Rent caps work in many countries around the world and will not lead to a decrease in supply.
Indeed, Australia has had rent caps in the past, and it has not had any drastic effect on availability.
Rent caps already exist in the ACT, which has been put forward by the Tenant’s Union of NSW as a model other jurisdictions could follow.
Under the ACT system, landlords cannot increase rents above 10 per cent of the Consumer Price Index (CPI), without giving a good reason why.
Queensland are currently considering a rent cap, and tenants unions around Australia have called for other states to follow their lead.
Under the Queensland system, rent would only go up once a year instead of the current system where it can go up twice a year.
The proposed Queensland system is not tied to CPI.
Homelessness has gone up 22 per cent in Queensland in the past five years, almost three times the national average, and perhaps Queensland needs to look at more drastic measures to curb this.
In addition, some landlords have raised rents in Queensland by up to $430 a week more than they were charging just a year ago.
This has obviously been a large part of the reason for the huge jump in homelessness figures in the state.
The Grattan Institute said that interfering in the market by putting a cap on rents was bad policy and would make the “race for space even worse” by discouraging investment in rental housing and reducing supply.
The Grattan Institute, and others opposed to rent caps, have not put forward any data to support their claims, and have not put forward any alternatives to capping rental prices or increases.
They simply say that rent caps will cause investors to stop investing in rental properties, which will lead to a reduction in supply of rental properties and an increase in rents.
Their arguments are not supported by rent caps in other countries, and appear to be part of a fear campaign.
In Germany, where more than half of the households rent, price control policies have existed since the 1920s.
The current system, known as “the rent price brake”, was introduced in 2015 and stipulates that the rent for a property cannot be more than 10 per cent higher than the local market rate, which is set out in an index.
Other countries such as Ireland, Scotland and Spain cap rent increases in certain locations where there are tight markets.
In Canada most provinces set the annual percentage that rents can be increased that year.
In New York, a widespread rent control policy was introduced in 1943 in response to a housing shortage during World War II, and there are still some dwellings tied to historical rent prices.
None of these have resulted in a decrease in availability of rental properties.
Nor did Australia’s evictions moratorium introduced in the early stages of the COVID pandemic, which actually saw rental availability increase.
There were also rent controls in Australia during World War II, applied on a national basis.
They continued for a few years afterwards, and proved quite successful.
No state or territory now regulates rents for affordability.
While there are limits on the frequency of increases, rents can always rise in line with market prices.
It is clear that something needs to be done about rental prices in Australia, as they are out of control.
There are many index measures that could be introduced to cap rental increases: affordability, average wage, CPI, interest rate rises or value of property. Perhaps even a combination of more than one of these indices could be considered.
Building more social housing will increase availability for renters, and this will also push rent prices down.
Also, the government could look at introducing rental assistance payments for low income earners, and increasing rental assistance payments for Centrelink recipients.
The current Centrelink rental assistance payments are grossly inadequate, and have barely risen in the past twenty years, most certainly not in line with CPI or rental increases.
Federal, state and territory governments need to look for a solution to spiralling rental prices, and they need to do it fast.
– Craig Hill
Brisbane
