Firstly, the Land Tax discourages property owners from investing in rental properties. The tax is levied based on the unimproved value of the land, regardless of whether the property generates rental income or not ie vacant land. As a result, property owners are burdened with additional financial obligations, reducing their incentive and ability to provide rental housing. This has led to a limited supply of available rental properties, driving up rental prices and leaving many individuals and families struggling to secure affordable housing.

Moreover, Land Tax has also impacted small-scale landlords who rely on rental income to cover mortgage payments or supplement their retirement funds. With rising Land Tax rates, many landlords find it increasingly difficult to pay their costs profit let alone break even on their rental properties. Consequently, some landlords are forced to sell their properties or exit the rental market altogether, further diminishing the availability of rental housing. A huge problem given that mum and dad investors provide approx. 87% of the state’s residential rentals.

Additionally, the Land Tax indirectly affects tenants by increasing the cost of living. Landlords, burdened with higher tax liabilities, are forced to increase rents. This places an additional strain on tenants' budgets, making it even more challenging to afford suitable accommodation.

To address the rental crisis, it is crucial for the Victorian state government to re-evaluate the impact of Land Tax as a major cause of the current rental crisis and consider alternative measures that encourage investment in rental properties without compromising affordability. By striking a balance between taxation and incentivizing rental property ownership, the government can help alleviate the rental crisis and provide relief to tenants and landlords alike.