A bullet dodged

You could hear the collective drawing in and holding of breath in the property sector before yesterday’s National Cabinet meeting and fortunately common sense prevailed.

Rent freezes or caps are off the table and look to be permanently in spite of the campaign run by one of the minor parties strongly advocating for it. My view is that any sort of “freeze” on rents as any sort of solution is nothing more than fantasy – you only need to look at the mess that is New York with their rent controls, along with the disastrous effects rent freezes have had in other parts of the world such as Ireland and Berlin to realise that while this might be a great headline grabber, it’s just bad policy and would only have led to further pressure on existing rental housing.

The plan which has come out of the National Cabinet focuses very strongly on the supply of new stock to the market, but the horizon for implementation is too long – the incentives to State governments doesn’t commence for another 5 years but at least they’re trying.

In brief, this plan covers some 12 points that I’ve seen and most of them are reasoned, pragmatic approaches to a very complex problem. These are:

  • A 20% increase in the supply of new housing over the next 6 years
  • A rebate to State governments of $15,000 for every new home completed above the previous mark
  • Reforms to planning including a focus of land release timing and increasing density
  • Reasonable grounds for eviction
  • Eviction appeals
  • A national standard for single rent increases per year
  • Rent bidding
  • Strengthening DV protections for tenants
  • Limiting break lease fees  
  • Streamlining rental applications
  • Dealing with short stay rental accommodation
  • National consistency of minimum standards

While some parts of the plan will cause heartburn in other States, in Victoria it’s pretty much steady as she goes, because we’re already in the sort of legislative regime, and we’ve adjusted to these requirements. As I say in a lot of my training around Legislation, we simply have to accept any changes and adjust our mindset and our procedures to take them into account; once we do, everything becomes easier – it’s only when we try to resist them that we cause ourselves heightened distress.

Although I’m hearing anecdotal reports of a bit of a lull in demand for rentals in some areas, we still have an urgent problem with accommodating our current population, not to mention the influx of immigration which will add another 750,000 people to our country over the next couple of years or so, and I think that the lack of immediate incentives to the supply side (as I and other commentators have suggested) hasn’t addressed the very real issue that this is a “Now” problem as well as a future one.

That all said, we also have to change our mindset and get rid of the NIMBYism mentality of opposing developments in areas where infrastructure already exists. The biggest drag and largest cost in a residential development apart from the acquisition costs for the land is providing the services to support the future communities. Broadacre land which is suitable for development is becoming increasing distant from areas with good public infrastructure and the costs to supply are enormous; we need to be looking to fill in some of the existing land in suburbs where these facilities are already in place thereby easing the cost of production and making the price points for better located new homes more affordable – this is an area where the Victorian government has already flagged that they will be removing responsibility for planning decisions from local government in an effort to streamline and simplify the granting of permits.

There’s clearly a lot more work to be done on this and no doubt we’re going to see more policy announcements over the next short while so let’s hope that the various State governments stay reasoned in their approaches to the shortages and don’t go off on their own little frolic and tip the balance further away from the current position.