, and if life or family circumstances change or if people have transient careers, then renting is a much more flexible and accessible option.
So while it’s great to see some assistance for those wishing to make the transition to home ownership, what are we doing to assist the balance of the renting population who will continue to battle market forces in an undersupplied rental market?
There are simply not enough rental properties for the people that need them.
We need to have more conversation from government about how to stimulate building and construction of rental properties to provide more shelter, because they certainly are not doing that themselves from a housing perspective.
Construction also means employment.
We also need to have more conversation about how to encourage people to invest more in property rather than other things, and not make it more difficult for them.
The potential focus here is less about ways to enter the market, but more about stimulating long-term investment property ownership.
Like it or loathe it, the reality of the rental market in Australia is that it’s almost entirely dependent on the private investor, and government housing is insufficient to put it mildly.
We need more properties to be available for rent, so let’s talk about responsible ways to make that happen.