A rhetorical trick is being used by property investors, and it's time to shine a light on this issue. The claim that they're 'boosting rental supply' might not be as straightforward as it seems, and it's a crucial matter that affects us all.
When investors talk about increasing rental housing, are they building new dwellings or buying and converting existing owner-occupied properties? It's a simple question with a significant impact on our housing market.
Let's break it down with a visual example. Imagine we have 16 rectangles, each representing a pre-existing owner-occupied dwelling. If we were to convert four of these into rentals, we could technically say we've increased the rental supply by four. But here's the catch: the overall housing supply remains the same at 16, and we've reduced the number of owner-occupied homes.
Now, consider an alternative scenario. If we build four new properties specifically for rental purposes, the 16 owner-occupied dwellings remain untouched, but we now have four additional rentals. This boosts the overall supply of properties to 20, and we've genuinely increased the rental supply without impacting the owner-occupied market.
So, which approach is more honest and beneficial for our housing system?
This issue was recently highlighted by independent economist Saul Eslake, who analyzed housing finance data from the Australian Bureau of Statistics. He pointed out that a significant proportion of finance commitments to property investors are for the purchase of established housing, which does little to increase the overall housing supply.
Mr. Eslake argued that while these investors may feel they're adding to the rental supply, they're also increasing demand for rentals by outbidding potential owner-occupiers. He believes it's time for governments to reconsider the tax concessions granted to these investors, especially when it comes to established properties.
This sparked a lively discussion, with Professor Cathy Sherry of Macquarie Law School expressing doubts about tax concessions for new builds as well. She suggested that this practice, which has been ongoing for decades, has contributed to the current housing crisis.
But here's where it gets even more interesting. Once we clarify that investors are indeed building new properties, we must also consider the quality of these builds. What's the point of increasing rental supply if these new properties are riddled with defects and exploitative practices?
This is a complex issue with no easy answers, but it's a conversation we need to have. So, what are your thoughts? Do you think the current system encourages the right kind of investment in our housing market? Feel free to share your opinions and insights in the comments below!
