Daniel Wild On International Student Intake Pressure On Rents ABC Illawarra – 4 September 2023

The Institute of Public Affairs’ Deputy Executive Director, Daniel Wild, joined Nick Rheinberger on ABC Illawarra Mornings to discuss the pressure caused by the federal government’s unplanned, record high international student intake that alone is costing approximately up to $1,040 per household per year.

Preliminary IPA research into the relationship between net international student intake and annual rent increases from 2005-2023, suggests periods of high net international student intake are associated with spikes to average rental prices.

All media appearances posted onto the IPA website are directly related to the promotion and dissemination of IPA research

Below is a transcript of the interview.

Nick Rheinberger:

The IPA has just done a new report on Australia’s housing crisis and they reckon our intake of international students is contributing to our housing crisis in a very serious way. Daniel Wild is Deputy Executive Director at the Institute of Public Affairs. He joins us now. G’day, Daniel.

Daniel Wild:

Morning. Nice to be with you.

Nick Rheinberger:

What are the numbers here?

Daniel Wild:

Well, the numbers show that over the last year the intake of international students has caused rents on average across Australia to go up by around $20 a week, which is over $1,000 a year. And as you identified, it is the intake of international students that’s putting a lot of demand pressures on the housing market. Now, the problem here is not with the students themselves, who are obviously just coming here for a better life and to set themselves up for the future, but with the universities who are failing to provide enough accommodation for the students that they are bringing in.

Nick Rheinberger:

Okay. There is a difference, as you would know, there’s correlation and there’s causation. Do we know one is causing the other?

Daniel Wild:

It’s a good point that you make. And yes, we do know that one is causing the other. Our analysis breaks down the population growth by international students, the net migration, and natural population increase to delineate the effects from international students themselves. There is a broader issue here, which is a lack of planning that’s taken place. So it is conceivable that we could accommodate the very large increase to international students that have entered the nation over the last 12 months, but there’s been a lack of planning to do so.

And the broader context is the government is committed to a 1.5 million migration intake over the next five years, which would be the biggest in our nation’s history. Yet there’s a lack of planning for schools, roads, hospitals, and housing as well. So you’ve got demand side pressures that are coinciding with supply side pressures and shortages there, and that’s what’s pushing prices up.

Nick Rheinberger:

Do we know what international students are actually taking up when it comes to the rental market?

Daniel Wild:

We do. Some previous analysis that we had published, which was for the last financial year, found that international students, the net intake of international students took up approximately 70% of new housing supply that came onto the market in that financial year across the nation on average. Now, different parts of the country would have different challenges with supply, but on a nationwide basis, seven in 10 houses were taken up by new international students.

And again, this gets back to the issue, which is a lack of planning. The government had a migration review that they released a number of months ago, yet it did not contemplate these demand pressures being put into our housing market. As we know, a lot of young Australians are struggling to buy their first home and they’re also now under a lot of pressure with rental costs. And this is also occurring in the middle of a broader cost of living challenge. And so a lot of families and young people are really feeling the pinch.

Nick Rheinberger:

You say that from 2025 to 2028, it’s expected that international students will take up approximately one quarter of Australia’s net new housing supply. Are they going into new houses or are you just talking about a percentage of the accommodation that we’re building?

Daniel Wild:

It’s a percentage of the accommodation that we’re building. And as we acknowledge, universities do provide some accommodation, but it’s not nearly enough to house the students they’re bringing in. And so there’s a real issue here with what you might call a moral hazard problem, they refer to it in economics. Which is basically they’re getting the benefits, so the benefits they get from the revenue from students go to the universities, but the costs are often pushed onto the public and onto taxpayers and governments who need to try and increase infrastructure. So there’s a public cost and a private benefit. And what we’re arguing is that universities need to do more to ensure that students who are coming here have accommodation that’s already ready for them so they’re not putting more pressure onto the market, and that universities should be paying the price of this accommodation.

Nick Rheinberger:

Are you saying it’s down to universities to look at how many students they’re attracting and make sure there is accommodation for them?

Daniel Wild:

There’s two. There’s the universities, and they have a primary role to play to make sure that they’re accommodating students. And secondly, the federal government needs to make sure there’s better planning in place. As I mentioned, the international student intake, which is now at a record high on an annual basis, is in the broader context of a dramatic expansion to our migration. Yet there’s been no planning for the schools and the roads and the hospitals and the houses that would be needed to accommodate the migration surge. Now, of course, migration has and will continue to play a very important role to our economic and social life, but a lot of Australians are finding challenges when it comes to cost of living, to getting a place in childcare, getting a place at the local school, finding a suitable house. And there’s just been a complete and total lack of planning on this matter.

Nick Rheinberger:

That sounds like a state government responsibility really, isn’t it? If the university doesn’t have enough accommodation, isn’t that part of coordinating with the state that you find yourself in, if you’re the University of Wollongong, to make sure that New South Wales has enough accommodation?

Daniel Wild:

Well, I think it’s both. As you rightly identified, the state governments have a lot of policy levers they could pull when it comes to the supply of housing. We know that there’s challenges around red tape and taxes and land release that contribute to the supply problem, but it’s the federal government that’s responsible for the demand. And the immediate issue we have, the reason we have a supply shortage at the moment is because we have too much demand that’s come in too soon. So it is at both levels of government and they both need to be working together. Like I mentioned, there was a migration review undertaken a few months ago and it was disappointing that it didn’t look at the interaction between state and federal government and how this is going to be planned for.

Nick Rheinberger:

Yeah. So have we let too many international students into the country? Is that one of your conclusions?

Daniel Wild:

Based on the current infrastructure settings, yes, we have. And again, I want to be clear about this. The blame is not with the international students, because they’re playing by the rules. They want to do the right thing for themselves and their future. And we’ve got some very good universities, so it’s no wonder why so many people want to come to Australia. The problem is not with them. The problem is with government who hasn’t planned for this. And the problem is with universities who are getting a significant private gain through massive revenues, but they’re pushing a lot of costs onto taxpayers and the public.

Nick Rheinberger:

Yeah, it’d be hard to resist the pressure from the universities who missed out on so many international students for a couple of years to try and claw some of that back. Right?

Daniel Wild:

Well, that’s right. But the issue here is a lot of universities have become increasingly reliant upon international students for their revenue. Now, I’m not saying this is every university, but a number of them have a significant share of their revenue that comes from international students. And look, that’s their own commercial decision. They can make that, but they’re also exposing themselves to the risks associated with that. And so there is a broader question. Well, if you have such a high reliance on international students, then perhaps the risk associated with that is not worth it, and they should be pivoting towards making the domestic market more attractive for Australian students who are here.

Nick Rheinberger:

All right. Daniel Wild, good to talk to you. Thank you.

Daniel Wild:

My pleasure. Thank you.

Nick Rheinberger:

The Deputy Executive Director of the Institute of Public Affairs here at ABC Illawarra.

This transcript with Daniel Wild talking on ABC Illawara from 4 September 2023 has been edited for clarity.