2017 was hoped to have been the year of the renter. As Federal Budget 2018 ticks by, the picture remains grim for low-income renters, despite property prices having come off the boil (for now) in some capital cities.
In last year’s Making Housing Affordable series I outlined how negative gearing and capital gains tax discounts not only distort housing markets by favouring property investors over first home buyers, but also combine to produce a pretty lousy experience for renters at the system-wide level. I wrote about that in anticipation of the 2017 Budget in which a Federal Treasurer was tipped to acknowledge – for the first time in my working life, and probably yours too – the affordability struggles of Australians who rent. Alas, it all came to nought.
Granted, there was little hope of the Turnbull Government winding back generous tax breaks for landlords. Instead they applied some limits to the market for foreign investors, announced a suite of measures to help providers of “Affordable Housing products” fund their wares, and promised reform of the National Affordable Housing Agreement. All of this remains a work in progress, and despite another Federal Budget having since come and gone, the actual funding for Affordable Housing remains largely aspirational. The impact of these measures remains to be seen, and in any event the housing produced will be quite targeted once it starts to come online.
In the meantime we’ve seen the release of the 2016 Census data, and it confirms we’re heading for a policy related train wreck. While our superannuation and aged pension schemes continue to assume high levels of home ownership, fewer homeowners are paying off mortgages, more people are renting much later into life, and homelessness has risen to ever more shameful levels. Something’s got to give.
But there’s something else happening that has policy-makers treading water at the moment. In fairness it might help some well-off renters become homeowners sooner than expected, but for most it won’t mean much at all. In key markets like Sydney and Melbourne, house prices are coming off the boil.
This is likely down to three things combining: households becoming wary of massive debt; targeted macroprudential settings impacting upon investor finance; and expectations of new supply flowing into the system over the next few years. As each of these things continues to take hold, we can expect the screws to tighten further on prices, and the dynamics of the market to change. Renters who are earning and saving may experience new levels of optimism, as they soon find (or imagine) themselves in a position to buy. But investors might become all the more attached to their tax breaks (especially if interest rates rise) as they move away from rapid gains and begin looking for cheaper, less risky homes. Those are the same homes that renters might like to buy, so the battle between these cohorts may yet kick on.
For now, at least, rents remain a different story. Anglicare’s snapshot and National Shelter’s Rental Affordability Index continue to demonstrate the depth of the problem for low income households. Slowing house price growth is not making any immediate impact here.
Download the PDF of Making Housing Affordable articles posted in May 2017.
Ned Cutcher is a Senior Policy Officer with Shelter NSW. He has previously worked as a tenants’ advocate across Sydney and the NSW Central Coast, and a policy officer with the Tenants’ Union of NSW.