Australia will get an update next month on figures that are often mentioned in the ongoing housing debate. This number equates to approximately 13 million vacant bedrooms in the country’s housing stock.
This figure is often pointed to as a potential way to quickly reduce rents if more of these rooms are made available to tenants. On census night on August 11, an update on the number of available bedrooms could reignite calls for changes to age pension and tax rules to encourage homeowners to “activate” these rooms.
Property economist Dr Lyndall Bryant, from Queensland University of Technology, has long researched the barriers facing people putting their spare bedrooms on the market.
“We have all these hidden rental opportunities in our existing housing that are just not being used… and it could improve a lot of things,” she said. Yahoo Finance. “You provide affordable rental housing to people who need it. You provide cost of living relief to homeowners who may be asset rich but cash poor, especially retirees. Also, there are a lot of people living on their own, and we also have this loneliness crisis.”
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Speaking before the Senate Committee on Australian Productivity this week, banking analyst John Mott of Sydney financial services firm Barrenjoey lamented the lack of suitable housing available to the shrinking boomer population and the implications this has for the productivity of the economy.
“We need to build more houses, we need to build more apartments (and) the rate of housing construction needs to improve so that older Australians who are currently in the empty nest stage can move on and free up bedrooms for all Australians,” he said.
South Australia recently introduced a stamp duty exemption for homeowners over 60 to avoid paying stamp duty, which could save them over $100,000 in downsizing incentives.
But until more supply comes online, researchers like Dr Bryant believe that making it easier for spare bedrooms to enter the market could make a real difference.
Age pension rules and tax fears hold back homeowners
When it comes to what she calls “tangible” barriers, or financial barriers to doing so, they focus on concerns about paying extra tax and losing out on Age Pension payments.
Her research shows that homeowners are concerned about losing the capital gains tax exemption for their family home if they use it to generate income. Fair or not, “it seems like a big monster sitting over everyone’s heads,” Dr. Bryant said, even though it may not apply in most cases, she added.
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“If you receive a pension, you actually risk losing part of your pension because it triggers some different assessment criteria whereby if you receive income from the family home, it no longer becomes an exempt asset in the asset test,” she said.
“So there are always significant financial challenges.”
There are differences in whether pensioners accept a lodger or a lodger rather than a tenant, but she would like to see Centrelink rules relaxed, similar to the pension’s work allowance, to remove the current disadvantage for many pensioner homeowners of renting out a spare bedroom.
“Black and white” Australian housing market
In addition to improving state rental laws to give landlords access to a simple template contract to house guests and tenants, she points to overseas schemes that could be used to promote the idea of renting out spare bedrooms and providing landlords with a certain level of tax-free subletting.
“So in the UK and Ireland there is what’s called a leasehold scheme and it’s been around for a couple of decades,” Dr Bryant said. This allows homeowners to rent out a room for £7,500 ($A14,300) a year without tax implications.
“So you don’t have to pay tax on it, and since it’s tax-free income, it doesn’t have any capital gains implications. It’s that simple.”
“The other benefit of this is that you set that financial threshold at an affordable level…it’s kind of a way of ensuring that these rooms are offered at an affordable price.”
Dr. Bryant said programs like this could help normalize the practice, make it fair, and also provide some protection for tenants.
“There are ways in which this could be done quite easily if the government were serious about creating diversity in our housing stock,” she argues.
“Our housing market has become black and white. You either buy or rent. And it’s either a house or an apartment. And we don’t have anything in between.”
On census night on August 11, researchers and policymakers will be scrutinizing images of the inside of Australian homes after the previous national survey was conducted during the Covid pandemic.
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