Whenever REIWA expresses concern about investors selling their rental properties, a very common response is ‘the property doesn’t disappear’. That’s true – it doesn’t, but if it leaves the rental market, one rental home vanishes.

A common response to that is ‘it will be bought by the tenant’. That may be the ideal outcome, but it’s not the likely one.

To understand why, you need to understand why people rent and what might happen if the property they are renting is sold.

Some people rent while they are building a new home. If the owner sells that property, they will need to find another home to rent, so they won’t be the buyer.

The tenant may be a teacher, a nurse or a police officer working in a regional area. They may not intend to stay there long enough to make buying a home financially worthwhile, so they rent. They won’t buy if the home is sold and they will need to find another rental.

Sometimes people rent because they want to live in an area where they can’t afford to buy. It may offer a great lifestyle, or be closer to their place of employment or in a particular school catchment area. They are very unlikely to buy if the home they are renting is sold.

Then there is the financial aspect of renting. Many tenants are simply not in a position to buy a home if the one they are renting is sold. They may not have been able to save a deposit while paying rent. They may not be able to service a mortgage at that point in their lives. If the home they are renting is sold, they will need to find somewhere else to rent.

Unfortunately, for some tenants, losing a rental isn’t an inconvenience but a crisis. There are older Australians who reach retirement while still renting. They’re living on a pension with no capacity to borrow and no deposit behind them. Single mature women often find themselves renting after a separation or the death of a partner, having been left with a settlement or a superannuation balance that is not going to help them buy a house. There are people on a Disability Support Pension or a Carer Payment.

None of these tenants will buy the home they are living in if it sells. They will join the queue for what’s left, competing against applicants with higher incomes and stronger rental histories. Every property which leaves the rental pool makes that queue longer and the rent higher, and it is the people with the least ability to move who feel it first.