Sector calls for exemption from proposed break lease compensation caps
Proposed changes to Victoria's rental laws could curb the future supply of student housing, the Student Accommodation Council has warned, amid concerns that current policy settings have already discouraged international investment.
Under proposed amendments to the Residential Tenancies Act, the amount renters must pay for ending a fixed-term lease early would be capped. The council said it supported protections for renters but warned the changes could deter investment in new purpose-built student accommodation, pointing to New South Wales, where it said similar rules had reduced supply.
The council is calling on the Victorian government to exempt purpose-built student accommodation from the proposed caps, or introduce a separate framework suited to the sector's academic-year leasing cycle and its limited capacity to offset losses outside peak intake periods.
Adele Lausberg (pictured right), executive director at the Student Accommodation Council, said purpose-built student accommodation differed from standard rental housing and should not be subject to the same break lease rules.
“Victoria is a magnet for the brightest young minds from around the globe,” Lausberg said. “Our education sector is a huge drawcard for international students, many of whom rely on purpose-built student housing. Student numbers are increasing and we cannot afford to drive away more projects that would house the students that play such a vital role in our economy.
“Student accommodation is designed around the academic year. If a student leaves after the main leasing period, particularly after semester has started, that room may be very difficult or impossible to re-let for the remainder of the year.”
“A capped compensation model may sound simple, but for student accommodation it shifts substantial unrecoverable vacancy risk onto providers and weakens the investment case for new projects.”
Lausberg pointed out that Sydney was already showing the consequences of policy settings that made student accommodation harder to deliver. “Despite acute housing pressure, Sydney's identified pipeline is materially lower than Melbourne's, and only a small share of those beds are currently under construction, she said”
The council cited research by Mandala, contained in its report Attracting International Capital: The Impact of Taxes on Global Institutional Investors, which found Victoria's absentee owner surcharge had prevented development of a 201-bed student accommodation site in Melbourne, at an estimated cost of $60 million in lost construction activity and $3.8 million in tax revenue.
“Melbourne is one of Australia's most important education destinations,” Lausberg said. “At a time when the city needs more dedicated student housing, Victoria should be strengthening investor confidence, not introducing new uncertainty. These are capital-intensive, long-term projects that depend on regulatory certainty.
“In Victoria, feasibility is already being tested by the absentee owner surcharge, and further uncertainty through break lease reforms risks making Melbourne less competitive for the global capital needed to deliver new student housing. This is about getting the balance right. Renters should be protected, but reforms should not unintentionally make it harder to deliver the student housing Victoria urgently needs.”
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