The taxing culprit of Victoria’s rental crisis

Opinion Editorial published in the Herald Sun on 16 May 2023
By Quentin Kilian, CEO Real Estate Institute of Victoria


As cost of living and interest rates rise, both renters and homeowners in Victoria are feeling the pressure. Unfortunately, proposed property policies to fix the 'broken rental market' are often used as political bargaining chips rather than genuine attempts to help renters or attract investors.

Contrary to stereotypes, nearly three-quarters of Victorian rental providers own just one property and are predominantly “Mum and Dad” investors, not wealthy corporations. At the pace rates are rising, it’s likely owning an investment property will become increasingly unaffordable for these people, having a negative impact on supply and rental availability.

In past years, ill-considered policy has done little to protect the interests of renters or rental providers. If proposed policies like rental caps come to fruition, there’s little doubt that the rental crisis will worsen as more providers exit the market.

A policy equally ill-conceived and downright lazy is Land Tax - discouraging investors from buying or developing properties in Victoria, contributing to reducing the supply of available rental housing. Even seemingly minor changes to Residential Tenancies Act (RTA) have ripple effects, such as placing financial and administrative burdens on rental providers and triggering disputes with renters that may ultimately end up in VCAT – a lengthy, costly, and unpleasant process for all.

The only true fix is a complete review of the property taxation system in Victoria.

Without the support of government and policymakers in creating more rental supply, Victoria could soon find itself in a state of real estate gridlock.

Governments must understand that attracting investors and supporting them as residential rental providers is a critical to address issues such as housing affordability and homelessness. – .

In 2021, the RTA saw 130 changes introduced, resulting in a mass exodus of investors and property managers. According to the ABS, there were approximately half a million rental properties in Victoria in 2020. Since COVID, the property sector has lost 40 per cent of its property management workforce, putting huge stressors on those remaining to manage the growing population of renters.

REA Group’s data in 2022 confirmed 25 per cent of all sales in the market were exiting investors, while just 6 per cent were investors entering.

It’s essential for policymakers to consider the broader implications of any property policy changes to create a sustainable real estate market. It’s a simple fact that when investments become less attractive, people put their money elsewhere, and the flow-on effect will have devastating consequences for Victoria’s housing market.

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