A Victorian property investor has pointed a finger at real estate agents, accusing them of contributing to the state’s ongoing housing crisis by discouraging long-term leases. The investor’s comments come as the Real Estate Institute of Victoria (REIV) has called on the state government to implement reforms that would ease the financial burden of land taxes on landlords who offer long-term rental agreements.
Calls for Policy Change Amid Rising Land Taxes
As land taxes continue to climb, some landlords are struggling to cover the increased costs without resorting to significant rent hikes. The REIV has proposed a system of land tax discounts to incentivize long-term leases, suggesting reductions of up to 45% for landlords offering leases lasting 10 years or more. Under the proposal, a 10% discount would apply to leases of three years, and a 20% discount for five-year leases.
This push for tax relief aims to retain rental properties that may otherwise be leaving the market due to the pressures of rising taxes. Despite the proposal’s merits, some landlords believe real estate agents’ practices are complicating the issue.
The Role of Real Estate Agents in the Crisis
Jenny, a landlord from Wangaratta in northern Victoria, claims that real estate agents play a key role in the housing crisis by actively discouraging longer leases. She described her experience with one agent who refused to facilitate a two-year lease for reliable tenants, despite her willingness to reduce the rent to ensure their stay.
“I wanted to keep the rent low and encourage the tenants to stay, but the agent opposed it because they were more focused on the commission they could earn from a shorter lease,” Jenny said. “They also stood to lose an annual re-signing fee, which could exceed $400.”
This fee, she added, would be lost if a long-term lease was signed, and the agent could miss out on the opportunity to increase rent when the lease term expired.
Jenny’s concerns highlight the financial incentives that may drive real estate agents to push for shorter leases. Many property managers rely on commission-based income, with re-signing fees and periodic rent increases providing additional revenue.
Challenges to Longer Leases
While some property managers, such as Scott Petrie of Trevor Petrie Real Estate in Ballarat, express a willingness to offer two-year leases to good tenants, they caution that longer agreements present risks. Petrie notes that longer leases can complicate eviction procedures if issues arise with tenants. Additionally, landlords and tenants alike may face unforeseen circumstances that require them to move or make other changes in the future.
“I probably wouldn’t want to see longer than two or three years, personally,” Petrie stated, citing potential complications if either party’s situation changes over time.
Financial Pressures on Landlords
Landlord Emma, also based in Ballarat, voiced concerns over rising land taxes, which have made it difficult to maintain rental properties without passing costs onto tenants. Although she does not wish to raise rents, Emma has been forced to do so twice in the past year due to her land tax bill increasing by over $1,000.
“We’ve never wanted to put up our tenant’s rent, but we’ve had to put it up twice,” she explained. “We got asked to put it up again this year, but we can’t do this to these people—they’re struggling as much as we are.”
Looking Beyond Australia: A European Model
REIV CEO Kelly Ryan pointed to international examples of successful long-term leases as a potential model for Australia. In many European countries, extended lease agreements of five, 10, or even 20 years are common, often with tenants taking on some responsibility for minor maintenance.
“Within these longer leases, tenants often take on responsibilities for basic maintenance—like fixing taps or changing lightbulbs—giving them a sense of ownership over their home,” Ryan said. “This approach could work here, especially in the commercial sector, where longer leases have already proven effective.”
Ryan emphasized that adapting these models to the Australian market could benefit both tenants and landlords, creating more stability in the rental market while alleviating some of the financial pressures that contribute to the housing crisis.
Moving Forward: Solutions for Stability
As the housing affordability crisis in Victoria continues to intensify, discussions about long-term leases and the role of real estate agents are becoming increasingly urgent. While the REIV’s proposed tax relief is a step in the right direction, addressing the financial incentives that drive agents to discourage long-term leases will require deeper reform and a broader shift in industry practices. Only through these changes can stability be restored to the rental market and ensure affordable housing options for tenants in the long term.
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