A recent government push to ease the housing crisis will leave renters unprotected from price gouging and other predatory landlord tactics, warn experts.
The federal government’s latest Build to Rent legislation, which hands foreign investors extra tax incentives, is under investigation after the Greens and opposition joined forces in June to send the bill to a Senate inquiry.
While originally intended to fund the construction of 150,000 extra rental homes, director of community land trust advocacy group Grounded, Karl Fitzgerald, says the “horrific” strategy could put more Aussies at risk of being financially manipulated by greedy landlords.
“This legislation rolls out the welcome mat for rent maximisation strategies,” he told the inquiry on Wednesday.
Currently, build-to-rent projects under this legislation offer up no protections for tenants, leaving the door wide open for steep rental hikes you can no longer find anywhere else in the Aussie market.
For tenants at the Smith Collective, Australia’s first large-scale build-to-rent project, rents have grown 50 per cent over two years.
Similar to programs in the US and UK, the proposal also looks to increase foreign corporate investment in rental housing, which Fitzgerald warns could reduce competition by pushing out mum-and-dad investors.
“What we’re seeing in the northern hemisphere is a horrific new software program called Yield Star, which, in Atlanta, coordinates rental increases for 81% of rental properties,” he said.
“The Board of Supervisors in San Francisco has now banned this as a monopolistic practice, and there’s just nothing in this legislation that even prepares us for what’s coming.”
Solving the housing crisis
But not everyone was in agreement, with Property Council of Australia Chief Executive Mike Zorbas calling for the government to double down on its build-to-rent efforts as the “missing piece of the housing puzzle.”
“We can deliver 105,000 rental homes, and immediately unlock 1,200 affordable tenancies through the changes proposed and that is a big contributor to getting to our national housing targets,” said Zorbas.
“At the time when new housing supply is desperately needed, the current settings are repelling investment. Thousands of new rental homes that should be under construction are not.
“Build-to-rent offers high amenity, secure tenure for renters in comfortable, energy-efficient homes with shared facilities and community programs.
Liberal senator Andrew Bragg stood his ground, labelling incentivising home ownership for foreign investors while Australians struggled a perversion of the Australian dream.
Independent economist Cameron Murray told the committee that it was unclear why local investors shouldn’t be advantaged over foreign investors when it comes to housing.
“Australian housing already attracts a huge amount of investment, there’s no problem with a lack of money,” Dr Murray said.
“It’s not clear what outcome the bill is proposing to get.”
Under the legislation at least 10 per cent of the Build to Rent dwellings will need to become affordable rentals, meaning they must be rented out at less than 75 per cent of market value.
But Dr Murray warned investors could game the system.
In a building of 100 apartments, for example, a property mogul might offer 10 studio apartments and 90 luxury dwellings, abiding by the scheme by offering below-market rent on the cheaper properties while raking in the tax advantages on the other apartments.
“You end up with second entrances for the poor people and studios being next to the garbage loading facility,” Murray told the inquiry.
“You’re giving away this value for free and developers are very good at maximising on all the different design changes and margins that they have access to.”
