Is rent control the right way to go?

Real estate bodies have labeled calls for rent freezes and caps on reality increases, fearing it could worsen the country’s rent shortage.

Over the past week, the Greens have called on the federal government to introduce a two-year nationwide rent freeze, followed by continued rent caps and an end to no-cause evictions.

Under the plan, rents would be capped at two percent increases every two years.

Greens housing and homelessness spokesman Max Chandler-Mather said that based on wages and rents at the start of the pandemic in 2020, this would see wages catch up with rents by 2029 .

“An emergency rent freeze will give wages and incomes time to catch up with rents, which over the past 12 months have risen seven times faster than wages in capital cities,” he said.

“With more and more people renting long-term, we desperately need legislative protections against unfair and arbitrary evictions and skyrocketing rents.

“As the Everybody’s Home report detailed yesterday, the rent affordability crisis is destroying regional communities and impacting the wider economy. A rent freeze will help these communities rebuild, address skills shortages and protect livelihoods.

“If the government is serious about cost-of-living relief, if it’s serious about affordable housing, then freezing rent increases is a no-brainer.”

The REIA takes

The chairman of the Australian Institute of Real Estate, Hayden Groves, told that while the Greens’ plan was well-intentioned, it would do nothing to address Australia’s long-term housing shortage. .

“The real estate industry, particularly property managers and owners, has implemented the moratorium on tenant evictions for the past two years of the COVID-19 pandemic,” Groves said.

“At the same time, rents have risen in areas where there is a chronic shortage of supply and unless this is resolved the situation will get worse.”

Groves said governments at both state and federal levels need to focus on encouraging supply and investment in private property markets.

Rent regulation could ease the cost of living

Senior researcher from the UNSW City Futures Research Center Dr Chris Martin said the increased use of rent regulation, including capping the amounts that rents can increase during tenancies, could help relieve pressure on tenants. tenants’ pockets and keep them in their homes.

“There should be rent regulation in principle because everyone needs a home, and the consequences of not having one are dire,” Dr Martin said.

“Rent control has not been discussed for some time in Australia, but it is something that should be on the research and policy agenda.

“We currently have very light rent regulation during tenancies, in terms of the frequency of increases and ‘excessive market relative’ provisions, and there is no rent regulation at the start of tenancies.

“It’s just what the market will bear.”

Dr Martin said housing was often treated as a way to increase wealth rather than a basic need.

“Rents are going up, but not the quality or output of the housing service,” he said.

“That’s the problem with real estate investing: it promises to make a lot of money by doing absolutely nothing.

“A landlord happened to acquire a property in a location that has become more desirable.

“In almost all cases, the quality of housing declines as they make more gains.”

According to Dr Martin, new supply is not likely to catch up with demand fast enough for many struggling tenants.

“If there’s a supply response, it just can’t come fast enough,” he said.

“In the meantime, it’s causing pain for households, many of which are already under rental stress, and it may displace them from communities they want to be in or have been in for a long time.”

Property data sources such as CoreLogic show that rents in Australia are rising in capital cities and regions, while vacancy rates are also at record highs – below 1% in some areas – as housing demand rentals continues to drive up prices.

Currently, tenancy laws regulate the frequency of rent increases – generally no more than once every six or 12 months, depending on the jurisdiction.

Tenants can also challenge a rent increase as being excessive in relation to the general level of market rents for comparable premises.

What the REIQ says

Real Estate Institute of Queensland (REIQ) chief executive Antonia Mercorella has said the Greens’ rent freeze bill disrespects mum and dad investors, who are primarily responsible for housing about 36 % of Queensland rental population.

She wondered how it could be deemed fair to freeze rents for tenants when the costs of acquiring and owning property continued to rise.

“The REIQ recognizes that rents have increased significantly over the past two years due to extraordinary economic conditions, but the Greens have conveniently ignored the realities of the past 10 years for landlords – who have seen rents remain relatively stable,” said said Ms. Mercorella.

Queensland Housing Minister Leeanne Enoch told Parliament earlier this week that ‘what tenants don’t need at the moment…is poorly thought out thanks to legislation from the Greens political party which could lead to further reduction in the supply of housing on the private rental market.

Ms Mercorella said the bill could also incite a greater “us and them” mentality, which has emerged due to the pressures of the current rental crisis.

“It’s a dangerous and unproductive game to pit tenants and landlords against each other, and we’d much rather see both sides encouraged to put themselves in the other’s shoes to better appreciate their respective positions – often a conversation approached in a positive way is a productive activity,” she said.

Rent assistance does not help enough

Dr Martin said that in the absence of rent regulation, Australia had rental assistance paid through the social security system, but it was not effective enough as many households in the need are not eligible and the amount is insufficient to make market level rents affordable for many.

“There are about a quarter of a million low-income tenants who don’t receive any rent assistance and pay unaffordable rent,” he said.

“And for more than a third of the people who receive it, even after accounting for all their rental assistance intended for rent, they are still in a situation of rental stress.”

The other alternative to private rental is the social housing sector, however, the construction of new social housing has been stagnating for decades, and the little stock available is not enough to meet demand.

“Although social housing offers more affordable rents, there is not enough to meet the needs of everyone who needs it,” said Dr Martin.

Rent regulation could be supportive of housing development, Dr Martin said, as it encourages landlords to increase the intensity of land use, thereby increasing the availability of rental housing.

“If you own land and rents are properly regulated, the way to increase your rental income would be to develop it further,” he said.

“Thus, rent regulation could be consistent or even encourage the development of rental housing.”

James V. Hayes