Stage 1 estimates the internal rates of return actually being achieved by landlords in the prevailing policy environment using the AHURI-3M model. These estimates are based on data from the wealth module in wave 2 of the Household, Income and Labour Dynamics in Australia (HILDA) survey conducted in 2002, supplemented by imputed estimates of the costs of owning and operating rental housing investments. A policy simulation is conducted to estimate the impacts of a policy proposal designed to improve landlord returns and enhance rental housing affordability. The policy proposal is the provision of an upfront grant that will increase landlords’ calculated internal rates of return by one percentage point.