Summit offers no solution to growing housing rental crisis

The federal government claims its target is to build 1.2 million homes over the next five years. Tell them they're dreaming.

There are two basic problems: too much demand and too little supply. The only way to cut demand is to cut immigration, which the government is not prepared to do. Improving supply by building all these proposed new houses sounds good, but will put further pressure on a building industry that cannot keep up with the jobs they have on now.

I would hate to be building or renovating a house at the moment. Australia is between a rock and a hard place - they need immigrants to build properties, but the immigrants themselves increase demand for properties.

Then of course you have the Greens, who are pushing for a rental freeze - one of the worst ideas imaginable. Once you have a rental freeze, landlords will be trying to minimise their losses, which will make them reluctant to do any repairs to the property. And they will have the best excuse: no tradies available to do the work.

To increase the supply of rental houses, becoming a property investor needs to be made attractive.

To freeze rents, the government should also be prepared to freeze rates, land tax, insurance and interest on loans; you can't attract investors by freezing their income at a time when their costs are rising sky high.

The following email from a reader sums it up.

"I am 51 and fully employed. I bought a cottage in Footscray years ago - it has a $350,000 mortgage with an interest-only loan at 5.99 per cent. My strategy has always been to leave the investment property on interest only and focus on repaying the non-deductible debt on my own home. The rental property has showed good growth and is now worth $900,000. The rent is $450 a week or $23,400 a year, which is a yield of 2.6 per cent based on the valuation.

"Rents have been rising, but not enough to offset my increasing costs. The interest for the year ending June 2022 was $9600, but it was $13,000 for the current year. That's an increase of 36 per cent. I believe interest for this year will be $21,000, which will be an increase of 62 per cent. In just two years interest has increased by 220%. The increase in interest in those two years is $220 a week, while the rent has increased by just $30 a week.

"On top of this I've been hit with an electrical and gas compliance cost of $1500, increased land tax, and large increases in insurance premiums. I anticipate making a loss of $10,000 for the current year, with the only silver lining being a tax refund of $4000.

"I would like to get out, but the potential capital gains tax bill of $150,000 makes me hesitate. I now understand why some people invest all their capital in the most expensive home they can afford, and enjoy living well in it and enjoying its CGT-exempt status.

"When it comes to pension time, the home is excluded from the assets test - the investment property is not."

He is spot on. As a strategy to curb inflation, raising interest rates is having the opposite effect.

High rates put pressure on landlords to increase rents to keep their own heads above water. Rent is now one of the major influences on domestic inflation.

The more we attack the mum and dad investors who are providing the rental properties this country needs, the more reluctant they will be to continue investing in the residential property space. Do we really want an Australia where most renters are stuck in government-built high-rise apartments?