5 game-changing policies to tackle NSW’s housing crisis

With housing becoming a centre-stage issue for NSW voters in the upcoming polls, UNSW housing policy experts Professor Hal Pawson and Dr Chris Martin said short- and long-term pledges addressing the housing and rental crisis should be on the agenda for major parties. 

“[Rampant] rent inflation [is] triggering crisis conditions for many low-income renters across Australia. Numerous tenancy horror stories are circulating in the media right now.

“And with 800,000 home owners facing steep mortgage increases as they exit fixed rate deals this year, prospects for many home owners are also dire,” the experts stated. 

According to the experts, here are five policies that can help confront the challenges in the housing and rental markets in the state.

1. Regulatory relief and emergency packages

During the pandemic, the experts highlighted that state and federal governments rolled out initiatives that provided immediate short-term regulatory relief to tenants that were doing it tough, including limiting or controlling rental increases. 

The experts recommended that similar regulatory options could be considered in current times, given the dire situation of a significant portion of renters in the state. 

Another way to provide a longer-term source of relief to tenants experiencing rental stress is to significantly increase Rent Assistance. 

According to Mr Pawson and Dr Martin, decades of inadequate up-rating have drastically devalued the financial assistance. 

They cited similar calls for fixing rental assistance by several advocacy groups, including the Grattan Institute, the Australian Council of Social Service and the Productivity Commission.

Recently, Everybody’s Home, a national campaign to fix the housing crisis, has also called for the payment to be reformed in light of new data that showed nearly one in two recipients of the Commonwealth Rent Assistance (CRA) are still under rental stress.

The experts said that while it is officially beyond the power of state governments to deliver such a boost, the NSW party leaders should voice their support for this campaign.

There is also a need for better regulatory policies on short-term rentals, the experts stated. 

“In some parts of NSW and the rest of the country, perfectly good long-term rentals are becoming Airbnbs, causing more strain on the housing and rental markets,” Mr Pawson said.

2. Expanding the land tax reform

A key reform the experts believe could improve housing affordability and economic productivity in NSW would be a broad-based land tax, including on owner-occupied houses.

According to Dr Martin, deferring tax liabilities until a property is sold or inherited could provide much-needed relief for low-income owner-occupiers.

“Widening land tax would bring more under-utilised land to market, improve housing supply, and discourage speculative hoarding,” he said.

Dr Martin pointed out that while the Coalition “took the big step” of committing to land tax reform, it also came close to botching it with a “badly compromised policy which is that first home buyers can opt in and avoid stamp duty.” 

On 16 January, the historic First Home Buyer Choice took effect, which allowed first home buyers to opt for an annual land tax instead of a lump stamp duty. 

“Its election promise to allow other owner-occupiers to opt in while keeping stamp duty for multiple property owners would go some way to getting this reform back on track,” he commented.

Notably, NSW Premier Dominic Perrottet announced at the end of February that his government would expand stamp duty reforms if re-elected. 

But Dr Martin also criticised the opposing party’s stance on overhauling the land tax. “NSW Labor, on the other hand, is opposing land tax reform in this election, which is disappointing. Phased introduction of a broad-based land tax is a pro-affordability, pro-productivity, [and] pro-fairness policy they should endorse.” 

3. Improve tenants’ rights

As home ownership becomes a more elusive dream for people in NSW due to high property prices, the experts offered a range of law reforms that can be rolled out to turn a rental into a long-term home.

Dr Martin said the first step is to prohibit landlords from terminating tenancies without grounds.

“No-grounds terminations are unfair, give cover for bad reasons for termination, such as discrimination or retaliation, and undermine tenants’ legal rights to get repairs done and challenge rent increases. 

“Reformed tenancy laws must also ensure that the tribunal has discretion to decline termination, considering the circumstances of the parties and the balance of hardship — termination of a tenancy should never be mandatory.”

Notably, tenants’ rights have also become a major battleground for major parties as the election looms.

As part of its hefty election promises, Labor has promised law reform to require “reasons for evictions”. 

Meanwhile, the Coalition has recently pledged to get rid of no-grounds terminations for periodic tenancies, but would still allow no-grounds terminations at the end of a fixed term. 

Under the Coalition’s proposal, tenants could be on a string of fixed terms and still experience the insecurity of no-grounds termination hanging over them. 

Dr Martin and Professor Pawson suggest that NSW should adopt the same approach as the ACT, where it is currently proposed to completely abolish no-grounds terminations.

“Reformed tenancy laws must also ensure that the tribunal has discretion to decline termination, considering the circumstances of the parties and the balance of hardship. Termination of a tenancy should never be mandatory,” Dr Martin stated. 

4. Scale up social housing investment 

In the last 25 years, social housing stock has “barely” increased in NSW.

The experts cited a recent City Futures report that shows that around 144,000 households around NSW are experiencing unmet needs for social housing.

Mr Pawson noted that none of the parties participating in the election has made a commitment to address the growing issue of unmet housing needs.

“Unlike Victoria and Queensland, NSW resisted calls for a state-funded social housing program as part of post-pandemic economic recovery plans in 2020 and 2021,” he said.

The experts proposed the expansion of the existing Social and Affordable Housing Fund, enabling it to support an additional cohort of newly developed homes.

If enacted, the broadening of the fund would emulate the move in Queensland, which recently doubled its own housing future fund by pledging another $1 billion to its stake.

5. Implement mandatory developer contributions to affordable housing

Following the practice of other countries, the experts said Australia’s planning systems could mandate the routine inclusion of affordable housing within private residential developments.

Mr Pawson cited the City West Affordable Housing system, which has operated successfully in Sydney over the last 25 years.

He said it is time to consider a city-wide scheme of the same blueprint where, for example, it would be required that five to 10 per cent of the floorspace of private developments be allocated to social or affordable housing.

“This was proposed by the Greater Sydney Commission as long ago as 2016, but never actioned,” he said. 

If properly implemented, the expert said that “the cost of such a measure will be borne by landowners, not builders or consumers. It’s no substitute for government-funded social housing subsidies.

“But when you consider that it could enable affordable housing provision to be hardwired into market housing development at no cost to the government, surely this is a no-brainer that has been largely ignored in Australia for far too long,” he concluded.