Editorial July 22nd 2022

Welcome to this week’s editorial,

As we continue on this fiscal slide that is seeing an ever increasing chasm develop between rents and wages the conversations of what to do invariably turn to penalising those who dare to have their investment homes stand vacant.

The latest Census reveals over 1 million homes sitting empty on Census night. The question to ask is “were these houses actually empty with empty meaning devoid of furnishings?” The answer would have to be no for most of them. We have to accept that there is second-home ownership, with the baby boomer population having second homes and holiday homes. There is also the many (over 1000 in Eurobodalla alone) Short Term Holiday rentals. Unsurprisingly most of these properties were vacant on census night as it was conducted in August, in winter.

Think tanks are now looking to see what can be done to arrest the growing problem of homelessness.

The first thing to do is to establish why there is homelessness. Some, like Eurobodalla Council, might look at the holiday house and Short Term Rental vacancies and write to non-resident owners appealing that they put their property on the permanent rental market for 12-24 months. This appears to have attracted around 50 new listings to date.

But if you drill down you might find those new listings are only affordable to those who have full time employment, a sound rental history, money for the bond and can afford to pay between $260 per week for a 1 bedroom rental through to $700 for a furnished four bedroom.

The median rent of $320 has been overtaken to a new high of $550 per week. A massive jump of 71% in just over a year.

The Covid rush to decentralise and the metropolitan mortgage escape will no add to the continuing climb exacerbating market pressures. The bottom line is that many have found, or will soon find themselves out of the rental market because their wages just don’t meet the rents demanded. It is all market driven. Supply and Demand. And legal. Property owners are allowed to charge whatever they wish and to place whatever conditions they want on leases within the law. Meanwhile the Federal Greens BIG STICK approach to solving the “issue” of availability is by pushing to cap private rent increases, phase out negative gearing, tax vacant properties and restricting Airbnbs.

Council could look to introduce a penalty on “vacant houses” with a ‘big stick’ approach that won’t work as any holiday house or Short Term Rental that might come on the market as a result of the Big Stick approach will still be generally unaffordable. The issue is not housing stock. The issue is affordable housing stock.

But what if Council was to take a ‘Carrot’ approach. What if they supported heavily discounted rates for long term rental properties (and even waived the General Fund rate). Council is sitting on $100 million in the bank waiting for a rainy day. Just how much rain do they need? To qualify for a discount all one would need to do is register with proof and Tax file number, exactly as is now required by Short Term Rental Accommodation.

This register, like the current STRA register could be tied to the taxation system and the Federal Government could then give tax breaks on permanent rental incomes. Maybe then the double incentives added to existing negative gearing might be enough to seduce new rental properties to the market. With higher supply the rents will drop. The data capture is a simple exercise. All it requires is the desire for local government and Federal Government to actually step up (and lose revenue) and play their part rather than saying it is Baby Boomer selfishness that is causing the problem.

Maybe it requires Council, in the first instance, to lead and show some grunte* and put their hands in their pockets to start the ball rolling. By Council’s own example the Federal Government might then follow suit. The government appears happy to privatise health, transport, education. Why not incentivise the private sector to provide all the housing required by those who can afford the rents, and then step into service those who most need affordable housing. Blind Freddy can see that the issue is about affordable housing stock. This is controlled by the amount of money folks have to spend on rents. If wages are not going up then rents must come down. Keynesian Theory 101. Or we can continue to do nothing.

Until next—lei * GRUNTE Generous Rates Underwritten w/ New Tax Exemptions.