The headline of the Courier Mail on Friday 23 September read “Granny Flats to the Rescue.”
It saw two of my recent blog posts collide; the rental crisis in Australia and the rising demand for one and two bedroom housing.
The vacancy rate in Australia today is 0.9 per cent – the lowest it has been since 2006.
Queensland has been hardest hit with a vacancy rate of 0.7 per cent and, at the same time, the fastest rate of interstate migration since 2004.
There are less than 2,500 vacant properties in Brisbane today. With a population growing by as much as 40,000 people per annum, that’s not a lot of housing.
It’s why the Queensland Government announced last Friday that anyone with a granny flat in Queensland would be allowed to rent that granny flat to an unrelated party.
In doing so, it followed the lead of New South Wales where granny flats can be built as-of-right (i.e. without the need for an approval) and rented out to unrelated parties.
While some councils across Queensland allow granny flats to be rented to unrelated parties, most councils limit the renting of granny flats to family members.
Which is a shame because a one- or two-bedroom granny flat is one of the most affordable forms of rental accommodation. In a rental crisis, it’s often those most in need who feel the brunt of the crisis i.e., single mums, families on welfare, older retirees.
Not only does it provide affordable housing for those in need, but it also provides a great financial incentive to property owners.
Granny flats typically cost around $100,000 to build.
If a homeowner borrowed 100 per cent of the cost to build the granny flat – at say 4.5 per cent interest rate – the additional cost would be $4,500 per year. That works out to be $87 per week.
Depending on the area, most granny flats will rent for upwards of $250 per week, not only covering the cost but making a significant difference to the affordability of an owner occupier’s mortgage repayments, or the rental yield achieved by an investor.
The details around how the Queensland policy will work are yet to be released. It’s not yet clear whether the policy will apply to newly built granny flats.
Either way, I think it’s only a matter of time before every state and council around Australia has a policy enabling granny flats to be built as-of-right and rented out to unrelated parties.
It’s the easiest and most effective way of providing affordable housing to those in need, and at the same time helping homeowners and investors alike.
A win-win-win.
