My thoughts on the accommodation crisis

We are all aware of the accommodation crisis, not just a housing crisis, but an accommodation crisis defined by room by room availability, yet preliminary research, by my firm is that of a total of approximately 14 million vacant bedrooms across Australia that at least half are located in urban areas mainly on the eastern seaboard.

If only a minority of these vacant bedrooms, say two million, (15%) could be offered meaningfully and successfully to ‘boarders’, this would immediately relieve much of the crisis anxiety and tension from this very tight market. The concept of ‘boarder accommodation’ amongst households was very common during a then housing shortage prior to the Second World War but diminished in popularity during the housing boom post the Second World War. It then dwindled to a relatively small number of metropolitan boarding houses, few of which remain today.

Whilst the idea of renting a room to a boarder may have some appeal, particularly to elderly citizens, especially those living alone seeking some company and who might be asset secure but cashflow constrained or poor, there are obstacles; (1) the rental income received would be subject to taxation, (2) the rental arrangement would potentially adversely impinge pro rata the otherwise ‘capital gains tax free status’ of the landlord’s primary residence, and (3) if the landlord were a pensioner, the extra income may be enough to adversely affect the pension formula and ultimate entitlement. Understandably, these three factors combined, do represent a real obstacle, to an arrangement that might otherwise be a win-win for the community at large.

Historically, during times of acute crisis, such as war efforts, communities come together to urgently resolve serious challenges, a bit like ‘melting the jewellery to build armaments’. I think the current accommodation crisis is probably that severe and waiting at least three to four years for a turnkey solution through new construction will not be fast enough. The dilemma of course is that we need to dramatically increase our population and economic strength through continued and increased migration but which immediately compounds the accommodation shortfall.

My suggestion is that if the Federal Government were to consider at least a three year moratorium on the rental earned, the capital gains tax free status and the impact on pensions, that’s such arrangements could conceivably usher in potentially millions of bedrooms to soften the accommodation urgency. At Charter Keck Cramer, we have not conducted a formal survey, but personally, my ‘litmus test‘ conversations with many property professionals and others, suggests very strong interest in exploring this potential. I know they would be some ‘devil in the detail’, but at least conceptually such an arrangement within the community could be approved relatively by the ‘stroke of a government pen’ certainly much faster than trying to resolve the dilemma by new construction.

I have been a property analyst for 50 years and have contributed I think over that time considered opinion, fresh ideas and well researched leadership and debate into the property markets nationally. I instinctively believe that my idea has some merit as a thought from a considered and experienced property analyst, but also a very concerned Australian who is greatly worried that without some fast-tracked solutions our accommodation crisis will worsen to a much more serious social dysfunction.?

Scott Keck, Chairman - Charter Keck Cramer