The ongoing debate surrounding negative gearing has once again taken center stage, with Prime Minister Anthony Albanese’s ambiguous stance raising concerns among rental property owners. The constant threat of changes to this tax incentive has created a climate of uncertainty, casting a shadow over the future of the rental market.

Investors play a pivotal role in supplying the rental market, particularly in regions like Western Australia where they account for approximately 85% of the private rental stock. The devastating consequences of the COVID rental moratoriums, which led to the removal of nearly 20,000 rental properties, serve as a stark reminder of the market’s vulnerability without investor participation.

The potential for legislative changes could deter investors from entering or remaining in the market, leading to a reduction in rental properties. This could have far-reaching implications, not only for renters but also for the broader housing market. While some may argue that a decrease in investor activity could lead to lower housing prices, this is a simplistic view.

Firstly, the release of rental properties onto the market would not occur simultaneously, potentially limiting its impact on supply. Secondly, the current high demand for housing suggests that any increase in supply would likely be absorbed quickly. While prices might moderate, a significant drop is unlikely, as evidenced by the limited impact of the post-moratorium property releases.

It’s essential to acknowledge that not everyone is in a position to purchase a home, and renting remains a viable option for many. For example, individuals working in regional areas may prefer to rent rather than invest in a property they may need to sell in the near future. Additionally, some renters may choose to rent-vest, purchasing an investment property elsewhere while continuing to rent their primary residence.

To ensure a stable and sustainable rental market, governments must create a legislative environment that supports and encourages investor participation. Until a viable alternative to private investment emerges, it is crucial to maintain policies that foster investor confidence and incentivize their involvement in the housing market.