Chapter 1Introduction
1.1The challenges faced by renters to find a suitable, affordable, and safe place to live are not new. However, today, these challenges are of unprecedented scale. Australia is experiencing a period of extremely low rental vacancy rates and rising rent levels. Rents paid by new tenants have increased by 24 per cent since the start of 2020. At the time of writing, in September 2023, the national median weekly asking for combined rents (that is, for houses and apartments across Australia) was the highest it has ever been: $585 a week. In July 2023, the national residential property rental vacancy rate was 1.3 per cent, with some capital cities vacancy rates closer to 1 per cent.
1.2The crisis of unaffordable, unavailable and unsuitable rental housing is the result of a complex set of drivers, which the committee is determined to fully identify and examine. The committee is cognisant that addressing the rental crisis will require a variety of solutions and actions from all tiers of government.
1.3At the outset of the inquiry, the committee agreed to produce an interim report to aid in the deliberations of the National Cabinet on renters’ rights. The committee notes that National Cabinet agreed on 16 August 2023 to ‘A Better Deal for Renters’ focussed on renters’ rights across Australia.
1.4This interim report is centred on the lived experience of renters to identify the issues people encounter throughout their rental journey, from finding to securing and maintaining a lease on a place they can call home. The interim report also provides an overview of the factors underlying the current rental crisis, which will be further examined in the final report.
Referral and Conduct of the inquiry
1.5On 22 June 2023 the Senate referred an inquiry into the worsening rental crisis in Australia to the Community Affairs References Committee for inquiry and report, with an interim report to be presented by 23 September 2023 to aid in the deliberations of the National Cabinet on renters' rights, and a final report to be presented by 28 November 2023.
1.6Details of the inquiry were published on the committee’s website and the committee invited a number of organisations and individuals to lodge submissions.
1.7At the time of writing, 193 submissions have been published on the committee’s website, and 16,061 submissions have been received through simplified submission forms. The committee acknowledges that many submissions are yet to be fully considered and published. This material will be considered in the final report. All of the evidence published so far is listed at Appendix 1 of this report, and the committee’s final report will contain the full list of evidence received.
1.8The committee has also held a number of public hearings:
23 August 2023 – Brisbane, Queensland;
24 August 2023 – Sydney, New South Wales; and
30 August 2023 – Canberra, Australian Capital Territory.
1.9A list of witnesses who gave evidence at the hearings is available at Appendix2.
Structure of the interim report
1.10This interim report consists of four chapters, including this introductory chapter, which provides the context for the inquiry and an overview of the current housing landscape and policy context.
Chapter 2 focuses on the experiences of renters and describes the many difficulties and challenges renters face;
Chapter 3 highlights evidence regarding specific cohorts facing additional barriers to renting; and
Chapter 4 provides an overview of the key factors underlying the current rental crisis.
Acknowledgments
1.11The committee thanks all those who contributed to the inquiry by making submissions, providing additional information and appearing at public hearings.
1.12In particular, the committee would like to acknowledge the individuals who shared their lived experience of rental issues, both in written submissions and at public hearings. The committee is keenly aware that publicly sharing a personal story can take an emotional and physical toll.
1.13The committee sincerely thanks those individuals for their courage and generosity in sharing their experiences. Lived experience stories have greatly aided the committee’s understanding of the extent and nature of the rental crisis in Australia and of its impact on a wide range of people.
Notes on references
1.14References to Committee Hansard in this interim report are to the proof transcripts. Page numbers may vary between the proof and official transcripts.
Note on definitions
1.15The following section provides definitions on terms used throughout the report, noting that these terms may be used differently or more loosely by submitters.
Housing affordability
1.16The term ‘housing affordability’usually refers to the relationship between expenditure on housing (including rate payments, mortgage payments or rents) and household incomes.
1.17One measure of housing affordability used by the Australian Bureau of Statistics (ABS) is ‘a ratio of housing costs to gross household income, also known as a housing affordability ratio’.
Rental affordability
1.18CoreLogic analysis measures rental affordability by ‘using the portion of median household income required to service rent on a new lease’. For Anglicare Australia, rent affordability means that ‘rent needs to be no more than 30percent of a household budget for it not to cause financial stress and difficult choices’.
Social housing, public housing, and community housing
1.19The Australian Housing and Urban Research Institute (AHURI) describes social housing as ‘government subsidised short and long-term rental housing. Social housing is made up of two types of housing:
public housing, which is owned and managed by State and Territory Governments; and
community housing, which is managed (and often owned) by not-for-profit organisations’.
Housing stress and rental stress
1.20The term ‘housing stress’ is commonly used to describe the experience of those households in the bottom 40 per cent by income that spend over 30 per cent of their income on housing. The term ‘rental stress’ is used in relation to such households in rented accommodation.
Rent freeze, rent cap, rent control, and rent stabilisation
1.21A legislated rent freeze occurs when landlords are prohibited by law from increasing rents for current tenants and, depending on the legislation, may not be allowed to increase rents for new tenants.
1.22A rent cap may restrict the frequency and/or amount that rents can be increased. A rent cap can be calculated using various methods, such as capping rents by a specific value, or by a specific proportion of the rent, or by reference to an external economic measurement like the consumer price index (CPI).
1.23The terms ‘rent control’ and ‘rent stabilisation’ broadly refer to types of rental regulations. According to Better Renting, ‘rent control’ refers to regulation that limits the amount that rents can be increased within and between tenancies, whereas ‘rent stabilisation’ refers to regulations that apply only within, and not between, tenancies.In the United States, rent control generally refers to more stringent regulation that ‘locks in rental rates at a specific amount’, whereas rent stabilisation allows for rents to be increased by a fixed amount.
Homelessness and marginal housing
1.24The ABS defines homelessness as the situation when a person does not have suitable accommodation alternatives and their current living arrangement:
is in an inadequate dwelling;
has no tenure, or if their initial tenure is short and not extendable; and
does not allow them to have control of, and access to, space for social relations.
1.25Categories of homelessness include living in improvised dwellings, tents or sleeping out, boarding houses, and severely crowded dwellings.
1.26Marginal housing encompasses living arrangements that are close to homelessness, including people living in caravans.
Trends in the Australian housing landscape
Housing tenure types
1.27ABS survey data indicates that, of all Australian households in 2019–20:
two–thirds (66 per cent) ‘owned their own home, with or without a mortgage’; and
almost one–third (31 per cent) rented their home.
1.28Figure 1.1 depicts trends in the proportions of renting and homeowning households over the two decades to 2020. Noteworthy here are the rise in private rentals from 20 to 26 per cent; the decline in public rentals; and the overtaking of no–mortgage homeowners by with–mortgage homeowners.
Figure 1.1Housing tenure, 1999–00 to 2019–20 (a)
Source: ABS, Housing Occupancy and Costs 2019–20, 25 May 2022, www.abs.gov.au/statistics/people/housing/housing-occupancy-and-costs/latest-release#cite-window1 (accessed 18 August 2023).
Home ownership
1.29Australia’s home ownership rate has remained quite stable over decades, changing little from 68 per cent in 1976 to 67 per cent in 2016 (after peaking in 1966 at 73 per cent).However, some projections suggest it may ‘decline by 2040 to around 63 per cent for all households, and to not much more than 50 per cent – down from 60 per cent in 1981 – for households in the 25-55 age bracket’. Australia’s ageing population has been a major factor in the steadiness of this rate to date.
1.30Researchers forecasting a future decline in Australia’s home ownership rate point to a range of changes in the political, economic and social environment. These include demographic and affordability factors, with younger age cohorts having had weaker purchasing ability over the past two decades. For example, the ownership rate for the second–lowest quintile fell to 43 per cent in 2015–16 from 66 per cent in 1988.
1.31The affordability of home ownership has declined over recent decades. TheParliamentary Library estimated in 2015 that ‘the ratio of average disposable household income (Australia–wide) to median house prices’ rose from around 3.3 in mid‑1981 to just over 7 in mid-2015; noting that much of this growth occurred between the late 1980s and early 2000s. CoreLogic has estimated this ratio to be 7.8 in March 2023.
Private rental market
1.32‘More Australians are renting, for more of their lives, than in the past’. Thisassessment by the Productivity Commission is illustrated by Figure 1.3, which also highlights that young adults are the age cohort most likely to rent.
Figure 1.3More Australians are renting, and renting for longer
Source: Productivity Commission, In need of repair: The National Housing and Homelessness Agreement: Study Report, August 2022, p. 297.
1.33Households renting from a private landlord rose from 20 per cent in 1999–2000 to 26 per cent in 2019-20 as a proportion of all Australian households, according to ABS survey data.
Social (public and community) housing
1.34The proportion of households living in social housing in Australia fell from 4.8percent in mid-2011 to 4.1 per cent in mid-2022. While the overall number of social housing households increased slightly over that period (from 404,300 to 418,400), it did not keep pace with the total number of Australian households.
1.35Reporting from data supplied by state and territory housing authorities, the Australian Institute of Health and Welfare (AIHW) has noted the following breakdown across the four major social housing programs of all Australian households in social housing as at June 2022:
68 per cent were in public housing;
25 per cent were in community housing;
3.2 per cent were in state owned and managed Indigenous housing (SOMIH); and
3.9 per cent were in Indigenous community housing.
1.36This breakdown varies across states and territories:
for most, the majority of social housing households were in public housing, followed by community housing;
for Tasmania, 64 per cent were in community housing with 35 per cent in public housing; and
for the Northern Territory, public housing and SOMIH each made up about 40 per cent of social housing households, followed by Indigenous community housing (at 15 per cent).
1.37Over the period from 2002 to 2022, the number of households in public housing fell by 13.6 per cent (to 286,000). By contrast, the same period saw almost a tripling (to 102,600) of households in community housing.
1.38According to ABS survey data, households renting from a state or territory housing authority decreased from 6 per cent in 1999–2000 to 3 per cent in 2019–20 as a proportion of all Australian households.
1.39Using ABS Census data, AHURI reports that Australia’s social housing stock as a proportion of all Australian dwellings fell from 4.9 per cent (228,938 dwellings) in 1981 to 3.8percent (351,017 dwellings) in 2021.
1.40Unmet demand in Australia for social housing was estimated as follows by AHURI in early 2023:
current stock: 348,018 dwellings;
current unmet demand: 213,846 dwellings; and
estimated additional demand (to 2037): 547,036 dwellings.
Current government policies and initiatives
1.41No head of power in the Constitution expressly empowers the making of Commonwealth laws concerning housing, so regulation of housing matters lies within state and territory responsibilities. The Commonwealth can exert influence over housing supply, affordability and standards through policy levers such as funding for social housing in partnership with states and territories, financial incentives, building and financial regulation, welfare support and taxation.
1.42The states and territories are responsible for most of the key policy levers directly influencing housing provision, such as public housing, land use planning and planning regulations. Other key housing market interventions at the state and territory level include tenancy legislation, building quality regimes, development deadlines, land tax and stamp duty.
1.43Figure 1.6 shows how all tiers of governments have policy responsibilities affecting the rental and housing landscape.
Figure 1.6Housing policy levers of Commonwealth, state and territory, and local governments
Source: AHURI, Submission 57, p. 23.
National coordination
1.44The Australian Government has sought over recent years to provide national leadership and coordination on housing policy, primarily through the National Cabinet (established in March 2020 to replace the Council of Australian Governments (COAG)).
1.45Throughout the COVID-19 pandemic, the National Cabinet coordinated rapid action on housing, including eviction moratoria and rent relief. It has since remained an important coordination forum on housing policy.
1.46The Housing and Homelessness Ministerial Council regularly reports to National Cabinet, providing a forum for Commonwealth, state and territory ministers with responsibility for housing and homelessness to progress housing reforms.
National Housing and Homelessness Plan
1.47The Australian Government is developing a National Housing and Homelessness Plan (the Plan) in collaboration with state and territory governments and with the advice of the interim National Housing Supply and Affordability Council. The Plan will be a 10-year strategy for the future of housing and homelessness policy in Australia, outlining short-, medium- and longer-term reforms to address housing challenges. The Department of Social Services (DSS) is leading the development of the Plan, including public consultations.
National Housing Accord
1.48The National Housing Accord 2022 (the Accord), entered into by governments at Commonwealth, state/territory and local levels, institutional investors and the residential development, building and construction sector, sets out commitments to deliver more social and affordable housing.
1.49The Accord originally included an aspirational national target of delivering one million new, well-located homes over five years from 2024. On 16 August 2023, National Cabinet agreed to a new national target of 1.2 million homes over five years from 2024.
1.50Under the Accord, Commonwealth, state and territory governments agreed to:
deliver up to 20,000 additional affordable dwellings over five years from 2024;
collaborate to improve financing for new social and affordable housing projects;
improve zoning, planning and land release to make housing supply more responsive to demand;
review barriers to institutional investment, finance and innovation in housing;
work with community housing and not-for-profit housing providers; and
collaborate to develop a new National Housing and Homelessness Plan.
New Home Bonus
1.51At the 16 August 2023 National Cabinet meeting, the Australian Government committed $3 billion to the New Home Bonus (the Bonus). The Bonus is designed to incentivise state and territory governments to meet the new National Housing Accord target of building 1.2 million new homes over five years from 2024 by providing funding to state and territory governments for exceeding their share of the original target of 1 million homes.
National Planning Reform Blueprint
1.52National Cabinet agreed on 16 August 2023 to a National Planning Reform Blueprint (the Blueprint) to improve housing supply and affordability. The Blueprint involves:
updating state, regional and local strategic plans to reflect new housing supply targets;
undertaking planning, zoning, land release and other reforms, such as increasing density, to meet housing supply targets;
streamlining approval pathways and prioritising planning amendments to support diverse housing across a range of areas;
promoting medium and high-density housing in well-located areas close to existing public transport connections, amenities and employment;
reforms to support the rapid delivery of social and affordable housing;
reforms to address barriers to the timely issuing of development approvals;
consideration of the phased introduction of inclusionary zoning and planning to support permanent affordable, social and specialist housing in ways that do not add to construction costs; and
rectifying gaps in housing design guidance and building certification to ensure the quality of new builds, particularly apartments.
A Better Deal for Renters
1.53National Cabinet agreed on 16 August 2023 to ‘A Better Deal for Renters’ to address renters’ rights across Australia, including by:
developing a nationally consistent policy to implement a requirement for genuine reasonable grounds for eviction;
ensuring provisions to allow appeals against retaliatory eviction notices are fit for purpose;
moving towards a national standard of no more than one rent increase per year for a tenant in the same property across fixed and ongoing agreements;
implementing a ban on soliciting rent bidding;
providing additional rights and protections for tenants experiencing domestic or family violence to:
- end agreements without penalty and with a streamlined process and evidence e.g. a declaration by a prescribed professional such as a doctor or support service worker;
- change the locks and make security improvements without the landlord’s permission;
- have their name removed from databases due to property damage caused by family or domestic violence; and
- with jurisdictions to consider further action to protect tenants who are victim survivors of domestic or family violence e.g. the ability to apply to have the perpetrator removed from the tenancy;
limiting break lease fees for fixed term agreements to a maximum prescribed amount;
making rental applications easier and prescribing a rental application form in each jurisdiction;
implementing safeguards to protect renters’ personal information by:
- prescribing a rental application form in each jurisdiction, with required documents limited to two in each of the following categories: identity, financial ability to pay rent, and suitability;
- requiring the destruction of renters’ personal information three years after a tenancy ends and three months after tenancy begins for an unsuccessful applicant;
- requiring tenants’ personal information to be provided and corrected within 30 days of a request by a tenant or prospective tenant; and
- specifying information not allowed to be collected from a tenant or more generally (e.g. disputes with landlords);
considering options for better regulation of short-stay residential accommodation; and
phasing in minimum quality standards for rental properties.
Australian Government policies and initiatives
1.54The policies and initiatives of the Australian Government that relate to housing and impact renters can be broadly categorised as:
measures to boost the supply of social or affordable housing;
rent assistance;
home purchase assistance;
emergency housing and homelessness services; and
taxation.
Measures to boost the supply of social or affordable housing
National Rental Affordability Scheme
1.55The National Rental Affordability Scheme (NRAS) was established in 2008 in conjunction with state and territory governments with the aim of increasing the supply of affordable rental housing available to low- to moderate-income households. The NRAS incentivises property investors (including charitable organisations and for-profit organisations) to rent out their properties at a minimum of 20 per cent below market rate. As of June 2022, there were 27,012 active allocations.
1.56In the 2014-15 Budget, the Australian Government announced there would be no further funding rounds for new allocations. The final round of NRAS dwellings that entered the Scheme will exit in 2026, bringing the NRAS to an end.
Affordable Housing Bond Aggregator
1.57The Affordable Housing Bond Aggregator (AHBA) provides low cost, long–term loans to support community housing providers (CHPs) registered under state or territory laws to:
acquire new housing stock;
construct new housing stock;
maintain existing housing stock;
meet working capital requirements and/or general corporate requirements; and
refinance existing debts.
1.58The National Housing Finance and Investment Corporation (NHFIC) funds AHBA loans by issuing bonds into the wholesale capital market.Additionally, the NHFIC may advance initial loans to CHPs through a $1 billion line of credit facility prior to issuing bonds.
1.59In the 2023–24 Budget, the Australian Government increased the NHFIC’s liability cap by $2 billion to a total of $7.5 billion, enabling the NHFIC to increase its support for social and affordable housing through AHBA loans.
National Housing Infrastructure Facility
1.60The National Housing Infrastructure Facility (NHIF) administered by the NHFIC provides concessional loans, grants and equity finance for two streams of projects:
eligible critical housing-enabling infrastructure projects (for example, stormwater, sewerage, gas, electricity, telecommunications, and transportation); and
new social or affordable housing.
1.61The bodies that can apply for NHIF finance include:
registered community housing providers;
state or territory governments or government-owned development corporations; and
local governments or their investment corporations.
1.62To date, the NHIF has approved over $400 million in loans and grants to support infrastructure projects across the country.
1.63On 11 September 2023, the Australian Government committed an additional $1 billion in funding to be distributed by the NHIF for public and community housing.
Social Housing Accelerator
1.64The Australian Government announced on 17 June 2023 a new $2 billion Social Housing Accelerator payment (the Accelerator) to be delivered to state and territory governments to create new social rental housing for Australians on social housing waiting lists. States and territories will have some flexibility in how they permanently boost social housing stock under the Accelerator, including new builds, expanding programs, and renovating or refurbishing existing but uninhabitable stock.
Housing Support Program
1.65National Cabinet agreed on 16 August 2023 to a $500 million competitive funding program for local and state governments to improve housing supply in well-located areas. These payments would fund, for example, work to connect essential services, amenities to support new housing development, and improving planning capability.
Housing Australia Future Fund
1.66The legislative package comprising the Housing Australia Future Fund Bill 2023, National Housing Supply and Affordability Council Bill 2023, and Treasury Laws Amendment (Housing Measures No. 1) Bill 2023 was passed by the Senate on 14 September 2023.
1.67The Housing Australia Future Fund (HAFF) is intended to create an ongoing ‘funding source to support and increase social and affordable housing, as well as other acute housing needs including, but not limited to, housing improvements to meet the needs of Indigenous communities and housing services for women, children and veterans’.
1.68The HAFF will consist of the HAFF Special Account and the investments of the HAFF. The HAFF will be credited with $10 billion as soon as practicable after establishment.The Future Fund Board will be responsible for deciding how to invest the HAFF in line with an investment mandate from the responsible Ministers. Any disbursements from the HAFF would require formal government approval.
1.69Over the first five years, the Australian Government intends to use returns from the proposed HAFF to fund 30,000 new social and affordable homes, including:
20,000 social housing properties – 4,000 of which would be ‘allocated for women and children fleeing domestic and family violence and older women on low incomes who are at risk of homelessness’;
$200 million for the repair, maintenance and improvement of housing in remote Indigenous communities;
$100 million for crisis and transitional housing options for women and children fleeing domestic and family violence, and older women on low incomes who are at risk of homelessness; and
$30 million to build more housing and specialist services for veterans who are experiencing homelessness or are at risk of homelessness.
1.70The NHFIC will be renamed ‘Housing Australia’ and its remit expanded to deliver the government’s social and affordable housing programs.
1.71A National Housing Supply and Affordability Council will be established as an independent statutory body advising the government on options to improve housing supply and affordability. An interim Council has initially been established as a non-statutory body within the Department of the Treasury.
Rent assistance
1.72Commonwealth Rent Assistance (CRA) aims to improve housing affordability for income support recipients. CRA is a non-taxable income supplement paid through Centrelink to individuals and families who rent in the private rental market. Recipients of a Centrelink pension or allowance, or an amount of Family Tax Benefit over the base rate of Family Tax Benefit Part A, who are also paying private rent above minimum thresholds, may be eligible for CRA. Since the supplement is paid as a part of another payment, it may be reduced as a result of the income and asset test rules associated with that payment.
1.73The 2023–24 Budget included a $2.7 billion commitment over four years to increase the maximum rates of CRA by 15 per cent for eligible recipients from September 2023. With the 15 per cent increase to the maximum rate of CRA, the Government expects to spend $5.5 billion in 2023–24.
Home purchase assistance
Home Guarantee Scheme
1.74The Home Guarantee Scheme (the Scheme) facilitates loans to eligible home buyers. There are three types of Guarantees:
First Home Guarantee – supporting eligible home buyers to buy a home sooner, with a deposit as low as five per cent. For the 2023–24 financial year, 35,000 places are available;
Regional First Home Buyer Guarantee – supporting eligible regional home buyers to buy a home sooner, in a regional area, with a deposit as low as fivepercent. For the 2023–24 financial year, 10,000 places are available; and
Family Home Guarantee – supporting eligible single parents and eligible single legal guardians of at least one dependent to buy a home sooner, with a deposit as low as two per cent. For the 2023–24 financial year, 5,000 places are available.
1.75The Scheme was expanded in July 2022 to include more places each financial year and to update property price caps to reflect recent increases in property prices to make more properties available for purchase using the Scheme.
First Home Super Saver Scheme
1.76The First Home Super Saver Scheme (FHSSS) supports eligible first home buyers to save money for a house deposit using their superannuation fund. Voluntary contributions (both before-tax concessional and after-tax non-concessional) can be made into an individual’s superannuation fund to save for their first home. If an individual meets the eligibility requirements, they can have these voluntary contributions released, up to a limit, (along with associated earnings) to help them purchase their first home. A maximum of $15,000 of voluntary contributions from any one financial year can be released under the FHSSS; and up to a total of $50,000 contributions across all years.
Indigenous Home Ownership Program
1.77Through the Indigenous Home Ownership Program, Indigenous Business Australia provides loans to Indigenous Australians who are buying, in most cases, their first home and who are unable to access mainstream financing (for example, a bank or credit union). The loans can be used to purchase established residential properties or land on which to build a new home. Loans can also be used for other housing-related purposes, such as to fund essential repairs or improvements to an existing home, or to refinance an existing loan in cases of family break-up or where there is a change in financial circumstances that would result in the family home being sold. Since its inception in 1975, the program has written over 21,000 home loans.
Help to Buy Scheme
1.78The Australian Government announced on 17 August 2023 that it is working with state and territory governments to deliver the Help to Buy Scheme, which will support up to 40,000 low- and middle-income families to purchase a home. The Australian Government will provide an equity contribution to eligible participants of up to 40 per cent for new homes and 30 per cent for existing homes. The states and territories have agreed at National Cabinet to progress legislation to enable the Scheme to operate in their jurisdictions.
Emergency housing and homelessness services
Safe Places Emergency Accommodation Program
1.79The Safe Places Emergency Accommodation Program is a ‘capital works program funding the building, renovation or purchase of emergency accommodation for women and children leaving family and domestic violence’.In the 2022–23 October Budget, the Australian Government announced $100 million over 5 years (2022–23 to 2026–27) to continue the program. This funding will be delivered via an open and competitive grants process and will focus on improving access to appropriate emergency accommodation for:
First Nations women and children;
women and children from culturally and linguistically diverse backgrounds; and
women and children with disability.
Reconnect Program
1.80The Reconnect Program provides ‘community-based early intervention … for young people aged 12 to 18 years (or 12 to 21 years in the case of newly arrived youth) who are homeless or at risk of homelessness, and their families’.Reconnect services include counselling, mediation and practical support to the whole family, to help break the cycle of homelessness. There are Reconnect services in each state and territory.
Taxation
1.81The taxation system provides support for private rental investment, especially by small investors, primarily through the capacity to offset losses on rental housing against income (negative gearing); capital gains tax (CGT) exemptions; and lower rates of land tax (compared to larger scale investors).
1.82For 2022–23, the Government estimated the aggregate tax reduction for rental property investors to be $24.4 billion. In June 2023, Parliamentary Budget Office (PBO) modelling estimated that the revenue forgone due to property tax deductions is to be $37.5 billion in 2023–24, while the revenue forgone due to the CGT discount (compared to inflation adjusted indexation of the cost base) is estimated to be $1.5 billion in 2023–24. This is around $13,800 per property claiming deductions, and around $10,200 per property claiming the CGT discount in the same year.
Negative gearing deductions
1.83An asset is negatively geared when the expenses associated with the asset are greater than the income earned from it. Negative gearing arrangements allow Australian property investors to offset any net rental loss against their other income (that would otherwise be taxed at the full marginal rate), thereby reducing their overall taxable income.
Capital gains tax concessions
1.84CGT concessions allow individual property investors who own an asset for at least 12 months to receive a 50 per cent discount on normal individual tax rates on capital gains when the investment property is sold. A residential property that is a person’s primary place of residence is fully exempt from CGT, provided eligibility and other assessment criteria are met.
Tax incentives for build-to-rent investment
1.85The 2023–24 Budget included new incentives for build-to-rent developments to boost supply in the private rental market by:
reducing the withholding tax rate from 30 to 15 per cent for foreign investors using managed investment trusts to invest in newly constructed build-to-rent developments after 1 July 2024; and
increasing the capital works tax depreciation rate from 2.5 per cent to 4 per cent per year for newly constructed build-to-rent developments, where construction commences after 9 May 2023.
State and territory governments
1.86As mentioned earlier in the chapter, states and territories are responsible for most of the key policy levers directly influencing housing provision, such as public housing, land use planning and planning regulations.
1.87Tenancy laws which directly impact renters are also the responsibility of states and territories. They are discussed in Chapter 4 of this report.
1.88All state and territory governments offer a range of programs providing direct assistance to private renters, including tenancy support and advice.
1.89 Programs to assist eligible tenants to secure private rental housing include:
Bond loans and advance rents, which are interest-free loans for part or full rental bond and advance rent. Some states require fortnightly repayments starting immediately, while others only require that the bond be repaid at the end of the tenancy.
Tenancy guarantees,bywhich the state/territory housing authorities provide private landlords or real estate agents with a formal guarantee to cover potential future rent arrears or property damage over and above the rental bond.
Relocation assistance, which provide loans to assist eligible tenants to cover the costs of a new private tenancy (for example, removalists expenses).
Australia in the international context
Social housing stock
1.90Australia has a lower percentage of social housing (3.8 per cent in 2021) than 15 other Organisation for Economic Co-operation and Development (OECD) countries. Countries such as the Netherlands, Austria and Denmark had over 20 per cent of social housing in 2020, based on OECD data (which estimated 4.4 per cent for Australia). The UK ranked fourth with 16.7 per cent. Australia’s social housing supply, as a proportion of households, is comparable to that of Canada, New Zealand and the United States, all estimated to be just under four per cent.
Rental affordability and rental crisis
1.91Australia is among the top 10 countries in the OECD with the highest proportion of the population renting in the private sector.
1.92Housing costs in Australia, comprising rents as well as costs of maintenance and repair, ‘make up a high share of overall household expenditure compared with the average OECD country’. Although housing cost overburden for low-income tenants is lower in Australia than the average OECD country, approximately one-third of low-income renters in Australia spend over 40 per cent of their income in rent.
1.93Rental affordability is a growing issue in many parts of the world. The OECD reported that ‘rents increased in all but two OECD countries between 2005 and 2020’, with rents more than doubling in several countries during that period. The International Monetary Fund reported in 2021 that rental housing has become increasingly unaffordable in many European countries. In 2022, Per Capita wrote:
Many of the world’s developed countries are experiencing a crisis in the affordability and accessibility of secure and appropriate housing for anyone not already in possession of significant personal or family wealth.
1.94Australia exhibits low use of rent control and rent stabilisation compared to other OECD countries:
A large proportion of countries operate some form of rent control as part of their housing policy, usually at the municipal or state level. … around half of European Union (EU) countries operate a form of rent control, as do regions of Canada, the USA, Korea and Japan.
Tenancy laws
1.95A recent report by Longview and PEXA concluded that ‘Australia is one of the worst countries in the developed world to be a renter’. The report ‘scored’ rental experience across ten developed Western countries by reference to both tenure (typical term; and grounds required for termination) and ‘making a house a home’ (whether tenants may have pets or make minor alterations). Three Australian jurisdictions (New South Wales, Queensland and Victoria) scored amongst the lowest of all jurisdictions included in the study (including Sweden, the Netherlands, Germany, Belgium, Austria and Spain).
1.96According to research undertaken by AHURI, compared with comparable countries, the Australian private rental market has policy and legal settings resulting in ‘weak tenant rights which do not facilitate secure occupancy for tenants’.
1.97For example, among ten comparable countries, only Australia, New Zealand, the United Kingdom (other than Scotland) and some United States jurisdictions allow no-grounds terminations of lease.
1.98Their research suggests that Belgium, Germany and Sweden have relatively strong tenancy law from the perspective of renters’ rights.