On 21 August 2008 the Housing Industry Association (HIA), Australia’s largest building industry association, released the most comprehensive report card available on the NSW residential sector. The report predicts a shortage of 18,000 dwellings across NSW in 2008-2009 alone, and also that fewer than 30,000 homes will be built in NSW for the third year in a row. A spokesman for the HIA said that the housing sector has become so undersupplied that illegal rent auctions were likely to escalate.
Illegal rent auctions (or “rent ranging”) involve agents and landlords advertising properties within a price range, rather than the usual weekly or calendar-month rate. According to tenant unions, it is now common to see letting agents and landlords encouraging renters to offer more than the advertised rent to secure a property. This practice is frowned upon by real estate institutes across Australia and condemned by tenant groups, who claim the practice of advertising one price but only accepting higher offers should not be tolerated.
Most complaints concerning illegal rent auctions are in Sydney, where residential vacancies have fallen to historic lows, with only one per cent of houses in Sydney empty. However, as the state government is slow to act, auctions continue to flourish in the inner-city markets, where there are typically over 30 applicants for each property.
According to the Australian Property Monitors (APM) Rental Series June results, the asking rent for Sydney houses and units have soared by 15%, and 11% over the last 12 months. Michael McNamara, General Manager for APM, made the following comments on the results:
- Rising rents are being driven by high mortgage rates, where landlords are offsetting increased costs and high interest rates are deterring renters from making the shift into home ownership.
- The combination of Generation Y leaving home, strong migration patterns and a weak building sector is intensifying demand. However the shortage of affordable accommodation simply adds to the growing number of displaced renters who cannot afford to live in well located areas.
In a recent interview on 2GB, Chris Martin, the NSW Tenants Union Policy Officer, called for government intervention in order to increase rental affordability and put an end to tactics like rent ranging. His suggestions include a change in the way housing is taxed, and the introduction of a rent affordability scheme, whereby tenants pay discounted rent and the owner is offered a government subsidy in return.