Why overseas students aren't to blame for the rental crisis

International students aren't to blame for Australia's rental crisis. In fact, capping new enrolments could hurt universities, local businesses, and the economy.

Research from the Student Accommodation Council (SAC) shows that only 6% of renters nationwide are international students, mostly in capital cities.

Yet, the government plans to cap international student enrolments at 270,000 starting in January 2025, hoping to reduce rising rents.

The study found that international students make up 7% of renters in Victoria, and 6% in New South Wales and Western Australia.

Of the 6% share, 39% live in student accommodation, further reducing their impact on the general rental market.

Purpose-built student accommodation has grown alongside international student numbers, ensuring there has been little to no overflow into the general market. Between 2015 and 2024, bed numbers in these facilities grew by 74%, mainly in capital cities.

These properties exclusively for students help ease pressure on the general market, preventing big rental price swings due to student numbers.

The government's cap will likely reduce international students in the general rental market by only 0.2% in 2025, and by 2026, their share will drop from 5.4% to 4.8%.

This decrease will mainly be felt near universities, having minimal impact on broader vacancy rates.

Real causes of the rental crisis

Australia's rental crisis stems from a shortage of available properties, driven by multiple factors:

1. Insufficient new builds to meet demand, with current constructions taking 50% longer than four years ago due to approval delays, a lack of skilled workers, and increased building material costs.
2. Investors exiting the rental market due to low demand for inner-city rentals during the pandemic and increased land taxes in Melbourne.
3. Population growth, including natural increases and migration, raises demand. An aging population also means people need housing for longer.
4. Increased single-person households reduce availability.
5. Cost-of-living crisis, higher interest rates, and employment rates affect individuals' ability to buy or rent.
6. Many investors find higher returns in the short-term rental market, reducing available rentals.

These factors combined have pushed rental vacancy rates lower across the country, which have struggled to recover since the pandemic. In September 2024, the national vacancy rate was 1.2%.

Impact of reducing international student numbers

International education is Australia's fourth largest export, contributing $48 billion and supporting 335,000 jobs. Capping student numbers could reduce GDP by $4.1 billion and lose 22,000 jobs.

Universities would also face a 6.4% revenue drop.

Solutions

To boost rental availability, we need to build more homes and remove building impediments. Offering incentives for investment properties will also increase stock.

There are also many hurdles to building student accommodation, such as tax barriers, zoning issues, and road blocks preventing large-scale investment. These could be eased in order to build more purpose-built student accommodation.

Rather than cutting international student numbers, which offers minimal benefits, the SAC's analysis suggests increasing rental stock to ease the crisis and retain the economic benefits of international students.