Beyond the visa cap: Why restricting international students won't solve Australia's housing crisis

The Government’s proposed student caps will not fix the problems in the rental market

The Australian government will cut international student numbers by capping new enrolments at 270,000 in 2025. This represents a major shift for Australia, which currently ranks as the world's second-largest destination for international students.

The government has indicated it is doing this in the hope that it will help tackle rising rents nationwide. It also aims to address claims that individuals are misusing student visas as a backdoor to immigration. This is despite only 28% of international students using their post-study work rights, and only 16% becoming permanent residents. The caps will affect both universities and vocational education providers.

Early announcements noted that universities would be able to enrol more students above their caps provided they “establish additional, new supply of purpose-built student accommodation to benefit both international and domestic students”. More recent announcements appear to have delayed this mechanism to 2026.

However, these caps will have far-reaching consequences across the economy without achieving their stated aim (see next section); the tertiary education sector calls them “short-sighted”, and it's clear they could undermine Australia’s economy and global competitiveness in the education sector.

International students make up just 6% of Australia’s renters with significant variation by state

International students have a small presence in Australia’s general private rental market. Based on the most recent data available, the national average sits at just 6% of all renters. This excludes students living in private PBSA.

Victoria has the highest share at 7% of renters, followed by NSW at 6%. These states host Australia's largest international student populations and major universities. Victoria's high share comes despite having the most private purpose-built student beds (26,000), showing strong student demand in the state. With the best available PBSA stock levels, Victoria could see the percentage of renters in the general market lowered if more beds were taken up in existing PBSA capacity.

WA has an under-supply of PBSA beds, meaning the student to bed ratio is higher. This is reflected in the higher percentage of students living in the private rental market than in comparable cities, like Adelaide.

Queensland and South Australia both sit at 5% of renters. Queensland's lower share reflects its 16,000 private purpose-built student beds, while South Australia benefits from recent development of student housing during the pandemic.

39% of international students live outside the general rental market, including a large portion in private PBSA

Two in five international students don't use the general rental market for housing. This significantly reduces pressure on local rental markets across Australia. Of the 725,000 international students in Australia, only 440,000 seek housing in the general rental market.

39% of international students live in specialised accommodation. This includes 184,000 students (25%) in university accommodation and other arrangements, and 101,000 students (14%) who live in private purpose-built student accommodation (PBSA).

Private PBSA plays a vital role in easing rental market pressure. It houses 101,000 students who would otherwise need private rentals.

This private purpose-built housing creates dedicated student communities while freeing up rental homes for local families and workers. Major private PBSA providers continue to expand across Australian cities, with several new developments under construction or in planning.

The growth of private PBSA offers a sustainable solution to student housing needs. As more student housing gets built, it creates additional options for students to live outside the general rental market. This expansion of purpose-built accommodation helps balance the needs of international students with those of the broader community.

Renters in metropolitan areas will save less than 1% per week in rent under student visa caps

Detailed modelling shows the international student cap will have
minimal impact on the rental market. Weekly rents will fall by just $5 - less than the cost of a cup of coffee.

This 1% reduction in average metropolitan rents comes at a significant economic cost. Savings will be greatest in inner city and CBD locations that surround major universities, rather than in suburban areas popular with families and retirees. The policy will reduce GDP by $4.1 billion and cost 22,000 jobs across the economy.

Our analysis suggests other factors drive rental prices far more than international student numbers. These include interest rates, housing supply, population growth and changing household preferences.

Targeting international students will not meaningfully address
rental affordability. The small rent reduction also needs to be weighed against lost economic benefits. International students contribute to Australia's economy through spending in retail, hospitality and tourism. They create jobs and boost local businesses across the country.

The caps will cost jobs and strain the economy

International education is Australia’s 4th largest export, contributing $63 billion a year to the economy and supporting 335,000 jobs

International student caps will reduce Australia’s GDP by over $4.1 billion, and cost 22,000 jobs across the Australian economy.

Universities will face significant financial strain as they lose revenue from international students, reducing their ability to invest

The new international student caps will reduce university revenue by $600 million annually. This will impact universities' capacity to invest in student housing and infrastructure development.

International student revenue helps universities partner with private sector developers and operators to bring new accommodation options to market, as well as upgrading infrastructure and facilities to ensure the ongoing strength of our institutions. This funding supports new housing projects and helps universities partner effectively with private investors in purpose-built student accommodation (PBSA).

Universities use international student fees to create attractive conditions for housing co-investment. A reduction in revenue will make it harder for universities to partner with the private sector to develop new accommodation facilities in partnerships or through joint-ventures.

By supporting the provision and utilisation of private PBSA, we can grow rather than limit the benefits from international education

Economic benefits

Australian universities generate significant economic value

• Education is Australia's 4th largest export, contributing $63 billion annually in direct and indirect GDP and supporting 335,000 jobs.

• International students in private PBSA spend an average of $4,000 per month in our CBDs.

• International students and their families and friends spend more than other tourists, comprising two-thirds of all tourism export revenue.

Sociocultural benefits

• Australian universities drive social inclusion and foster a strong national identity

• International education enriches Australian culture through diverse perspectives and cross-cultural exchange.

• International alumni become lifelong ambassadors for Australia in their home countries.

Research benefits

• Australian universities consistently rank among global leaders in research output

• Higher education institutions spent nearly $14 billion on R&D in 2022.

• 7% of university research funding is supported by the fees paid by international students.

• International research partnerships lead to breakthrough innovations.

Geopolitical benefits

• Universities are one of Australia’s most effective soft power assets

• Australian universities rank highly, with 9 in the top 100 globally.

• We are a market leader in educating international students, with more than 2.5 million studying in Australia in the past 50 years.

• These strategic relationships deliver sustained diplomatic advantages across trade, security, and other strategic imperatives.

Read and download the full report.