Will a cap on international students make housing more affordable?

The Federal Government is proposing a cap on international students in 2025, with legislation recently put forth to limit enrolments to 270,000. This would comprise 145,000 university students and 95,000 vocational education training (VET) placements. Many people in the tertiary education sector argue that this is an immigration policy designed to curb new arrivals amid a housing crisis.

The Federal Government has been criticised for a record surge in immigration following the pandemic, which has placed additional pressure on the rental market. According to the Australian Bureau of Statistics, 737,000 migrants arrived in Australia in FY23, up from 427,000 in FY22. Among them were 554,000 people on temporary visas, 283,000 of which were international students.

REA economist Anne Flaherty said the post-pandemic surge in overseas students in 2023 and 2024 coincided with building sector constraints that exacerbated the housing undersupply and contributed to rapidly rising rents and record-low vacancy rates over the past two years.

“There is no question that high levels of migration have been a key driver of the rental crisis,” Ms Flaherty said. “Rent growth from surging student numbers can be seen in “student suburbs”. Examples include Clayton, home to Australia’s largest university Monash, which saw unit rents up 20% over the 12 months ending July, and Glebe, near the University of Sydney which saw rents up 17%.”

Ms Flaherty said the new cap in 2025 would have little immediate impact on the market, given the students here now will stay for several more years while they complete their studies.

The Federal Government wants universities to provide more purpose-built student accommodation (PBSA) to free up homes in the strained private rental market. CBRE estimates that only 6 percent of students currently have the opportunity to live on-campus or in PBSA close to their universities.

In a new report on student accommodation, CBRE estimates there are 223,000 overseas students in Sydney and 334,000 in Melbourne. It estimates an unmet demand for 25,000 PBSA beds in the University of Sydney and UTS catchment alone and 15,000 beds in the University of Melbourne and RMIT catchment.

The Student Accommodation Council says there are 7,700 new PBSA beds in the pipeline for 2026 but 84,000 are needed. The council’s executive director, Torie Brown, said governments need to incentivise foreign investors to build more student housing. “Ridiculously high state taxes on international investors who build PBSA continue to be a handbrake on new development,” she said. “International students have been unfairly blamed for the rental crisis … There are more domestic students in rental homes than international – yet no one is suggesting we ban share-houses for local university students.”