Politics gets in the way of Policy. Again.

In the distant past of 2021, the Labour federal government proposed a $10 billion affordable housing investment fund, which would see $500 million of investment earnings (a reasonable 5%) spent each year on new affordable housing projects across Australia. Admirable goal, meaningful dollar amount to put towards it, and invested wisely they should even get away with keeping the principal investment intact too (government efficiency – bravo!).

Fast forward to 2023, and that proposed fund has made it through the House of Representatives and been waiting on the endorsement of the Senate to pass into law, take effect and get to work.

Given the volume of rhetoric that has been dedicated to housing over the past few years, the strident calls for housing reform and the lamentation of the sheer deficiency of housing supply across the nation, you would think this would be a straightforward run. Not so.

Cross party support has been lacking and a broader backing has been tied to yet another proposal to institute a national freeze on rent rises, among other measures.

This is one of those times where unfortunately, the politics of it is likely to get in the way of what could be a broadly beneficial policy because frankly, an arbitrary, government enforced rent freeze is about as financially sound as buying magic beans.

The market has moved, often quite substantially so, over the past 3 years and this is being reflected in the rent increases seen across much of the country. There is a clear supply and demand dynamic at play here, not just the whims of the few. Further, as house prices have risen, so have the rents to back those up. Furthermore, with the RBA instituting its 11^th rate rise in the past 14 months, the cost of funding has risen substantially and for those investors not on long term fixed rates, expenses have skyrocketed. Tripling (in some cases) outgoings and then choking income growth at the same time is a dangerous mix.

Rather than punish the private investors that provide the bulk of the nation’s rental housing, the government should be focused on creating new supply (as it appears to be trying to do) and subsidising those that otherwise can’t afford a roof over their heads. Incentive (not DISincentive) should be the tool here, because there are plenty of investors getting over having a stick waved at them and their properties.