7 November 2022

Home Truths: ACT businesses take another hit as rental squeeze sends job seekers running

| Katrina Condie
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Community Housing Canberra is sourcing land to build affordable homes for low to moderate-income earners to rent or purchase. Photo: CHC.

Job seekers are turning their backs on desperate Canberra businesses because they can’t find rental accommodation, and if they can find somewhere to live, it’s often unaffordable.

Business owners, particularly those in the service and hospitality industries, are crying out for staff and claim the shortage of affordable rental accommodation in the Territory is having a serious knock-on effect on the economy.

A Canberra business owner for more than 40 years, John Runko says businesses are bouncing back after the COVID lockdowns, but they cannot find staff.

“There are not enough people to fill the positions that are currently vacant,” he said.

“We don’t have enough labour to perform all the tasks the city needs – there are more jobs than people available.

“There are so many businesses needing staff that they are obviously trying to attract people from interstate, but when candidates discover the lack of rental accommodation and the cost of it, they’re saying it’s too hard and not worth their while taking up the job.”

aerial view of Canberra homes

Even if the ACT could attract much-needed essential workers in a hurry, where would they live? Photo: File.

Mr Runko says Canberra is one of the country’s most expensive regions to rent and is on par with some of the most exclusive suburbs in Sydney.

He said the ACT was not an attractive option for interstate job-seekers. At the same time, many Canberrans were being forced to move out of the city to more affordable outlying areas, leaving business owners high and dry.

“I’ve been in business and the property industry in Canberra for four decades and this is as bad as I’ve seen the rental market, in terms of both affordability and the tightness of it,” he said.

“There are so many people already being hammered with cost of living and it’s causing so many issues. It’s making life in Canberra very hard for low-income earners, casual or part-time employees and students just trying to make ends meet.

“We’ve found ourselves, as a city, unable to address the needs of our community. This has to change.”

READ ALSO Home Truths: Realities of the housing market in a public service town

Homeground Real Estate business development manager Maria Edwards says with increased cost of living pressures in other areas, such as food and fuel, family budgets are being stretched more than ever.

Every day she sees people desperate to not just get a roof over their heads but one they can afford to live and thrive under.

“What we are finding is that tenants are becoming more cautious and not overcommitting themselves with rents, which is putting more pressure on the lower end of the scale,” she said.

“For example, someone who may have rented a property for $750 last year is now trying to find properties in the $650 range – which just means there is more competition for medium to lower-priced properties.

“This seems to be resulting in prices for top-end properties coming down a bit, which is positive, but it will take a while for landlords to shift that mindset, especially when interest rates are rising and they are looking at their own financial positions.”

She said increasing interest rates also prompted landlords to pursue maximum rent rises when renewing existing leases.

Renters are lining up to take advantage of Homeground’s Affordable Housing scheme, with a unit in Braddon recently attracting 60 enquiries, the majority of which were from young singles or couples finding it almost impossible to secure a rental for under $500 per week in the city.

With the government looking to increase the number of overseas workers to help bridge the employment gap, Mr Runko says it will place even more pressure on the under-supplied rental market.

“Increasing immigration sounds like a good solution for businesses, but where will these people live when they get here, and how will they afford to live here?” he asked.

Ms Edwards agreed that once skilled migrants start returning to the ACT, there will “definitely be more pressure on the market, especially since typically they don’t start out in the top earning brackets”.

ACT Council of Social Service (ACTCOSS) CEO Dr Emma Campbell says housing insecurity has become a “real concern” for health workers and community employees who are being “pushed into serious financial stress”.

She said essential community sector workers would need to use a substantial portion of a normal week’s wages to rent an apartment in most Canberra suburbs.

“To rent in the inner north or south, an essential community sector worker would need to sacrifice more than two-thirds of a full working week’s income to rent an apartment,” Dr Campbell explained.

“These are the people who have helped us get through the pandemic. Yet, across the ACT, these workers cannot compete for rental properties.”

READ ALSO Home Truths: In a year of high demand, SLA fails to hit land release targets

During the COVID housing boom, many mum-and-dad landlords exited the market and homes were snapped up by live-in owners. As a result, more investors are leaving the market than entering it, which has reduced the rental pool and, in many cases, the demand has driven rents up.

Community Housing Canberra is helping low-income earners by developing properties that are sold under the ACT Government’s Land Rent Scheme. In contrast, others are sold directly to the market as off-the-plan apartments, townhouses and houses.

While organisations are “making an effort”, Mr Runko says it’s just a drop in the ocean. He says Canberra needs between 2000 and 3000 additional rental properties “right now” to accommodate the employees needed to keep the city working.

“We need all stakeholders to put their vested interests aside and come together to ultimately increase the supply and diversity of rental properties in Canberra,” he said.

“One of the more practical solutions is to encourage build-to-rent on a greater scale. If we can get enough people to start building these – by the hundreds – that has to ease supply somewhat. The problem is, that will take three to five years to happen.”

While there is no simple solution, Mr Runko says one big step towards meeting housing demand would be for the Federal Government to free up land and the ACT Government to encourage more large rent-to-buy developments.

“There is no short-term answer, but we need to stop talking about ‘hope’ and start acting right now,” he added.

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Incidental Tourist5:53 pm 10 Nov 22

Funny to hear from a “business owner for more than 40 years” about build to rent (BTR) as a cost effective rental solution. BTR typically requires 10% or more rental yield to be financially viable while mum-and-dad investors often work on 3-4% rental yield by negatively gearing against their main income. You don’t have to spend 40 years in business to figure out if BTR is a part of the costing problem, it is not the solution at all. Those who was around 40 years ago know that renting then was far cheaper than today in comparable prices. Back then nobody had any clue about BTR including today’s policy makers who did not even graduate from their primary school.

William Newby7:00 am 09 Nov 22

It is simple; to accommodate additional people we need additional LAND to build additional homes.

This matter has been discussed and even predicted for year’s now, and we’ve seen nothing from Barr.

HiddenDragon9:04 pm 08 Nov 22

The potential benefits of build-to-rent and any other options which might be put forward to deal with this disaster will be seriously diminished because the ACT is, in effect, the property equivalent of a narco state, with the ACT budget and a substantial chunk of the private sector addicted to gouging every possible dollar out of everything to do with real estate.

Changing that in a meaningful way would require something akin to a revolution in how this town operates, with the focus changing from (as it clearly is now) managing the economy to support and benefit property revenues and profits to (as it should be) managing the property sector to support and benefit the broader economy and the population.

Tinkering at the edges and feigning concern, while continuing to make out like bandits, will not cut it.

The Chief Minister / Treasurer has insisted for years that raising rates would not cause higher rents, statements that defy belief. This shows an inability to understand basic maths and complete lack of logic. Is it any wonder there’s been no ability to manage the budget? Who’s keeping things on track? Who’s auditing government accounts? Who’s managing the long term implications of current financial decisions? No-one it seems.

If you want a well run territory, ensure the Chief Minister’s decisions are overseen by an independent and competent Treasurer to ensure good financial decision-making with no long term damage to the ACT. Sadly, we don’t have that independent perspective as the Chief Minister is in charge of everything and everyone, with no proper oversight. He is both Treasurer and Chief Minister. No organisation that values good governance allows the role of Treasurer to be held by the CEO, as there’s no checks and balances in such a situation.

We are reaping the consequences of many many years of mismanagement. When will ACT voters realise this and vote the out?

If John Runko wants all stakeholders to put their vested interests aside, he needs to start by demanding that of the ACT GreensLabor government. They created this situation by raising rates and land taxes continually (still happening) until they became unaffordable for many landlords unless they charged skyhigh rents to cover the costs. There has been no let up in the rate rises and they were warned of the consequences, but ignored the warnings. We have the highest rates in Australia. Sydney is way cheaper and way more competitive.

Landlords lost the ability to manage their properties effectively at reasonable rents, because of conditions created by the government that kept increasing the costs of owning and maintaining rental properties. Landlords didn’t leave the market because of covid, but because it was no longer viable to own property and rent it out here. It has also become unaffordable to live here for many pensioners who own their homes as rates continue to rise. They can live much better in NSW with lower rates, lower food and health costs and better services.

‘Many mum-and-dad landlords exited the market….as a result, more investors are leaving the market….which has reduced the rental pool…..and the demand has driven rents up’.

For years many people have been saying exactly this (if you make things harder for landlords they will sell up, fewer people will buy investment properties and rental prices will increase) and yet certain interest groups in the ACT have denied this and pushed to make things harder for landlords. It is CLEAR that if you make things harder for landlords, many sell up, and rental prices go up. You reap what you sow…

Absolutely. Well said!

Who exactly is buying these houses that investors sell?

And what exactly would these buyers be doing if the investor didn’t sell?

You make it sound like the house disappears when the investor sells it. In reality, a potential renter buys it and thus no longer has to rent.

Net result to the rental market, zero.

Nah Chewy, not true at all, not all buyers are potential renters. That is a wrong assumption to make. Many buyers never rent. In fact, statistics are showing that many people are now living at home with their parents until they can afford to buy. Also many renters are not in a position to ever buy as they don’t have a deposit (or the bank will never lend money to them). Your argument is a fallacy which has been proven wrong time and time again. When a rental property exits the market it is definitely one less rental property available to a renter. That does not at all mean that one renter has bought the property.

devils_advocate5:34 pm 08 Nov 22

It could also be that potential landlords would be more likely to invest in new housing, and add to the total supply of housing, if it weren’t subject to hundreds of thousands of dollars in punitive taxes (in addition to the ongoing rates and land tax liabilities)

As things are though, why would they bother?

You didn’t answer the question though.

Who exactly is purchasing the property if the investor sells?

You’re suggesting it might be a first home buyer or person relocating.

Once again, if the investor doesn’t sell, these people would be competing for another home that would be open to a renter anyway.

Net result to the rental market is still zero, you haven’t miraculously created more demand across the market as a whole.

Yours is the self interested fallacy that has been prove wrong time and time again yet keeps being recycled by landlords trying to feather their own nests even more.

It’s also truly laughable that you attempt to use the unaffordability of housing in large part brought about by the incentives given to investors as a reason that investors should be given more incentives.

I agree that more and more people are being priced out of home ownership. Which is entirely the point, make it more affordable and more renters become buyers.

No one said that every renter will be able to afford a home, but home ownership rates have significantly declined in recent decades. And it isn’t because they’ve suddenly all decided that they want to be life long renters.

Devils Advocate,
Except as the data shows, property investors don’t typically buy new dwellings because it’s not as profitable an investment

What they actually do is bid up the price of existing dwellings making it harder for renters and first home buyers to enter the market.

It’s funny how you claim “Why would they bother”, when it’s literally been an almost guaranteed return for the last few decades, so far is the system geared in their favour.

devils_advocate8:22 am 09 Nov 22

“Except as the data shows, property investors don’t typically buy new dwellings because it’s not as profitable an investment”

Precisely. As a result of drip-feeding land releases at the edge of town at astronomical prices and imposing punitive regulatory burden and taxes on urban infill. These costs are so high they can’t even offset the depreciation advantages on new builds.

If only there were something the ACT “government” could do to reduce these deadweight losses…

Devis Advocate,
except as already explained to you the taxes don’t restrict urban infill, they simply ensure that developers don’t receive obscene windfall profits from the changes in land use and lease conditions that allow those developments in areas they otherwise wouldn’t be able to.

Developers should not be able to game the system to make massive profits based on changes in government policy and planning like that. The community through government taxation should be the largest beneficiary from these types of changes and developers can and still do make large profits on these developments. As we see in other states, developers buying land on spec to lobby for landuse changes leads to horrendous planning and development outcomes.

Where you are on surer footing is around the regulatory burden and approvals process which causes unnecessary delays and administrative burden for little gain. I agree this should be streamlined.

And in Greenfield areas, the government needs to advance their planning to ensure a consistent feed to market, noting that we do have limited land available and it should be used in the most efficient manner possible, which may not always be the quickest.

I agree there is plenty the government could do in this space, very little of it involves ensuring developers and landlords can make higher profits.

devils_advocate11:16 am 09 Nov 22


Except, as already explained to you, while the imposition of these taxes will indeed simply reduce the profitability for some projects;

for others it will render them completely unviable and they will not go ahead, thus reducing potential supply that could otherwise have come onto the market.

Devils Advocate,
I agree that it will make some projects not go ahead but the point is that if you’re relying on exploiting changes in planning rules to make your project profitable, they were never actually viable to begin with. It’s an attempt to maximise profits, subsidised by the wider community.

The impact of this on overall supply of properties is tiny because the market can and does react to the underlying fundamental costs of bringing a development to completion. Trying to leech off the changes in land value through planning changes isn’t one of them.

devils_advocate3:21 pm 09 Nov 22

I’m not talking about planning changes. I’m talking about blocks that are already zoned for redevelopment and subdivision, and which still attract a $30k tax per unit (on top of stamp duty paid by the buyer, and another lot of stamp duty when each subdivided property is sold). There is no “leeching” or “windfall” other than to the ACT government that reaps massive revenue windfalls and multiple tax payments in return for zero investment in anything.

Devils Advocate,
If you were correct, then they wouldn’t be subject to the tax and they could already build those multiple dwellings. You’ve already admitted this previously.

Varying the lease clauses is a planning change. A change that allows the purpose and restrictions of the block to change, which manifestly increases its value in doing so.

Developers gain windfall benefits by being allowed to develop something that was not previously allowed on those blocks. The LVC ensures that the community is the one that benefits from this, not developers.

This is not something you can argue against, it is black and white.

devils_advocate7:52 pm 09 Nov 22

I’m not arguing against it though. They can quadruple the LVC (again) for all I care. Blow out merit track to 10 years, dream up new taxes. I’m merely reminding everyone what is the well-known outcome of imposing a deadweight coat (tax burden) on the supply of a commodity (in this case, one potentially importantly source of new supply of housing).

The LVC does nothing to benefit the community when it prevents otherwise viable urban infill projects from proceeding (which is most certainly the case when it amounts to hundreds of thousands of dollars of additional tax over and above all the other costs imposed by the “government”)

Devils Advocate,
Yes you keep repeating yourself, so ill do the same.

If you are relying on windfall benefits from landuse and planning changes to make money, your project was never viable to begin with.

It isn’t a deadweight cost on providing the commodity because the developers are in no way responsible for the planning changes that cause the uplift in value. They do nothing except attempt to exploit those changes for personal gain.

Developers don’t pay anything to make the land more valuable, the government is responsible and so the community should benefit from that.

You could argue that the charge currently doesn’t reflect the increased uplift gained by the planning changes if you wanted to but you haven’t. Mainly because it does.

devils_advocate8:20 am 10 Nov 22

chewy14, you could similarly argue that imposing deadweight losses in the form of taxes does not distort consumer surplus, producer surplus or the quantity supplied.

Why you’d want to bother though is beyond me given the effect is well documented in theory and in practice.

Devils advocate,
yes you could do that, but I don’t know why you would want to when the LVC doesn’t involve the creation of a deadweight loss, it is a recognition in the change in value of the land created by planning changes which do not impact the developer’s underlying costs or profits.

Ironically the main deadweight losses in the property market are in the other direction, large incentives provided to property investors and developers that lead to overpriced products creating inefficiencies in the supply and demand of the product to consumers. The exact thing you’re promoting wanting more of.

devils_advocate12:57 pm 10 Nov 22

“deadweight loss is the difference in production and consumption of any given product or service including government tax. The presence of deadweight loss is most commonly identified when the quantity produced relative to the amount consumed differs in regards to the optimal concentration of surplus.”

If property developers and investors were provided with “large incentives” then production would rise above an efficient level. As it is, there is an under supply and some otherwise efficient projects have not gone ahead, due to hundreds of thousands of dollars of additional taxes being imposed.

Any econ 101 text can provide further exposition on that topic, or indeed having a look around at what’s happening in the ACT housing market.

Devils Advocate,
yes I know what it is, but once again you haven’t grasped that the LVC doesn’t create a market inefficiency resulting in a deadweight loss. The government is responsible for the increased land value and reasonably should expect to take the lion’s share of benefit. The developer does nothing to realise that benefit and should not expect to profit significantly from exploiting planning and landuse changes.

You’re claiming that unless developers are provided with significant government incentives and subsidies, the market cannot deliver an efficient outcome. It’s backwards. The projects that don’t go ahead aren’t “efficient” by definition if they are relying on government subsidy to be viable.

“If property developers and investors were provided with “large incentives” then production would rise above an efficient level.”

It’s almost like there are numerous other factors impacting the property market in the ACT as I’ve agreed previously. Correlation does not equal causation. And you don’t fix the other structural roadblocks in the property market by creating more problems with ever increasing subsidies to investors and developers.

devils_advocate3:36 pm 10 Nov 22

“ It’s almost like there are numerous other factors impacting the property market in the ACT as I’ve agreed previously. ”

Ah yes classic whataboutery. Having seen the straw man and projected bias I suppose it was about time.

I’m also interested to know what are all these developer subsidies you keep referring to.

How is it remotely whataboutery?

I’m explaining that housing affordability issues are about many factors not remotely related to property taxes, whilst you solely focus on attempting to attribute the problems to (conveniently) costs on landlords/developers.

Although if you want to focus solely on your argument, provide some research showing that the ACT taxation settings are the main cause of housing supply issues here. Particularly when compared to other areas of Australia with different taxation settings, yet the same problems.

“I’m also interested to know what are all these developer subsidies you keep referring to.”

You’ll note I said subsidies and incentives to developers and investors.

But you also can’t be serious asking “what subsidies” whilst complaining about the impost of the LVC. The removal of which would entail subsidising developers through allowing them to receive windfall gains through planning changes controlled by government.

devils_advocate4:36 pm 10 Nov 22

It’s not a windfall. The value of the land and its best potential use is captured through the rates and land taxes as a liability and paid to the ACT government.

Developers don’t receive any profit unless they invest their own capital and labour, and take a substantial risk. None of that constitutes a “windfall”.

A windfall would be a gain that someone receives having done nothing to earn it, for example windfall gains from double-dipping on both stamp duty and land taxes, as a result of massive increases in house prices.

Developers do not invest any of their capital or labour to exploit changes in planning restrictions that increase the value of land that they are building on. The government is responsible for it and should benefit from it.

That is entirely the point. Developers do nothing for this benefit.

What they do invest is in the construction and sale of new properties, for which they are rewarded appropriately by their efforts.

“A windfall would be a gain that someone receives having done nothing to earn it”

We finally agree.

devils_advocate11:08 am 11 Nov 22

“Developers do not invest any of their capital or labour to exploit changes in planning restrictions that increase the value of land that they are building on. ”

And simply changing the planning restrictions does zero to increase the supply of available housing. As I said that requires capital and labour and risk (all supplied by the developer).

So yes, I agree – the government does nothing and receives the tax windfall, while the cost and risk is pushed to the developer (who subsequently passes these on to the buyer in the form of higher prices).

Glad to have your agreement!

“And simply changing the planning restrictions does zero to increase the supply of available housing”

But it does change the value of the land, which is exactly what the tax is for.

“As I said that requires capital and labour and risk (all supplied by the developer).”

For which they receive profit commensurate for it.

The ACT government introduced a reduced rental land tax scheme to much fanfare and then it turns out that the scheme gets very little take up and that the scheme ultimately provides little support to Canberra renters.

This outcome shouldn’t surprise people when government implements an ill-thought-out policy that provides relatively little financial incentive to the landlord and the policy fails to take into account ATO rules around market value for tax purposes meaning a landlord has to declare the market rent not the actual rent received.

I also can’t understand the ACT government’s paradoxical argument that reducing land tax will incentivise landlords to reduce rent, and then also argue the exact opposite outcome that the additional rental land tax of 150% doesn’t increase rent charges.

A really important work. People who pay wages and employ workers have a very different interest from people who make money just by renting out property. These small businesses create benefits for the community, but even they are suffering from what’s been done to housing. Making renting more affordable will help renters but also employers in the ACT.

Perhaps they should just give landlords more incentives and subsidies than they already have.

If that doesn’t work, they should just remove all rental controls on landlords and let them do whatever they want.

I mean that seems to have controlled house prices and rents across other areas of Australia that don’t have our taxes and rental controls.


devils_advocate8:44 am 08 Nov 22

Have they tried raising rates and land taxes for landlords? Surely that would fix the problem?

If that doesn’t work surely they can impose increasingly onerous obligations for landlords under the residential tenancies act


Yes. Absolutely.
Nothing makes renting cheaper than a Government that charges Land Tax (150% of the property’s Rates), on rental properties.
Imagine how much “cheaper” rents would be if the Government further restricted supply, pushing up land values and Rates!
Imagine how much more affordable housing costs would become as the Government further moved Stamp Duty and replaced that revenue with, you guessed it, increased Rates.

Of course, the Government would distance itself from this by saying that they are taxing the landlord, not the tenant and it’s not its fault that those costs are passed on. The reality is that with higher Rates we get higher Land Tax which means higher Rents.

It’s not all bad news for renters. The contribution they make towards Government taxes like Rates and Land Tax through their tent, helps pay for that bright shiny red Light Rail.

devils_advocate8:31 am 09 Nov 22

@kenbehrens “through their tent” – I realise that’s probably a typo but could be the way things end up turning out…

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