International student caps: how not to fix the housing crisis

There are many things that could be done to address the housing crisis. Scrapping negative gearing is one. Legislating rent caps and preventing banks raising mortgage rates are two others. Building public housing is a fourth. But Labor is not interested in any of these measures—for them, the profits of business and investors’ returns come before people without homes.

But abysmal results in opinion polls have forced the Albanese government at least to appear as if it’s doing something about housing. Cue the newly introduced cap on Australia’s international student intake. From next year, Australia’s total international student intake will be capped at 145,000, which Education Minister Jason Clare says will result in universities having 15 percent fewer enrolments than before the pandemic, and vocational providers 20 percent fewer.

In doing this, Labor is building on the argument pushed by opposition leader Peter Dutton last year that international students are to blame for housing shortages. Despite not dog whistling quite as transparently as Dutton, Labor’s policy nevertheless rests on the idea that housing is unaffordable because there are too many people.

A media release from Clare’s office stated, “From 2026, the Albanese Government will encourage universities to create new supplies of student housing to benefit both domestic and international students as part of their future growth”. The implication is clear: international students are taking homes they are not entitled to and are driving up prices. Ian Verrender, chief business correspondent for the ABC, was explicit about this in an interview on 28 August, saying, “It’s just basic arithmetic that if you’re gonna add 470,000 people ... into the economy and you’re not gonna build enough houses to put a roof over their heads, then something is going to give. You’re going to see the prices rise, and the price, in this case, is rent”.

So let’s apply some more “basic arithmetic” to the housing problem. A recent report by Prosper Australia found that more than 100,000 homes in Melbourne were left empty or underused in 2023, including 16 percent of all investment properties. These empty homes, and the rise in prices due to the deliberate restriction of supply, are the result of choices by investors and developers, aided and incentivised by government policy. So the problem is not as simple as an excess of people or shortage of homes, but that the homes that exist are treated as assets, rather than shelter.

Albanese promised to lead an “unashamedly pro-business” government, and he’s delivered. In “basic arithmetic”, that means Australia’s richest 200 people now own $625 billion in personal wealth, while tens of thousands are without homes. To address that, we need policies that prioritise people’s needs over the profits of the rich.

Labor could, for example, abolish all tax concessions for property investors. Negative gearing is one such concession: it allows investors to reduce their tax if they “lose” money on an empty property. It rewards them for keeping homes empty instead of renting them out. This restricts supply while enriching investors, which pushes up rents. It’s more “basic arithmetic”.

According to the parliamentary budget office, negative gearing will cost the government $157 billion over the next decade, when combined with the discount on tax paid when selling investments. Despite widespread calls from the Greens and housing advocates, Labor is refusing to scrap these concessions, which would hurt the profits of housing conglomerates, developers and the wealthy.

Then there are rent caps, which the Greens have proposed repeatedly in parliament. We’re told it’s “basic arithmetic” that if you have more people but no corresponding increase in the number of houses then rents go up. But rising rents are not a force of nature beyond human control, like gravity. They’re the result of landlords choosing to charge tenants more. The government could simply pass legislation to limit or prevent rent increases. Or create new taxes for landlords who raise rents, and use the money raised to build public housing.

The same goes for mortgages. The Reserve Bank of Australia and the government have justified interest rate rises as necessary to curb inflation. The effect is to make the cost-of-living crisis even worse for working-class households, by adding rising mortgage costs onto rising prices. Including mortgage increases, the cost of living climbed by 6.2 percent in the year to June 2024, according to the Australian Bureau of Statistics, well above nominal wage rises. Labor could legislate a freeze on mortgages to give some relief to working-class households, but have refused to countenance that sort of imposition on the big banks. Last year the Commonwealth Bank reported a cash profit increase of 6 percent to a record $10.2 billion.

Broadening out from housing, there are plenty of other things Labor could do to address the cost-of-living crisis. They could target the supermarket giants, whose price-gouging on essential goods has been widely attacked. For the second half of last year, Coles posted a profit of more than $600 million, and Woolworths $900 million. Both were increases of more than 10 percent. Labor could freeze the prices of essential goods, giving direct cost-of-living relief. It could also raise welfare payments above the poverty line, as happened during the pandemic. It could provide child and aged care rather than giving money to for-profit providers. All this could easily be funded by putting steep taxes on corporations and the wealthy, starting with scrapping negative gearing. It’s just basic arithmetic.