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Toni Atkinson, Property Agent, Waverley (2026)

24/04/2023

WHY WEAR A RED POPPY ON ANZAC DAY?

To symbolise Australia’s recognition of ANZAC day, a few traditions are always abided by. ANZAC cookies are consumed, the ANZAC day parade is celebrated, a moment of silence is observed, & lastly, red poppies are worn on Australians’ lapels, dresses & shirts. Here’s a little bit of history as to why the red poppy has become a symbol of remembrance at ANZAC day observances.

IN FLANDERS FIELDS

The red poppy is also known as the Flanders poppy. That’s because the poppy was one of the first things to grow in the mud & soil of war-ravaged Flanders in Northern France. Worn internationally on Remembrance Day (11 November) as well as on ANZAC day (25 April), the meaning of the poppy was first captured by a poem ‘In Flanders Fields’. Written by Lieutenant Colonel John McCrae, the poppies became a tribute to the unmarked graves of men.

In Flanders fields the poppies blow
Between the crosses row on row,
That mark our place; and in the sky
The larks, still bravely singing, fly
Scarce heard amid the guns below.

We are the Dead. Short days ago
We lived, felt dawn, saw sunset glow,
Loved and were loved, and now we lie
In Flanders fields.

Take up our quarrel with the foe:
To you from failing hands we throw
The torch; be yours to hold it high.
If ye break faith with us who die
We shall not sleep, though poppies grow
In Flanders fields.

GROWTH & HOPE

However, today, the flower is a symbol of hope and regeneration in the face of destruction. This is because in 1921, the British Legion chose the poppy as the official emblem to honour the dead, & help the living come to terms with their loss. The red poppy now helps keep alive the memories of the departed soldiers &, by acknowledging the site of the battleground in France, marks commonality between nations.

30/03/2023

REALITIES OF THE 2023 MARKET

While recent news headlines suggest scary property market conditions, agents have a different perspective – seeing huge buyer demand & strong results for sellers.
Rising interest rates & softening property values mean those looking to make their next move don't have the same once-in-a-lifetime opportunities seen during the pandemic.

But what's the average seller to make of the current climate when deciding whether or not to list this year? Things aren't quite as gloomy as some in the media make out.

NINE THINGS SELLERS MIGHT NOT KNOW

THIS YEAR MARKS A RETURN TO A MORE SUSTAINABLE MARKET
Rather than wishing to return to the lofty years of the pandemic & its unsustainable price growth, experts are appreciating a return to reality & more stable market conditions.

What's happening at the moment is normal. It’s clearly come off the extreme heat of what was a very chaotic market post-Covid. We’re back to a normal rhythm, it's a much more productive market than what’s being written about.
The first three auction weekends of the year saw a decent volume of 60-90 properties, with a 75-82% clearance rate, which is very healthy. Prices are really stable, & buyer activity is strong, which is a good sign. Buyer enquiry is 40% up from a year ago & there's a shortage of property. Now is a good time to sell because, with little choice, buyers are looking at everything that's available.

Despite what people are seeing in the media, current conditions reflect a return to stability. The Covid market was unprecedented, it simply wasn’t normal & probably won’t be repeated.

Canberra has had the smallest price decrease & has stabilised further this quarter, which shows conditions aren't as bad as what's being touted in the media. From stats & history, we can tell it’s a market that's returning to normal. However, people are worried about mortgage serviceability in the current climate.

Rates of mortgage pre-approvals are increasing, so borrowers have access to the finance they need to purchase.

DEMAND FOR HOMES IS MOSTLY HIGHER THAN IT WAS PRE-PANDEMIC
It's correct to say that demand has dropped in some regions from what it was before the Reserve Bank started raising interest rates in May 2022. However, recent data shows that buyers are coming out in greater numbers in most areas than they were before the pandemic boom began.

THE REALITY IS DIFFERENT TO WHAT'S BEING SPLASHED ACROSS THE FRONT PAGES
If you’re not witnessing demand for properties in person it’s be hard to understand what's happening. If you’re only moderately watching the market, you'd pick up the paper & get a very negative take. It comes down to where you’re looking for your information.

The market is dramatically undersupplied in many areas. Every agent is saying they need more stock, if you were to double the amount of current stock, all of that would be bought in a matter of weeks. There is that amount of demand at the moment.

For those on the fence about whether or not to sell this year, don't take an agent's word for it – go out & see it for yourself. There are markets within markets, so taking a broad view of a major city is likely to give an incomplete picture.

Gauge the temperature, there are always anomalies & pockets that buck the trend. But seeing it in person will give you confidence. Don't just believe everything you see on the front page.

INTEREST RATE RISES AREN'T STOPPING MOST PEOPLE FROM BUYING
While the multiple interest rate rises have dampened demand from its staggering peak, there's still plenty out there looking to buy. People expected that rates would be going up & they have – we acknowledge that it’s having an impact.

There’s still a large group of people looking to make their next move & it’s superseding what’s available in the market. Those that are considering selling soon must understand that the only thing that dictates the market is buyer demand &, while it is as strong as it is, they’d be mad if they didn’t do it next six months.

Interest rate rises aren't putting most buyers off – they're just adjusting their expectations. Borrowing power isn’t what it was but that isn’t stopping buyers, they’re still purchasing. The fact that they need a bigger house than what they're in now just means they just won’t buy the fully renovated house.

In terms of interest rates, it marks a return to normal levels rather than the historic all-time lows that many got used to. It’s a normal rather than a negative environment.

BUYERS ARE UNDER TIME PRESSURE TO PURCHASE
Within the market in Sydney's west, for example, buyer enquiry levels are higher than this time last year. Due to the low stock levels, buyers are concentrating on what’s available now. They've factored in the interest rates rises – it’s not a shock anymore – & money is still relatively cheap.

The environment of rising rates actually adds a time-pressure element to buyer behaviour. Buyers are acutely aware that each time there’s a rise that their borrowing capacity is reduced. A year ago, if they could borrow $1 million, it’s now closer to $750,000, so there’s a time factor there. They don’t want to forfeit their approvals because next time it'll be less.

A TIGHT RENTAL MARKET HAS PUSHED MANY INTO BUYING SOONER
The national rental crunch has been a trigger for those that were on the cusp of buying to take the plunge. Because of this, the lower end of the market is moving quite well, Mr Honey said. Those selling in the affordable bracket should have a lot of confidence & see this as an opportunity. There's lots of competition as people still need a place to live.

The property market is different from other investment classes in that it’s a necessity as people need shelter. Rental prices are increasing, there's a significant shortage – if you can afford to borrow & buy then buying is a much better vehicle than relying on the rental market.

HOMES THAT HAVE BEEN PROPERLY MAINTAINED ARE SELLING FOR A PREMIUM
Buyers are looking for properties they can move into now. Well-presented, well-marketed, styled properties are getting more eyeballs. It's the turnkey homes that are getting above-market results.

Values of properties in Australia are still well up on pre-pandemic levels, so most homeowners will be sitting on considerable equity.

AGENTS CAN BE SURPRISINGLY HELPFUL WHEN IT COMES TO GETTING A GOOD RESULT
Agents' roles have changed drastically over the past few years. When it comes to helping a vendor get a good result while also minimising stress, agents now are more helpful than some might think. Good agents regularly assist vendors with home preparation by providing advice & putting them in touch with trusted local tradespeople for anything that might need doing before a property is listed.

The vast majority of our work is almost project management now. Sellers need to make sure they hire an agent who can help get a property ready for sale properly. The role has really changed – agents have access to a lot of trades, whether it be re-roofing or other things.

Sellers need to concentrate on controlling what they can control. There are no shortcuts in this market. If you go for a full market campaign & create competition, you’ll get a great price.

IF YOU WAIT FOR THE 'PERFECT' TIME TO SELL, IT MIGHT NOT TURN OUT THE WAY YOU THINK
While it'd be nice if real estate transactions could be quantified into an easy calculation, the reality is that for most vendors, it's almost always highly personal. The reasons for transacting property are often based on very emotional life events such as births, deaths, retirement & changes in employment – many of which are outside of our control. So the best time to sell is simply when you're ready.

The other factor is that if you’re selling in this market, you’re also buying in this market. So if you sell your home for more, then often you'll need to spend more to get into your next home. Many downsizing homeowners held out for the highest price possible during the Covid boom, only to find homes in the area they wanted to move to had also increased in value.

FIVE TIPS TO GET A GREAT RESULT WHEN SELLING IN 2023
While it goes without saying that conditions are different from the Covid-fueled boom enjoyed by sellers in previous years, vendors are still getting great results right now.

AGENTS SUGGEST FOLLOWING THESE TRIED & TESTED STEPS

GET EDUCATED ABOUT YOUR LOCAL MARKET
If you’re interested in selling & moving on, do your own research about the local market rather than buying into negativity in the media. It's important to go in educated about similar properties that are selling.

Sale prices are still good, but the really strong market has left us, so it’s important to have realistic expectations about what kind of outcome you might achieve. It's about being prepared, listening to the market, & moving on.

WORK WITH THE BEST AGENT YOU CAN FIND
Working with a seasoned agent will help vendors navigate the ups & downs of the selling process. Enlist the help of an agent who has worked through different market conditions before, the good & the bad, so that you can be assured you're getting the best advice.

A good agent will also be able to give you recommendations around the expectations of current buyers & be able to provide practical advice when it comes to preparing the property for sale.

DON'T SKIMP ON MARKETING
Getting as many people, from all ends of the market, through your property will give you every chance of getting the best result possible. Turn up the marketing in the right areas & put the property out to every single potential buyer to get everyone through you possibly can. Aim to create that competition so you can get the premium price that you deserve.

REMEMBER THE BASICS ABOUT PRESENTING A HOME FOR SALE
Don't forget the basics of getting your home ready for sale including:
- Completing any outstanding maintenance
- De-cluttering
- Having the home styled.

GET ADVICE BEFORE TAKING ON ANY BIG RENOVATIONS
If you’re wondering whether it's worth doing before you go to sell the property, or whether it makes more sense to accept less for the sale knowing the buyer will be factoring in having to pay for that themselves the best person to speak to about these kinds of issues is an experienced local agent.

By enlisting the premier agent in your area they'll be able to tell you what is going to drastically impact the selling price. There might be quick fixes that sellers aren't aware of. In any market, it's imperative to present the home in the best possible way. However, trades are expensive & there’s a time factor with that too.

MISTAKES TO AVOID WHEN RENOVATING
Some trades might take months to complete a job, he explained, so it's important to weigh up that time factor against the extra money you can potentially make. If you're going to spend big upgrading the kitchen only to break even, then it's not worth it.
But if there are small things a vendor can do that make their home appeal more to buyers, & therefore get a higher price, then sellers should weigh that up.

There’s always a perfect buyer that is willing to spend more, sometimes it’s even circumstance-related, not product-related, such as a short settlement period. A layered approach with marketing will ensure you’re going to reach the most people.
Take the advice of the professionals – we’re in a strong market but it’s not white hot, mistakes can cost you a lot.

28/03/2023

HOW TO MAKE MONEY OFF A TINY HOME RENTAL

Whether it’s the need for more space, flexibility, or a way to make a side income, tiny homes are generally a small, functional house that can be used residentially, making them perfect for renting out short or long-term.

That said, it can be daunting to start without a background in tiny home living. Do they really make money? How much of it goes into maintenance? Is it worth it? You need to think about all the different components of what's going to make the house work properly for that market. From the planning & flooring to décor & furnishings, firstly prepare your space, & secondly focus on making your tiny home a money-making success.

HOW TO PREPARE THE HOME FOR THE RENTAL MARKET

CONSIDER THE TARGET MARKET
One of the most important things to think about is what will make the tiny house work for your intended market. What are you putting it there for, & why? Who is going to be using it, & what do they need it to do? How big or small do things like a bed or fridge need to be?

Remember, your tiny home isn’t just for you, but guests with different tastes, so remember to keep things neutral to provide the perfect holiday escape.

ENSURE THE SPACE HAS AN OPEN FEEL
While it is a tiny home, people still want to feel like they have space & aren’t cramped in. Thinking through the floorplan is key to success. For higher desirability with your potential market, think about the double use & more use out of spaces. Also minimise the number of walls & doors in the tiny home, as too many makes it feel boxy.

MAKE IT ENTICING & RELAXING
Your tiny home should be appealing in décor, & a source of relaxation for incoming guests to feel rested, providing them with a good night’s sleep. Another décor trick is hanging drapery from the ceiling, giving an illusion of added height.

CREATE A SEAMLESS INDOOR-OUTDOOR FEEL
Any additional space you can add from the outside-in will make a big difference. You could even create a patio using turf to extend the space, creating the perfect outdoor area for an evening cocktail or morning brunch.

HOW TO MAKE YOUR TINY HOME PROFITABLE

HAVE IT PHOTOGRAPHED
Once you’re set-up, it’s time to frame your tiny home in the best possible light. Photos are important – great pictures have inspired some buyers to purchase from photos alone, while terrible real estate photos can mean the difference between a profit & a loss. Consider hiring a professional property photographer with experience in framing your tiny home for maximum benefit to highlight the design sections that make your tiny home feel large.

POST IT ON LISTING SITES
There’s no point running a rental if no one knows it exists, so make room in your budget for marketing so you can gain returns on your investment. As well as professional-looking photos, how would you describe your property to make it appeal? For example, how many people does it accommodate? Are pets allowed? & a big one - is it in a popular location?

Tiny homes in desirable areas can rent pretty much all year round, so getting the right description out to your market is key. Ensure your listing is advertised on key rental & holiday websites, or if for a long-term rental, that you have engaged a real estate agent to market your tiny home efficiently. Finally, keep up to date with market trends & insights to ensure your property is accurately priced according to rental supply & demand.

CONSIDER PROFIT VERSUS MAINTENANCE
So, once you’re all set up, is it worth it? The positive difference with a tiny home is that costs normally associated with a larger property, like a home with a yard, become obsolete.

Of course, there are cleaning costs amongst other regular fees, but it is estimated that the ratio of profit versus maintenance is probably around 80% income & 20% expenses.

The opportunities a tiny home provides for your lifestyle & income are never-ending. If you adequately plan with your design preferences, the combination of spaces, marketing & budgeting, you’re going to win.

(To read more linktr.ee/AlldisCox through to our page)

27/03/2023

INTRODUCTION TO 3D PRINTING

Learn how to design & print basic 3D objects on Waverley Library's new 3D printer. 3D printing allows you to design or download objects in full 3D, then print them out in a matter of hours.

This workshop will give you an introduction to the basics of 3D design, & allow you to create a small name badge to attach to your keychain. After the lesson, library staff will print out your work for collection the next week.

WAVERLEY LIBRARY
32-48 Denison Street, BONDI JUNCTION

On Thursday, 30 Mar 2023
1 hour 30 minute event, from 2.00 to 3.30pm

TICKET REQUIRED via EventBrite - https://www.eventbrite.com.au/e/introduction-to-3d-printing-tickets-494626690747?aff=erelexpmlt

4w

24/03/2023

DIFFERENT KIND OF PROPERTY LURING LOADS OF INVESTORS

Years of pandemic followed by months of rate rises have lured a flood of residential property investors into the commercial space for the first time — & for good reason. Since 2020, commercial investors have been battling for essential service assets with long-term tenants. Think industrial warehouses, childcare centres, petrol stations, medical clinics & fast-food outlets.

Amid stockmarket volatility & uncertainty in the housing market, those who’d otherwise chase residential assets are now looking to a different type of investment.
Investors’ share of total housing purchases fell from about 15% in late 2018 to just 5% at the end of 2022. At the same time investors now account for more than a quarter of all housing sales.

The lure of commercial real estate is clear. To date, commercial real estate values have been more resilient & less impacted by the rising cost of debt than residential values. And commercial real estate assets typically offer higher yields in comparison to residential.

There’s been a flight of residential real estate investors moving into commercial since the start of the pandemic. They’re from all walks of life. There’s a perception that commercial property is bought by rich people. That’s not the case.

BENEFITS OF INVESTING IN COMMERCIAL PROPERTY

Commercial properties are more likely to be positively geared, they can make a better return, & their lease terms can provide a more predictable income stream. Often the tenant of a residential property only has to sign a one-year lease & pay a one-month bond. With commercial properties, the leases are up to five years, the tenant often pays the outgoings, & the Landlord can have a three- or six-month bond in case something goes wrong. It’s more of a set-and-forget investment.

Investors can also depreciate commercial property, while they can only depreciate a residential property that’s brand new or bought off the plan.

The longer leases associated with commercial property, which often include fixed annual rent increases, are attracting lots of investors seeking stable assets. Many first-time commercial investors are currently in the market. These are sometimes mum & dad investors, but at the moment we are seeing many buyers who are nearing retirement & looking for a stable income for when they stop working full time.

Commercial tenants tend to be reliable, as they’ve put a lot of money into the fit out. Fast food tenants may have installed exhaust fans, cool rooms, & counters. A dental clinic may have X-ray equipment, medical chairs, & reinforced concrete.

They can’t just move next door & people take confidence in the capital improvement the tenant has invested in the property. But while you may have a commercial tenant for longer, they can also be harder to replace.

It’s also worth noting that commercial property buyers need more cash up front for a deposit. While you can borrow 80% of the property value in residential, this number slips to 65% to 70% with commercial property.

WILL THE GOOD TIMES LAST?

While commercial property values have shown more resilience throughout the pandemic, yields have started to soften across most asset classes since the second half of 2022, with this trend expected to continue. With further interest rates likely over the coming months, we are likely to see yields soften further over 2023.

However, well located assets occupied by high-calibre tenants will continue to see strong levels of demand, particularly in light of more challenging economic conditions. Because it’s hard to compare different commercial properties like for like, they are measured in yields.

These are calculated by dividing the annual rent (gross or net) by the purchase price, so a property with a rent of $30,000 per annum divided by a purchase price of $500,000 would show a yield of 6%.

When property prices increase, yields reduce & when prices go down, yields increase. So, while vendors seek low yields, buyers seek high or softening yields. While rapidly rising rents are pushing up yields for residential investors, commercial property yields are still around double. But, as with any investment, it’s important to know what to look for.

THE BEST DEALS AROUND

First-time commercial investors typically start off in a smaller price bracket, with an entry point of around $1.5 million to $2 million. In Sydney, this budget would buy a small retail office, cafe, medical clinic or industrial unit, with regional areas offering lower purchase prices & often solid growth prospects.

Different asset types carry different vacancy risk. For investors seeking defensive income, assets occupied by tenants operating in relatively recession-proof industries could be a good option. Examples include healthcare, childcare, service stations, & non-discretionary retailers such as grocery stores. Strip retail & office, in comparison, typically see a higher vacancy risk.

Investors should also assess the lease terms. This means the quality of any existing tenants, how long they have left on their lease, whether fixed or inflation-tracking rent increases will take place, whether they pay the outgoings and, if not, by how much they’re expected to increase.

Some investors will be willing to take on more risk than others. An investor needs to be clear on whether their strategy is to achieve high income, in which case they may be willing to tolerate investing in higher-risk assets, or whether they want defensive income, in which case their return will typically be lower.

23/03/2023

NEXT DOOR NASTIES

Location is one of the most important things to consider when purchasing a home. So what happens if you’ve got an unusual neighbour?

Proximity to an undesirable location like a cemetery or an airport, has long been thought to hurt property prices & squash buyer interest. But does that still hold true today?

Most people aren’t bothered by proximity to a cemetery. A lot of buyers will make jokes about being in the ‘dead’ centre of town or how quiet the neighbours are. There will be some cultures that it won’t appeal to, but a lot actually like the green spaces where they can take their pets for a run.

Another pro is the fact that prices tend to be lower, which appeals to young couples looking for a decent price & less competition. Most houses near cemeteries don’t experience a significant drop in value, though some can be up to 10% cheaper.

They’re not hugely discounted, & it also comes down to market conditions & prices in these locations, but generally it’s a more affordable way of getting into the inner-city suburbs. While it might spook some people, an area’s history is a ‘unique’ selling point, & a great way of breaking the ice with buyers.

It’s not just cemeteries that can influence the surrounding housing market. Combined industrial & residential suburbs can be the noisiest. Often people move into these areas to take advantage of the comparatively lower house prices & get a foot on the property ladder.

In many cities, locals accept aircraft noise. Planes cruising low overhead isn’t so bad once you get used to it. It’s only about 5-8 seconds every 30-45 minutes & after you’ve lived there for a while, your ear tunes it out & you don’t even hear it anymore.

There are often solid bargains to be found near unusual or undesirable locations. Buyers consider these properties because they often offer a whole lot of property relative to the price tag. Step back one street or around the corner & it can often be a good 10% to 20% more.

The downside is the property may be harder to sell when it comes time to put it back on the market. The price reduction on the way in is also a reality when you go to sell. The buyer pool is usually limited or narrowed as many won’t even consider these locations.

Growth in undesirable locations can also be well short of those in surrounding streets, & positions even on the same street. For the right buyer, though, a home next to a cemetery, airport or even a sewage treatment plant could be just the ticket. If you can work through the associated superstitions that many people have, then you could absolutely buy well.

22/03/2023

WHY RENT CONTROLS ARE NOT THE ANSWER TO AUSTRALIA’S HOUSING CRUNCH

Rental markets around the country are extremely tight, with vacancy rates nationally sitting at just 1.6% – but calls for price controls won't solve the problem.

There are many reasons why markets are so challenged, including more renters living alone since the pandemic, investors selling out, & more recently, the return of migration. The result is that rent prices are growing very quickly. Over the year to January 2023, median advertised rents on realestate.com.au rose by more than 8%, with some areas seeing even faster growth.

Clearly, that’s putting pressure on the budgets of many tenants, in an environment in which cost-of-living pressures are already rising. As a result, there have been calls for governments to intervene. One solution that has been suggested is rent control.

While these controls can hold down the cost of rents for some, they create a host of detrimental side effects. In particular, rent controls can end up making renting more expensive for other tenants who don’t benefit from the policy.

They can reduce the supply of rentals, making it harder to find a rental, as well as lead to renters staying in homes that aren’t appropriate for their needs. And there's the likelihood they could lead to lower-quality & worse-maintained rental stock.

WHAT ARE RENT CONTROLS?

The term 'rent controls' can cover a broad range of restrictions on tenant-landlord relations. But the types of rent controls I want to look at here are those that restrict the prices of rents in some way.

These types of rent controls are classified into two broad categories:
- Rent freezes, or hard controls, cap the level of rents
- Rent stabilisation, or soft controls, are policies that limit how quickly rents can increase for occupied properties, rather than capping or freezing the level of rents.

Often, rents are uncapped between tenancies, for example, once the property becomes vacant, the landlord can advertise any rent they like for the incoming tenant. Australia has some experience with rent control. Rent controls were introduced during World War II by the government, with controls ending in 1948. Since that time, rent controls have been rare in Australia.

Examples are New South Wales & the Australian Capital Territory. NSW persisted with the rent caps that were in place during World War II. Rent control in NSW largely ended in the 1960s. The ACT introduced rent control in 1974; this was abolished two years later.

DO RENT CONTROLS ACHIEVE THEIR STATED GOAL?

The short answer is: for some people, yes. Most studies find that rent controls create cheaper rents for the incumbent renters that benefit from the controls. And these discounts can be significant. By the time NSW lifted rent controls, controlled rents were around 50% to 60% cheaper than market rents.

As another example, Sims (2007) finds that Massachusetts’ rent caps lowered rents for controlled apartments by about one-fifth. But rent controls create spillovers that raise rents in the non-controlled part of the rental market – eligible tenants get lower rents, but other renters end up paying more.

Rent stabilisation can also have an unfortunate side effect. Landlords have incentives to choose less-secure tenants because shorter tenures give landlords more opportunities to adjust rents when the property is vacant. That can make renting harder for the types of renters that particularly value stability.

RENT CONTROLS HAVE LONG-TERM EFFECTS ON RENTAL MARKETS

Unfortunately, rent control comes at a significant cost, including to the groups it purports to help. The literature examines many different effects, but I’ll focus on three:
- Reduced supply of rental housing
- Renters staying in homes that aren’t appropriate for their needs
- Poor maintenance & lower quality rental dwellings.

RENT CONTROLS REDUCE THE SUPPLY OF RENTALS

The biggest objection to rent controls is that they reduce the supply of rentals & ultimately make renting harder & more expensive. This happens through two avenues:
- Encouraging landlords to move properties out of the rental market
- Undermining the incentive to build new rentals.

The first avenue is strong & very clear in the evidence: rent controls clearly lead to properties being removed from the rental market. And that’s true even of softer, rent stabilisation policies, not just for rent caps.

A compelling study of San Francisco’s rent stabilisation policy, which capped annual rent increases for eligible properties to no more than 7%. They find that, in response to rent control, there was a 15% decrease in rent-controlled properties because landlords redeveloped or sold their rental housing to owner occupiers.

Furthermore, because one of the key outlets from rent control was to redevelop into higher-end housing, rent control contributed to gentrification. We find that this high-end housing, developed in response to rent control, attracted residents with at least 18 percent higher income, relative to non-rent-controlled buildings.

This is not an isolated finding, studying rent control in Massachusetts, finds that units were six percentage points more likely to become rentals after rent control ended than before – meaning that thousands of units were kept out of the rental market by rent control. The second avenue is straight forward in theory: controlled rents mean a lower return from building new rentals, so fewer get built.

In practice, there’s surprisingly little evidence on the impact of rent controls on construction for a simple reason: most rent controls specifically exempt new construction precisely because policymakers are concerned about this effect. As a result the evidence on this effect is weak. But the evidence we do have finds either no effect in jurisdictions where new buildings are exempt from controls or a negative effect.

RENT CONTROLS LEAD TO POOR MATCHING BETWEEN WHAT RENTERS NEED & WHERE THEY LIVE

Housing is a limited & scarce resource – that means ensuring that people are in homes that suit their needs is important. With rent freezes & caps, where rents are far below their market rate, rentals essentially become a lottery providing a windfall to the household lucky enough to be living there.

This flattening of rents can lead to households staying in homes that they value very little, which others would value far more. But because the rent doesn’t reflect that value others place on the home, there is no incentive for the incumbent household to move.

Empirically, this is what we see in tightly rent controlled markets. A study on this issue compares similar demographic cohorts & the dwellings they live in across cities with & without rent control. They find that, because of rent control, 21% of New York renters live in apartments that are too big or too small – & this is not driven by the fact New York is more expensive to rent in than other cities. This misallocation can be costly, the economic costs of misallocation are larger than the costs of undersupply.

RENT CONTROLS LEAD TO LOWER QUALITY RENTAL HOUSING

Rent controls lead to landlords underinvesting in maintenance & a lower quality rental stock. Its repeal leads to a significant improvement in aesthetic maintenance – chipped paint, holes in the walls & floors, & loose railings, etc.

While enforcement mechanisms can help mitigate the incentives to underinvest, these mechanisms are imperfect & expensive to enforce. The result is that small maintenance items get ignored.

WHAT’S THE BOTTOM LINE? WHAT COULD WE DO INSTEAD?

If rent controls are, at best, an imperfect way to help renters, what else can we do? In the short-term, a less distortionary way to help renters would be to raise Commonwealth Rent Assistance.

Rent assistance is better targeted at those that need it. It has fewer negative side effects; & it is not, contrary to some counter arguments, a subsidy to landlords. Studies of Australia’s rent assistance find it raises rents only modestly, meaning the payment almost entirely benefits the renter.

But longer-term, the solution to rental affordability is about building enough homes. Rents are growing quickly right now because rental homes are very scarce – building more would solve that.

(Thanks REA for the info)

Toni Atkinson, Property Agent

24/04/2023

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