It’s no wonder Queensland had such a big fight about property tax and landlords — Queensland is Australia’s rent state. But the government lost that fight and shelved its plan to charge interstate landlords, focusing instead on short-term rental owners.
It should have fought harder.
The 2021 census shows Queensland is second only to the Northern Territory in having the highest proportion of rented households.
NSW is catching up, but Queensland holds the state mantle. Sydney pips Brisbane with its larger proportion of rental properties, but outside the capitals, Queensland is in a different league. The state includes large rural and regional areas with a very high rental share, mainly around the Gulf of Carpentaria but also in areas with substantial populations.
Rent city
Sydney is Australia’s most rented city, with 36% of households live in rentals and 17% of its suburbs (technically they are “statistical areas level 2”, but pretty close to suburbs) having more than 50% of households residing in rentals.
Perth is the least-rented city, with 27% of households renting and just 3% of its suburbs having more than 50% of households living in rentals.
You might expect Brisbane to be more like Perth, but in fact it is more like Sydney. Fortitude Valley, for example, has the highest share of rentals of any capital city neighbourhood in Australia: 79%. Across Brisbane, 27% of households live in rentals and 16% of the city’s suburbs have more than 50% of households living in rentals.
Queensland may have a lot of renters, but it has relatively few landlords, as the next chart shows. Compared with other states, few Queenslanders own an investment property (as measured by the share of taxpayers declaring rent in their tax return). One possible implication is the landlords of Queensland are scattered across the country.
This is exactly why Queensland might want to do something different from other states — its
landlords aren’t locals.
The government proposed to change which properties would be included in the state’s property tax assessments. However, the same statistics above are why it should have expected a nationwide backlash.
The change, proposed by Queensland’s Labor Treasurer Cameron Dick, would have hit anyone who owns investment property in Queensland. The way the tax-free threshold applies would have changed. Instead of hitting only people who own $600,000+ in investment property in Queensland, it would have hit people who own $600,000+ in investment property Australia-wide (although the tax would apply only on their Queensland land holding).
Currently, if you own an $800,000 investment property in Melbourne and a $400,000 investment apartment in Queensland, you didn’t pay tax in Queensland. Under the proposal, you would pay tax on the full value of that apartment, which would be $2600, or $50 a week.
That would be a hit to some who spread their investments over multiple states specifically to avoid land tax. So would landlords pass on the tax bill to renters? Can renters be harmed if investors sell up and leave?
Who gets hurt?
Investors will leave Queensland if property taxes rise. That would reduce the supply of homes available to rent, some commentators warn, and that’s a bad idea when Brisbane’s rental vacancy rate is a puny 0.7% and the city has the highest housing inflation in the country.
The rebuttal goes like this: you can’t hurt Queensland renters by reducing the number of landlords because a former renter will buy the property and vacate a rental property. Tax change doesn’t change the number of houses! Ha!
The rebuttal is a tempting line of thought. But it overlooks an issue: interstate migration. Every week more than 2150 people move to Queensland and about 1650 leave, for a net gain of 500. That’s a pretty flexible system. Anyone can move up there whenever they want. Some kids living in Fortitude Valley might decide they would like to buy their flat when they see the price it is listed for, and forgo moving to London. Or Melburnians might decide they’re moving to Noosa if a glut of properties comes up.
Queensland has the highest interstate migration. Particularly relevant are the pull effects of policy changes on everyone in the rest of Australia. Of course, some people who move to Queensland would do so and live in rental properties, so higher rents might also deter some migration, especially more temporary migration. How that balances out is unclear, for now.
And would landlords pass on taxes? The short answer is: not yet! The long answer is they will pass on some: less in places where lots of rental properties are being built, but more in places where rental properties are scarce. Which brings us to our next point.
Fewer towers
When you tax something, you almost always get less of it. By taxing investment properties a bit more, you get slightly fewer of them. In the beginning that might mean some landlords sell up. Eventually it might mean fewer homes are built that are suitable for renters (e.g. city centre flats favoured by young people, homes in dynamic cities with transient populations like the Gold Coast). That could slightly reduce Queensland’s ability to attract more population.
So changing land tax may have caused a slight dip in the rental share of Queensland, a slight slowing in migration to Queensland, and a slightly more normal balance of landlords to renters. As discussed, Queensland is ahead of the rest of the country on those measures. Changing that would not have been a bad idea.
However, the Palaszczuk government caved. The tax has been scrapped, interstate landlords will continue to own their homes in Fortitude Valley and Noosa, and no additional revenue will be collected. Instead, the government is focusing its message on Airbnb — cracking down on homes listed as short-term rentals and charging them higher rates.
It’s the same concept as the tax on interstate landlords, just shifted to a less well-protected target. Make owning a short-term rental expensive to shift property into the long-term rental market. Nobody is standing up for Airbnb owners, so the government has found a target it can soak without backlash.
The problem is, of course, that while Queensland has more than 600,000 long-term rentals, it has far fewer Airbnbs. This won’t move the needle on Queensland’s status as the rent state.
Should the Palaszczuk government have stuck with the landlord tax? Let us know your thoughts by writing to letters@crikey.com.au. Please include your full name to be considered for publication. We reserve the right to edit for length and clarity.
