Water usage rates suggest Melbourne is awash with unlisted vacant properties

Water usage figures suggest more than 90,000 homes in Melbourne are possibly unoccupied, according to research by lobbying groups Earthsharing Australia and Prosper.

Casting doubt on regularly reported vacancy rates, Deakin researcher Phillip Soos used City West Water and Yarra Valley Water figures to look for homes that consume less than 50 litres of water per day, saying these are all most likely unoccupied. The average water use by households is 350 litres per day, with a single toilet flush using up to 12 litres of water.

Soos says the homes his report found are not identified by REIV's rental vacancy rate and says the listing of these homes on the rental market would alleviate rental problems in the city.

He says 5.9% of homes he looked at were vacant and says the bulk of these are speculative homes, which rely on capital gains rather than rental incomes.

"Landlords have an incentive to withhold properties from the rental market, as they profit substantially from realising capital gains upon sale rather than from long-term rental income," Soos writes.

Essendon North has the highest vacancy rate, followed by Docklands and Williams Landing.

"Surprisingly, many of these suburbs are in inner and mid-rim locations, while some are out on the fringes. Given the desirability of close proximity to the city, inner suburbs would be expected to have the least potential vacancies," he writes.

He says many investors are holding onto properties without leasing them out – contributing to the rental shortage faced in Melbourne.

"Investors are faced with a wide array of costs associated with maintaining tenants in rental properties to the point that increases in the capital value of property has become the primary source of profit," he writes.

"The rapid run-up in housing prices has provided a lucrative torrent of windfall gains via capital appreciation for investors while rents have not kept pace.

"Faced with this set of circumstances, investors may conclude that renting properties make for dubious investments when factoring in the wide array of costs associated, including time and effort."

Soos recommends government provide a substantial disincentive to withhold properties from the rental market by increasing land value tax.

He says this will lower land values as it cannot be passed onto tenants and it would act as a holding cost, requiring a rental income to cover it.

Soos also recommends the government investigate why long-term vacant properties are held off the rental market and publish the results of its inquiry.

"Until the government conducts an investigation into the causes of long-term vacancies, the benefits of having vacant property used for rental will go unmet, with tenants losing out."

Earthsharing spokesperson Kath Fitzgerald says the figures are "jaw-dropping" and that property speculators "create a media atmosphere that there is nowhere to live".

"Australia has one of the most generous residential property taxation regimes in the world. Capital appreciation has dwarfed rental income for years. Withholding properties from the market is a rational investor strategy."

"The National Housing Supply Council claims a 228,000 housing shortage nationwide. We say there is nearly half that locked up here in Melbourne."

Earthsharing Australia is a Melbourne-based organisation that believes poverty and social disorder stem from the misuse of land.

Prosper Australia is an NGO that aims to distribute wealth produced from land to the entire community.