Rental sector boom spurs calls for regulation reforms

By Kay Rivera | 06 Aug 2018

The recent Australian Housing and Urban Research Institute (AHURI) report on the Private Rental Sector (PRS) revealed some progressive developments that might need immediate attention from official regulators. Highlights of the study include higher growth, debt- based financing, specialised markets and impact of technology in the sector.

Undertaken by Swinburne University of Technology and UNSW Sydney researchers, it found that more than a quarter of all Australian households (about 2.1 million) are private renters. From 2006–2016, the PRS increased by 36%, twice the rate of all household growth.

This growth is expected to continue because of a decline in home ownership, specifically among younger and middle-aged Australians challenged by rising house prices and a decreasing social housing sector.

The report added that debt-based financing of PRS properties has surged significantly. Out of all 10 countries evaluated, Australia was seen to have the highest level of household debt related to housing for both owner occupied and rental housing.

Moderate and high-income renters have also been advantaged by the rapid influence of digital technology in the sector, including large online property portals, rent bidding apps and social media that links tenants directly with landlords.

Another notable insight was the unusually high degree of integration with the owner occupied sector.  What does this imply? Should Australia experience an economic shock like the Global Financial Crisis during the past decade, investment in both sectors can fall simultaneously with minimal established institutional capacity for countercyclical investment.

But while PRS shares most of its housing stock with owner-occupied sector, it is also fragmenting and diversifying with the development of niche markets and services and a growing ‘informal’ sector characterised by a lack of transparency and tenure protection.

“We’re seeing newer markets such as in the student housing sector, new generation boarding houses in NSW, developers retaining units for rent, an affordable rental sector provided by not-for profit organisations, and a growing informal sector,’ said Sharon Parkinson from Swinburne University.

AHURI then realized that PRS’ market diversification floats some concerns, such as low-income and vulnerable households facing particular barriers in accessing and maintaining housing.  This is clear evidence that rental property investment and provision favours moderate to highly priced rentals with limited and insufficient dwellings accessible at the low rent end.

With the aforementioned changes, AHURI urges policy makers to review the effectiveness of existing policy and regulation. The research network highlighted that, compared to other nations, Australia has relatively weak laws regarding security and rent regulation. Added to this is the insight that without proper monitoring, some landlords and intermediaries are acting in unscrupulous ways to increase rental returns.


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