If government is serious about tackling the housing crisis, it must help private investors

Worse, if they even tried without expanding the total supply of housing beyond present needs, their money would just push prices up across the board.

Driving away the private sector

The QCOSS figures are certainly inflated, but even so, there is only one group that can finance the extra expenditure, and that is the private sector.

But the figures suggest that private owners are actually fleeing the sector. The Real Estate Institute of Queensland reports a decrease in rental properties in the state and blames this partially on legislated and proposed increases in tenant rights making ownership more risky for landlords.

Blame must also be apportioned to the federal government, which has toyed with the idea of abolishing negative gearing and the capital gains tax discount, while direct and indirect policies have increased building and maintenance costs at the same time as borrowing costs have gone up.

The state governments have also contributed by hiking land taxes.

In Brisbane, for example, there is a disincentive for an investor to buy a second rental property because they will lose around one-quarter of the additional income in land tax.

Then there is the threat of rent controls. Why wouldn't a government that puts caps on the price of gas or coal put a cap on rent?

Bizarrely the federal government has been toying with tax concessions to encourage large-scale buy-to-rent schemes at the same time as wanting to take legitimate tax deductions away from private landlords.

Yet private owners are the most efficient landlords. In an asset class where you are lucky to gain a two percent cash return after paying interest, maintenance, management fees, land tax, and personal taxation on an asset that returns generally no more than five percent gross, large investors struggle.

The reason small investors thrive is they often gear the asset 100 percent, use the collateral in their home, and perform management and maintenance themselves. They do it for the capital gains which they magnify using extreme financial engineering.

With a 10 percent deposit and four percent growth per year on the total asset, their capital will multiply more than four times over 10 years, and they get a return on their labour along the way.

These economics aren't available to large-scale build-to-rent developers, hence the call for government subsidies or concessions.