3 Comments

Because those renting out their properties bought them on credit and are needing to increase the rent to keep up with the servicing costs.

Expand full comment

I don’t think that can be an explanation.

Consider that the existence of negative gearing implies that investors willing buy loss-making homes. Why can’t they just put up the rent?

Also, only a few marginal rental homes are owned by investors in negative cashflow positions. Most homes were bought many years ago.

Expand full comment

Your point about using regulations to slow down readjustment periods due to their disruptive costs is interesting, but I'd suggest considering a different approach: government-backed low-interest loans to cover moving expenses. This would maintain the natural pace of market adjustments while making the costs more manageable through structured repayment. The loan program could be specifically targeted to low-income households, with reasonable restrictions like limiting eligibility to one loan every 1-2 years to prevent abuse. What's particularly curious about this idea is the current gap in the market for moving expense loans. This might be explained by a bifurcated market dynamic - upper middle class households can typically cover moves from savings, while lower income households who most need such loans face prohibitively high interest rates from private lenders due to their credit profiles. A government program could bridge this market failure by providing affordable terms to those who most need the assistance.

Expand full comment