The affordability of rental accommodation has become a pressing concern, not only in the Kiama LGA but across the entire state. The government's proposal to impose rent freezes has sparked a debate about its fairness to investors. The Bugle delves into the complexities of this issue, considering both renters struggling to find affordable homes and investors grappling with rising costs.

The rental housing market is currently experiencing a significant squeeze, with rental houses becoming increasingly scarce. Investors are becoming wary of choosing property as an asset class due to soaring interest rates for loans and the looming threat of rent freezes. This raises questions about the impact of such policies on 'mum and dad' private investors who have chosen to invest in real estate.

Many potential renters are finding themselves outpriced by landlords, leading to crowded inspections and competitive bidding wars. This trend has persisted for some time, prompting questions about the motivations of landlords. Are they being greedy or is increasing rent a necessity driven by a series of 12 interest rate hikes? There’s also the possibility of another rate rise on the way given that last month’s inflation figures are back on the rise.

To shed light on the investor perspective, we spoke with John in Kiama, a pseudonym, who manages a rental property within his self-managed super fund. John explained that loan rates for super funds are typically less competitive than those for individuals, so it is already more difficult. The relentless rise in interest rates imposed by the RBA forced him to raise the rent on his 3-bedroom apartment by 10 percent just to break even. This change was a stark contrast to the stability he experienced before the interest rate hikes. “I’d have no choice but to sell if the rates rise again,” John states.

The pertinent question is, who should bear the responsibility of providing affordable housing options for those who cannot find housing within their budget? John raises the issue of government responsibility, suggesting that they may have played a role in the current state of affairs by not adequately addressing affordable housing needs.

John's predicament highlights the vulnerability of some investors, who may be compelled to sell if interest rates rise again. The potential introduction of rental caps and rent freezes has sent ripples of concern throughout the Australian rental market, as evidenced by a recent survey conducted by Property Club, Australia's largest independent property investment group.

Property Club President, Kevin Young, shared insights from the survey, revealing that 67 per cent of landlords surveyed would consider selling their investment properties if rent freezes and rental caps were implemented. This reflects the financial strain many landlords are already facing, exacerbated by rising interest rates and limits on rent increases.

Real Estate agent Sam Lathbury, of First National Coast & Country, explains, “It’s a really interesting time in terms of legislation and what may happen, and the effects that this will have on landlords and the rental market overall.” He mentions that “Generally (landlord) cost increases have eventually been passed onto tenants which might be seen as unfair, but the market sets the rent.”

Sam predicts that if there is an introduction of rental caps/freezes which results in increased costs and reductions in rent, then the return will drop and landlords will undoubtedly question whether to continue with renting their properties, as the risks and financial commitment has to be worth it.

“The reality is that there will always be a need for rental properties and if landlords decide to sell and there is less rental stock, supply and demand will result in a more competitive and difficult market for tenants to find a property,” Sam points out.

Amidst these concerns, the shortage of rental housing in our LGA is pushing rents beyond the means of low-income renters. The prevalence of Airbnb properties further compounds the issue, and urgent action is needed.

The debate over rent freezes is a complex one, involving the delicate balance between renters' needs and investor concerns. The government must navigate these challenges carefully to ensure affordable housing for all. It's essential to consider the long-term consequences of policies on both renters and investors in the quest for a fair and sustainable housing market.

The Bugle approached NSW MP for Kiama Gareth Ward and Federal Member for Gilmore Fiona Phillips to weigh in. Fiona Phillips has confirmed that there is no federal government proposal to impose rent freezes. She maintains that the Federal Government’s view is that a rent freeze would only make supply issues worse, which is in no-one’s best interests.

Ms Philips indicates that the government’s focus is on improving housing supply, because this is the best way to improve housing affordability for renters and buyers. In addition, data and evidence reveals that a rent freeze would not improve affordability and would mean fewer rentals in the future. Most importantly, the Commonwealth also does not have the power to implement a rent freeze and a majority of states and territories already have ruled one out. Experts have also testified to a Senate Inquiry about the negative impacts of rent freezes.

Ms Phillips says, “Young people and people of all ages in the Kiama local government area should be able to live locally. However, for too long, the previous federal government did little to address the growing shortage of affordable and social housing.”

She maintains that the Albanese Government is taking action on housing and putting in place short, medium and long-term plans to tackle the challenges people in Kiama are facing. “We’ve just passed through Parliament our landmark legislation to deliver the $10 billion Housing Australia Future Fund, which will create a secure, ongoing pipeline of funding for social and affordable rental housing,” Ms Phillips says.

“We’re working with the states and territories to help them meet the ambitious new national target to build 1.2 million well-located new homes over five years from July through our $3 billion New Homes Bonus and $500 million Housing Support Program.

“This is in addition to our ambitious housing agenda, which includes the $2 billion Social Housing Accelerator and the Help to Buy Scheme, which will commence next year.

“People in Kiama can be assured that we’re working with all levels of government, investors, community housing providers, the building and construction sector, and other housing stakeholders to implement our ambitious housing agenda.”

Member for Kiama Gareth Ward said that addressing housing affordability involves a range of policy leavers. Many of these leavers can make both rents and home ownership easier. Mr Ward said he hasn’t given up on efforts to make it easier for people to realise the great Australian dream of home ownership.

“In the 1980s, people needed to earn five times their average income to afford a home. Now it’s more than 14 times.

“Adding to the challenge is that those under 34 are the first generation this century to see their increase depreciate in real terms.

“In combination, these factors are making the cost of living harder than ever with shelter comprising a considerable proportion of the weekly household budget.

“The decision of the Minns Labor Government to scrap the First Home Buyers Choice scheme has made it hard for young people in Kiama to purchase their own home. This scheme allowed people to avoid stamp duty by paying a small annual land tax instead.

Mr Ward said that more housing supply would supports homeowners and renters alike.

“We need more housing supply in the market, but this supply needs to be in the right places along with the necessary infrastructure to shoulder growth. For example, the fasters growing rate of homelessness is women over 55. People in this category are often looking for 1- and 2-bedroom apartments close to public transport and services. This means increasing heights in key areas to accommodate this lacuna in the market.

“By targeting increased housing supply, through a range of housing types, you can address not only rents but make home ownership more affordable for people who are on the precipice. People who can leave the rental market and become homeowners free up rental properties.

“I also believe the government needs to make it harder for foreign investors to flood the market and crowd out first home buyers and renters. There are so many countries around the world where Australians can’t buy land. Why do we allow those same countries to purchase land here? It makes no sense to me.

“I strongly believe that we need to change negative gearing rules. Being able to negatively gear 10 or 20 properties also impacts available housing stock to the determent of renters and first home buyers.

“We also need the government to change superannuation rules to allow people to use some of their Super to enter the property market. Housing affordability and poverty are inextricably linked. I’m very critical of union-controlled super funds that invest members money in build-to-rent schemes that crowd out available land and home ownership."