Rent freeze not the answer to housing woes

Greens leader Adam Bandt has come up with a brilliant idea: a housing fund that states can only access if they agree to a rent freeze for two years. This, he believes, will provide affordable housing.

For a man famous for telling a journalist to Google the answer to a question, Bandt has clearly not made a habit of using the platform. There have been numerous failed attempts globally to create affordable housing via rent control.

In the early 1970s, Swedish economist Assar Lindbeck wrote that “rent control appears to be the most efficient technique presently known to destroy a city – except for bombing”.

Decades of Swedish rent control have delivered huge supply shortages. Waiting lists for rent-controlled apartments are up to nine years. Many such apartments are handed down like heirlooms within families.

This year and next year will see an estimated 650,000 new people come to Australia. These people will need accommodation.

But property companies are struggling to deliver needed dwellings because of material and labour shortages.

The federal government’s plan to add one million new houses over the next five years is laudable but may put the private sector into competition with governments, with the unintended consequence of forcing up prices all around.

In 2019 modelling, the Housing Industry Association found that

50 per cent of a house and land package is incurred through red tape and taxes. Foreign investor surcharges can be another significant barrier to attracting investment into building more houses in Australia.

When dwellings are built, the sale cost naturally includes all the charges and taxes incurred by the developer.

This makes housing less affordable, so governments have suggested that some houses in a new build be sold cheaply as “affordable housing”. But the developer doesn’t bear the cost of those discounted dwellings, because doing so would render the project unviable.

The Greens and Labor have incorrectly identified the reasons that housing supply is scarce and expensive. That lies with the government, which keeps getting in its way.