The real issue is not CGT but our Rental Market

I was planning to write about negative gearing and the capital gains tax discount today.

Structurally, changes may well provide fairer outcomes over time by limiting tax advantages to those who can accumulate assets, but I will leave that for my next post.

Because the bigger issue is Australia’s rental market.

Over the past five years, rents have increased by roughly 45 per cent across Australia, while vacancy rates are sitting around 1%. That is well below what would be considered a healthy rental market.

When it is this tight, it does not just mean higher rents; more importantly, it means no choice, extreme anxiety, fear of being forced to leave, and zero stability unless you are a highly attractive tenant.

For many people who rely on renting, that stability must exist. Older Australians living alone, single-parent families, households with little savings, people who lose their jobs, experience illness, are unable to work or have no family support to fall back on.

It is no surprise that homelessness is where it is, and let’s face it, it's not good enough.

One uncomfortable reality in Australia is that governments have stepped away from building social housing at scale. Institutional build-to-rent remains tiny, and for decades, we have relied on ordinary Australian households to provide rental accommodation.

At the same time, those investors are often blamed for the housing crisis itself.

The rental crisis, and it is that, has not appeared overnight. In many ways, it has been building for more than a decade.

Credit tightening consistently reduced borrowing capacity. Higher home prices meant that the reduced capacity was simply needed to buy a home. Interest rate increases have forced many investors to sell to keep up with their home mortgages.

Policy settings have shifted repeatedly. Land tax, tenancy rules, minimum building standards and ongoing speculation about tax reform have made the environment feel increasingly unpredictable.

The last investor cycle also left a horrendous opportunity cost in the high-rise apartment market, with diabolical returns and a collapse in building confidence.

At the same time, capital city investment prices have moved beyond the reach of most investors, prompting them to search nationally.

I am currently tallying up the scale of this regional investing activity by “borderless buyer agents” and what it may mean for the rental market over the coming years.

My view for some time is that it is massively underestimated, yet much worse than expected, as I find more data.

The Senate committee review into CGT is due on 17 March. 80+ submissions show a wide range of opposing views, many reflecting clear self-interest across the housing system.

A shift in tax policy may well happen and be the right decision.

But whatever changes come, Australia needs a rental market that actually functions and protects our most vulnerable fellow Australians.