The " Rental " Crisis !

The " Tent City " that has just been demolished in Martin Place has drawn attention to the " homeless people " sleeping rough in the city.  It is true that some of them are hopeless alcoholics or drug addicts with out of control finances, but many are low income earners who simply can not find a rental property within their capacity to pay.  Some are the marginalized unemployed who have no hope of gaining a rental on the meagre " Newstart " allowance.

In a speech to the Property Council, the NSW Treasurer has indicated that the government is keen to develop a  " build to rent " sector of property development in this state.  About one third of Sydney residents live in rental accommodation, hence this is a stable market capable of delivering both capital safety and a reasonable return to investors.

Perhaps this is the ideal time to float such a scheme.  The interest most people are getting on money on term deposit with a bank or languishing in a small savings account is abysmal.  Even significant amounts are lucky to get a three percent return, and money below a five thousand dollar level mostly gets no interest at all.

There are an amazing number of self financed retirees who have taken their superannuation by way of a cash withdrawal and opt to manage their own finances.  In the present financial climate they would welcome a safe investment that paid a better return than the banks are offering.  What is required is clever thinking to put together a plan that takes advantage of the conditions now offering.

Ideally, this would be a partnership between the government and private enterprise, and as such should be free of stamp duty and similar costs in obtaining land.  Construction of the buildings would be put to public tender and it would be important to include a mix of high and low rental units to avoid the stigma of " public housing " that might otherwise become fixed to such a project.

Importantly, the management and the letting of units would be in the hands of the investors and not a government agency.  The normal rental rules would apply with the exception that the low rental units would only be available to tenants who satisfy that they are low income earners that meet the relevant criteria.  This would not be " crisis "  housing.  The aim would be to let to genuine low income families who would be expected to reside in this accommodation on a long term basis.

Investors would be free to sell their shareholding in the holding company, but the company articles would prevent the sale of units within the building or any change to the balance of high and low rent apartments.  It would be essential to maintain the integrity of the building as containing a mix of normal rental clientele.

Obviously the day will come when interest rates rise in the general market but there is no reason why such a scheme can not deliver a reasonable return.   Importantly, the opportunity exists while interest rates are low to get such a scheme up and running and at the same time provide those self funded retirees with a better return on their money.