26 July 2007
Sydneys rents will continue to soar until 2010 unless urgent action is taken by the Federal Government, according to Aaron Gadiel, CEO of the NSW Urban Taskforce. Research organisation BIS Shrapnels latest report Building in Australia 2007 to 2022 predicts that the construction of new homes in NSW will fall short of whats needed for the next three years.
Mr Gadiel, speaking before the National Housing Affordability Summit today, said the Federal Government could open the investment flood gates for new affordable housing if it changed tax rules discriminating against renters.
Renters are paying more than they should because their homes are more heavily taxed than owner-occupied properties, Mr Gadiel said.
Rental properties are subject to capital gains tax, while owner-occupied homes are exempt.
The taxation of rental properties means theyre less attractive for investors leading to a shortage of new properties, Mr Gadiel said.
Renters are effectively paying at least part of their landlords capital gains tax bill through higher rents. According to the NSW Department of Housings most recent Rent and Sales Report annual increases in median rent for one bedroom units are as high as 26 per cent in Hurstville, 18 per cent in Parramatta and 17 per cent in North Sydney. Rents for two bedroom units in Leichhardt increased by 24 per cent and in Auburn they increased by 15 per cent. In 14 local government areas there were rental increases of 10 per cent or more.
Without a federal policy change, Sydney renters will continue to face escalating rents for the rest of this decade, Mr Gadiel said.
This is an unbearable proposition for the 450,000 Sydney households who rent.
New homes offered at an affordable rent lower than the market rent for a local area should be free of capital gains tax. The homes would have to be rented out to lower income earners.
This gives these properties the same tax treatment as owner occupied homes.
An immediate policy change will see a flood of money going into new residential rental housing and reduce the upward pressure on rents.
This proposal will help house the next generation of nurses, teachers and child care workers where theyre needed in the expensive inner suburbs.
The social benefits of this proposal are enormous. It will help retain a diverse social mix across Sydney. Families currently suffering because the bread winners are travelling two to three hours a day would be given an alternative.
The NSW Urban Taskforce is calling on both the Liberal and Labor parties to adopt this proposal in the run up to this years Federal election.
The NSW Urban Taskforce is a property development industry group, representing NSWs most prominent and important developers, builders and property financiers. The NSW development industrys annual turnover is $35 billion and employs 180,000 people, accounting for six percent of the States total employment. It is the fifth largest contributor to the State economy.
Chief Executive Officer,
Phone: 0417 477 904 or (02) 9238 3955