Expert says talk of short-stay restrictions distracts from the real issue – Australia needs a lot more rental properties
As the rental crisis continues across the nation, there have been regular calls for restrictions on Airbnb and other short-term rental platforms. However, such restrictions are not a silver bullet to end the rental crisis, according to the Real Estate Institute of Western Australia.
REIWA CEO Cath Hart said that targeting short-stay accommodation simply drew attention from the broader issue – the need for a lot more rental properties.
“Short-stay accommodation such as Airbnb is only a relatively small portion of the overall housing stock, although it may be more prevalent in popular tourist destinations,” Hart said. “A recent search of Airbnb showed about 700 properties across WA, so even if all these properties suddenly converted to the rental market, it would not be enough.”
Hart also pointed out that short-term accommodations aren’t always suitable for use as a long-term rental.
“For example, it may be a granny flat, self-contained apartment that is part of the owner’s property, an extra room rented out occasionally or even a property the owners occasionally use themselves and rent out at other times,” she said. “Or it may be an eight-bedroom, four-[bathroom] luxury home that is ideal for groups of people looking for a holiday but unsuitable as a rental, and possibly unaffordable as well.”
Hart said that REIWA’s modelling indicated that about 18,000 to 20,000 properties were needed to compensate for the fall in rental properties over the past two years and keep up with population growth.
Investor exits
“Investors experienced an extended downturn prior to COVID,” she said. “The Perth median house rent price declined from $450 per week in early 2015 to $350 in mid-2017 and remained there for a year before lifting slightly in 2018. House prices also experienced a steady decline during that time. The vacancy rate was much higher than it is now.”
While market conditions have since improved, more than 19,000 rental properties have been removed from the rental pool since January 2021 as investors exit the market, Hart said.
“This significant reduction in rental properties combined with a continually growing population is what’s driving WA’s rental shortage,” she said. “Delays in the building industry have also played a role as many tenants who took advantage of COVID building incentives are still waiting for their home to be completed and need to retain their rental accommodation in the meantime.”
Calling on government
Hart called on the government to throw its support behind efforts to increase the number of rental properties.
“Whether it’s at a local, state or federal level, we have to ensure we have policy settings that encourage rather than discourage people from investing in rental properties,” she said. “This could be local planning policies, fair and equitable regulations on rentals, or tax settings for negative gearing or capital gains. We also need policies that support development. WA needs about 22,000 new builds each year to replenish the market, and we’ve fallen well below that over the past decade. That has contributed to the current situation with rentals.”
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Hart said REIWA welcomed the WA government’s recent announcement of an $80 million Infrastructure Development Fund aimed at helping local governments and developers offset the cost of providing water, sewage and electricity services to new housing developments.
“These costs have been a barrier to new development, and this assistance should help boost housing supply in Perth and the regions,” she said. “The government has also been reviewing the planning approvals process, which will help encourage development.”
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