Investment in Rental Housing in Australia: Small Landlords and Institutional Investors

Abstract

The private rental sector has always been an important part of the Australian housing system. Although declining in relation to home ownership in the two decades after the Second World War, private renting has never fallen below 20 per cent of the total housing stock, a share that it has maintained over the past 40 years. Small, scale petty landlordism has characterised this market sector, with a majority of rental stock owned by individuals. This paper summaries the specific characteristics of rental ownership in Australia, drawing on a recent national survey of landlords carried out by the Australian Bureau of Statistics and identifies the key factors responsible for the persistence of this pattern of ownership. The reasons for the absence of institutional investors from this sector are then discussed, based on selective interviews with key players in the banking, insurance and superannuation industries. Current changes in market and policy environments are identified which may, however, increase the likelihood of institutional involvement in the provision of rental housing, in general, and social housing, in particular. The analysis is informed by the results of financial modelling carried out at the Australian Housing and Urban Research Institute.