Additional Comments by Coalition Senators

1.1Coalition Senators would like to thank all those who took the time to provide evidence to the committee on what is an incredibly important matter one third of Australians currently face.

1.2The current rental crisis comes in the face of a cost-of-living polycrisis which is seeing Australians pay more for everything. Groceries, fuel, interest rates, and rents have all skyrocketed under the Albanese Labor Government.

1.3Because of this, for many Australians the dream of owning their own home is fading away as they’re firmly placed in the rent trap. This then places additional pressure on the rental market as more and more Australians have no option but to rent.

1.4It is the view of Coalition senators that you must fix the homeownership crisis if you are to fix the rental crisis—both require a substantive increase in supply.

The state of the economy

1.5The state of the economy, with its record high inflation is imposing significant costs on Australian households everywhere.

1.6Under the Coalition, Australians experienced a lower cost of living, lower interest-rates, and lower taxes which helped with the affordability of mortgages for homeowners and on rents for those leasing.

1.7However, Australian households are now doing it tough under this government, with 12 interest rate rises and counting since they came to power.

1.8The Government needs to refocus its attention on cost of living to ensure consumer confidence in the housing market for first home buyers and investors.

Urgent need for more supply

1.9During the hearings and throughout the submissions there was overwhelming evidence to back up the claim that we have a lack of housing supply.

1.10At the Brisbane hearings, Ms Caniglia from Q Shelter explained exactly how the housing market works when she said:

Housing is a system, and at the moment we don't have enough supply to meet demand. That causes not only an incredible set of repercussions for households seeking to rent in the private market but also these other repercussions which make it difficult to deliver human services.[1]

 

1.11This is a sentiment that was echoed by the Housing Industry Association during the Sydney hearings when they stated:

The HIA has long argued that housing supply has failed to meet underlying demand in Australia, this in turn having a negative impact on housing affordability, which has led to increased pressure on the supply of rental accommodation across the country.[2]

1.12It was repeated during the Canberra hearings by REIA when they put on the public record:

It is REIA's strong view that it is a shortage of housing supply that is causing this catastrophic situation for renters.[3]

1.13It was stated in REIQ’s submission that if an adequate supply can be put into the market, and that if there is a way to increase rental vacancies to what is considered a healthy rate then rents will stabilise and normalise again.[4]

1.14As they state:

History has proven this to be the case.[5]

1.15Coalition Senators agree, supply is the primary issue, and one of the solutions to this crisis is addressing the lack of supply.

1.16Australian Governments work constructively to increase housing supply as a matter of urgency.

Rent Caps and Freezes

1.17It is the opinion of Coalition senators that speculation over rental caps and freezes has been enough to disrupt the market. As we heard at the Brisbane hearings from Mrs Kohlhagen of the SA Landlords Association:

A lot of my clients in the last two years have said, 'That's enough; I'm out.' With the latest changes that may happen, I'm seeing the scare tactic happen down there: 'We don't know what the government's going to do. My lease renewal's up now. I'll put the rent up just in case.'[6]

1.18Coalition Senators are concerned that mere conjecture over the Greens’ rent caps or freezes has been enough to spook mum and dad investors into increasing their rents in preparation, artificially increasing the market cost, or exiting the market altogether, which diminishes supply. Both these things exacerbate the crisis, and it is our recommendation they’re ruled out so that market confidence is returned.

1.19In their joint submission, Treasury and the Department of Social Services explored academic literature that investigates the impacts and effects of rent caps and freezes in international jurisdictions, such as New York and Berlin.[7]

1.20They concluded that:

… while controls on rental prices may deliver benefits to existing tenants through lower rental prices, achieving the policy objectives of price intervention is difficult as it limits labour market mobility, is inequitable, imposes negative externalities, negatively affects the quality of rental stock, imposes costs on future renters and leads to a reduction in rental supply and increase rental costs in the long term.[8]

1.21This aligns with other expert evidence received both via submission and through the public hearing process that highlighted the many long-term negative impacts that rental market interventions have.

1.22Rent caps and freezes should not be considered.

Stamp Duty Reform

1.23Coalition Senators believe that stamp duty reform is necessary if we are to improve access to the homeownership market. This reform is wholly the responsibility of state governments who should act.

1.24In its submission, the Grattan Institute stated:

Housing would also be better allocated if more state and territory governments swapped stamp duty for a broad-based land tax. Stamp duties are among the most inefficient taxes available to the states and territories. They discourage people from moving to housing that better suits their needs, and sometimes they discourage people from moving to better jobs.[9]

1.25Australia’s homeownership crisis can only be resolved if all levels of Government pitch in and make the reforms needed so that Australians who want to own their own home can. Such reforms are not easy, as seen in New South Wales, where the former NSW Liberal Government tried to implement reform around stamp duty which was undone by the following NSW Labor Government.

1.26At the Melbourne Hearings the Grattan Institute commented on that change when they said:

In terms of what that does and what's happening in New South Wales, I think the former New South Wales government had the right intention, which was to try to transition from stamp duty to land tax. The former Premier put a pretty bold option on the table, allowing people to switch, to choose. Unfortunately, what was ultimately put on the table, what was legislated, was much less ambitious. It was essentially allowing first-home buyers to choose. That was not going to deal with the No. 1 cost of stamp duty, which is for those that already own a home being able to choose to upgrade to a better home that suits their needs. That's the real constraint, because they have to pay stamp duty again. Unfortunately, it didn't do that. I think it is disappointing that Labor, now in government, actively have come out and said that they will oppose introducing a land tax to move away from stamp duty. That, unfortunately, means that we're unlikely to see reform in New South Wales for some time unless that position changes.[10]

1.27But what is known is stamp duty reform will have an immediate effect on the cost of housing, again as stated by Grattan at the Melbourne hearing:

Some work has been done that suggests that if you reform stamp duty, potentially housing prices and rents would be lower by, say, four per cent or something similar.[11]

1.28Coalition Senators believe tax reform, especially around stamp duty should be a priority for state and territory Governments.

1.29Work with state and territory governments to implement stamp duty reform.

Revitalise the Culture of Homeownership

1.30Coalition Senators believe that homeownership should be at the centre of our response to this crisis. By revitalising the Australian dream of owning your own home, Australians will not be impacted by changes in the rental market, demand on rentals will fall and most importantly, peoples hard earned income will go to paying off their own mortgage and not someone else’s.

1.31Coalition Senators were shocked to hear evidence from Tenants Victoria who claim that the dream of homeownership in Australia was transitioning away to a life of renting. At the Melbourne Hearing Ms Frew stated that:

I think that Australia is transitioning away from the sense that we used to have that most people would own their own home, to now really the sense that most people are going to be renters. I think that ideological shift in thinking about that is one reason why it's so great have this kind of inquiry looking into renters and their situation.[12]

1.32This ideological shift seems to be echoed by former Labor Victorian Labor Premier, Daniel Andrews who said in a Guardian article in 2022:

We’re always talking about the great Australian dream, absolutely. But I get a sense, I’ve talked to my kids and their friends, they’re much more focused on perhaps living where they want to live and ownership is not such a big thing. They are happy to rent with secure terms.[13]

1.33While it may be a part of Labor and the Greens’ ideology to force young people into becoming perpetual renters, it is the Coalition who has ambitions to make every Australian a homeowner if they want to be a homeowner.

1.34We utterly reject any cultural shift away from homeownership and recommend all parties do more to revitalise the Australian dream of owning your own home.

Super for Housing

1.35Coalition Senators believe that if we are to revitalise the culture of homeownership, Australians who are first home buyers should have the ability to access their super to purchase their own home rather than be stuck in a rent trap.

1.36Under a Coalition government, first-home buyers would be able to access up to 40% of their super, at a maximum of $50,000. For Australians over the age of 55, they would gain the ability to invest up to $300,000, per person, in their superannuation fund outside of the existing contribution caps, from the proceeds of selling their primary residence.[14]

1.37By accelerating people’s ability to achieve a deposit, and by encouraging retirees to downsize, more first homeowners will be able to buy a property and the allocation of properties available will be greater.

1.38The Federal Government should implement the Coalition’s super home buyer scheme.

Interim Report Comments

1.39In the interim report Coalition senators discussed the following topics, which should be considered by Government when implementing policies to address the housing crisis.

The private rental market’s role in rental supply

1.40The Coalition members note the Albanese Labor Government’s silence on the matter of property rights. It is important to note that most private landlords are ‘mum and dad’ style investors, investing in property to create wealth and safeguard their retirement. These investors are by no means the ‘big end of town’ and are overwhelmingly quiet, aspirational Australians looking to safeguard their retirement. Over 70 per cent of the investment property pool consists of these investors,[15] defined as those who own a single investment property aside from their primary residence.[16]

1.41Maintaining the rights of property owners is essential, given the important role private investors play in maintaining rental supply. With approximately 30 per cent of Australians renting, of all the rental stock in the market only 3 per cent is currently provided by state or territory governments as social and affordable housing, while 27 per cent is provided by 'mum and dad’ style investors in the private rental market.[17]

1.42The Housing Industry Association surmises onerous policy initiatives such as rent caps will incentivise ‘mum and dad’ style investors to abandon the standard residential market and turn to short-term rentals or sell their properties, reducing private stock available for rent:

They'll either do as Tim suggested and go into short-term rental-type approaches or take a profit and sell because the value of the home has increased. There is a risk with that.[18]

1.43As outlined in the Productivity Commission’s submission,[19] rent control is not an effective way to improve affordability for renters, as this artificially depresses rents and decreases supply of new properties. Such a policy has not been introduced in most Australian jurisdictions except for the ACT. Coalition Senators do not support a policy that will only have short-term benefits for renters, and potentially long-term disadvantages.

Other factors contributing to rental supply pressures

1.44High rental demand is also being driven by international migration since the re-opening of Australia’s borders. Net overseas migration was driven by a large increase in arrivals, up 103 per cent from last year.

1.45The Albanese Labor Government’s plan to bring 1.5 million migrants to Australia over five years, without a plan to house them, will only exacerbate the existing housing and rental crisis. By their own account, Labor's Housing Australia Future Fund proposes to construct merely 30,000 homes within that period, falling considerably short of the anticipated need. The Committee heard evidence that the net migration increases between 2023–28 requires approximately 250,000 additional dwellings.[20]

1.46Sustainable Population Australia highlighted the detrimental impact of increased migration intakes on the rental market:

The Albanese Government appears to be committed to a ‘Big Australia’ policy of rapid population growth, which will only serve to exacerbate the existing rental affordability crisis.

…

This financial year, net overseas migration (NOM) will swell Australia’s population by 350,000, far surpassing all previous records.[21]

1.47Skill and trade pressures also significantly influence heightened rental demand. The Housing Industry Association detailed to the Committee that rising costs in construction, repairs, and renovations are curtailing the availability of suitable rental stock:

The additional costs to build have gone up on average by 20 per cent. In Sydney that's adding, say, $130,000 to an average build.

…

[Trade and material] costs in particular have gone up very significantly because of supply chain issues, and they don’t tend to come back down.

… we still remain with some of the most acute skills shortages and trade shortages for the amount of work that's out there. The reason is partly COVID and the amount of work that's been going on since then, but we've also seen a significant drain of skilled labour into infrastructure projects. Renovation projects, even though new home sales have really fallen off a cliff, have continued to grow quite substantially. The draw on skilled labour is still very significant, and so we're still at close to the lowest levels of the availability of skilled labour that we've had in our history.[22]

Disincentivising vacant properties

1.48Injecting new supply to the housing market is of little utility if supply remains underutilised. Strong disincentives should be considered to address ongoing vacancies in our property market.

1.49The 2021 Census revealed that over 1 million dwellings remain unoccupied nationally.[23] The Committee heard evidence that as at 1 July 2023, the national residential property vacancy rate was 1.3 per cent, with some capital cities approaching 1 per cent.[24] The Committee further heard evidence these rates are ‘very low’ and exacerbate the challenges that marginalised communities face within the property market.

1.50With such low vacancy rates, urgently freeing up additional stock is imperative.

Conclusion

1.51Coalition Senators once again want to thank all those who took the time to provide their evidence to the committee on one of the many crises Australians face under this Labor Government.

1.52We believe that in order to fix the rental crisis, the Government must address the homeownership crisis that is trapping millions of young Australians in the rental market.

1.53To achieve this the Government must work urgently with state and territory governments to increase the supply of housing.

1.54The Government should also consider alternative ways in which first home buyers can enter the property market, such as the use of their super as a deposit or offset for their first property.

1.55Coalition Senators strongly oppose policies that seek to destroy property rights, or intervene in the market through measures such as rental caps and/or freezes. These actions will only exacerbate the current crisis and make things worse.

1.56Australia is a homeowning democracy, and Coalition senators know that prioritising opportunity for homeownership is the best deterrent to poverty and the best solution to the current rental crisis.

 

 

 

Senator Wendy Askew

Senator Maria Kovacic

Senator Kerrynne Liddle

 

 

Footnotes

[1]Ms Fiona Caniglia, Executive Director, Q Shelter, Committee Hansard, 23 August 2023, p. 3.

[2]Mr David Bare, Executive Director—New South Wales, Housing Industry Association, Committee Hansard, 24 August 2023, p. 48.

[3]Mr Hayden Groves, President, Real Estate Institute of Australia, Committee Hansard, 30 August 2023, p. 42.

[4]Real Estate Institute of Queensland (REIQ), Submission 38, p. 8.

[5]REIQ, Submission 38, p. 8.

[6]Mrs Margaret Kohlhagen, President, Landlords Association (SA) Inc., Committee Hansard, 23 August 2023, p. 55.

[7]Treasury and Department of Social Services (DSS), Submission 133, pp. 47–51.

[8]Treasury and DSS, Submission 133, p. 51.

[9]Grattan Institute, Submission 127, p. 19.

[10]Mr Brendan Coates, Economic Policy Program Director, Grattan Institute, Committee Hansard, 27 September, p. 49.

[11]Mr Brendan Coates, Economic Policy Program Director, Grattan Institute, Committee Hansard, 27 September, p. 48.

[12]Ms Amy Frew, Director, Client Services, Tenants Victoria, Committee Hansard, 27 September 2023, p. 11.

[13]Benita Kolovos, ‘“Here to get things done”: Daniel Andrews prepares for battle over paid sick leave’, The Guardian, 14 March 2022, www.theguardian.com/australia-news/2022/mar/14/here-to-get-things-done-daniel-andrews-prepares-for-battle-over-paid-sick-leave (accessed 4 December 2023).

[14]Liberal Party of Australia, Budget in Reply, 11 May 2023, www.liberal.org.au/latest-news/2023/05/11/budget-reply (accessed 4 December 2023).

[15]Mr Lynton Sheehan, Executive Manager, Housing and Homelessness Services, Woden Community Service, Committee Hansard, 30 August 2023, p. 19.

[16]Mr Hayden Groves, President, Real Estate Institute of Australia, Committee Hansard, 30 August 2023, p. 46.

[17]Mr Hayden Groves, President, Real Estate Institute of Australia, Committee Hansard, 30 August 2023, p. 46.

[18]Mr David Bare, Executive Director—New South Wales, Housing Industry Association, Committee Hansard, 24 August 2023, p. 55.

[19]Productivity Commission, Submission 148, p. 10.

[20]Institute of Public Administration, Submission 60, p. 2. See also Committee for Economic Development of Australia, Submission 33, p. 1.

[21]Sustainable Population Australia, Submission 67, pp. 2–3.

[22]Mr David Bare, Executive Director—New South Wales, Housing Industry Association, Committee Hansard, 24 August 2023, p. 54.

[23]Australian Bureau of Statistics, Census of Population and Housing: Housing data summary, 2021: Table 1. Dwelling Type by State and Territory, 28 June 2022, www.abs.gov.au/statistics/people/housing/housing-census/latest-release (accessed 4 December 2023).

[24]SQM Research, Weekly Rents: Capital City Average, https://sqmresearch.com.au/weekly-rents.php?avg=1&t=1 (accessed 12 September 2023); SQM Research, Residential Vacancy Rates: National, https://sqmresearch.com.au/graph_vacancy.php?national=1&t=1 (accessed 12 September 2023).