- Throughout the 20th century, Australia had rent control measures in place during several crises, such as WWII
- Rent Assistance is inadequate for affordable housing, says Dr Chris Martin of UNSW
- Social housing has failed to bolster affordable housing, leading to calls for some effective form of rent control
Previously, The Property Tribune’s Sebastian Lofts-Len has spoken about the dangers of rent control, which has been highlighted by failure in Berlin.
A proposed Tasmanian rent control bill was voted down by both major political parties in March last year too.
Notably, these articles were published early last year. While house prices were booming this time, there hadn’t been strong signals of the inflation pressures Australians are now facing.
On top of this, there were some temporary rent freezes across Australia that had been introduced following the first economic shock caused by the pandemic.
CoreLogic and SQM data both show share rises in rents across the capital cities and regions. Vacancy rates are also at lows – not uncommon to be below 1% in some areas, with the national vacancy rate currently sitting at 1%.
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In light of ever-increasing rents, the regulation of rent prices in Australia has once again been floated.
Although landlords have benefitted from the sharp rises in rents, low-income households are in particular filling the pinch, said Dr Chris Martin, a Senior Research Fellow at the University of New South Wales City Futures Research Centre.
“If there’s a supply response, it just can’t come fast enough,” Dr Martin said.
“In the meantime, it’s causing pain to households, many of whom are already in rental stress, and it can displace them from the communities they want to be in or have been in for a long time.”
Dr Chris Martin, UNSW Sydney City Futures Research Centre
Currently, there are tenancy laws in place that regulate the frequency of rent increases. Usually, it is no more than once every six or 12 months. A rent increase can also be challenged by tenants, if shown to be excessive compared to comparable properties in the local market.
Dr Martin believes this is a “very light” regulation of rents during tenancies.
“..there’s no regulation of rents at the beginning of tenancies at all. It’s just whatever the market will bear,” he said.
He believes that the use of rent regulation, such as capping the amounts rents can increase during tenancies, can relieve pressure on renters pockets, and keep them in their homes.
“Proper rent control hasn’t been discussed for a while in Australia, but it’s something that should be on the research and policy agenda,” Dr Martin says.
Arguments for rent control in Australia
Dr Martin noted that housing is often treated as a way to grow wealth, as opposed to a basic necessity. He believes there is no reason housing shouldn’t be regulated, as per other essential goods and services.
“There should be regulation of rents in principle because everyone needs housing, and the consequences of not having it are dire,” he said.
This move, he argued, would enable renters to stay in homes for longer due to affordable pricing, while also preventing landlords from benefitting from windfall gains at the tenant’s expense.
“Rents are increasing but not the quality or output of the housing service. This is the problem with property investment: it promises that you can make a lot of money doing absolutely nothing,” Dr Martin said.
“A landlord just happens to have acquired property in a place that has become more desirable. In almost all cases, the dwelling quality is declining while they make more gains.”
With rent regulation absent, Rent Assistance, which is paid through the Australian social security system, is the principal policy intervention for housing affordability in Australia. Dr Martin said this isn’t effective enough.
“There are about a quarter of a million low-income renters who don’t receive Rent Assistance at all and are paying unaffordable rents,” he said.
“And for more than a third of people who do receive it, even after accounting for all their Rent Assistance going towards the rent, they’re still in rental stress.”
An alternative to private rentals is social housing. However, this has stagnated over the past few decades.
“While social housing does provide more affordable rents, there’s not nearly enough to meet the needs of everyone who needs it,” Dr Martin says.
How to make rent control work in Australia?
While the idea of rent control in Australia may sound innovative, some states, such as New South Wales, have a long history of such measures during crises.
Rents were regulated during the First World War as part of the Fair Rents Act. A similar control was also reintroduced during the Great Depression. The Second World War also saw regulations, with rents capped at the 1939 levels during the conflict.
“To this day, there are still a handful of properties that would be covered by post-war rent control regulations in New South Wales that have kept them well below the market level,” Dr Martin noted.
In terms of overseas controls, most Canadian provinces have guidelines that stipulate the minimum percentage increase in rent that can be changed during the next year. Ireland has location-specific rent regulations where rents are capped in ‘rent pressure zones’ at 2% per annum. Some properties in the United States have similar benchmarks too.
Dr Marin cited capping rents in line with the Consumer Price Index – the main measurement of inflation – as one way to implement rent control.
The rationale behind such a measure would mean minting the real value of the landlord’s return on their investment. As an interim measure, however, a temporary freeze on rent increases could be implemented to alleviate pressure on renters.
“During the early days of the COVID-19 pandemic, some states introduced six-month rent freezes, which helped to keep households in their homes,” Dr Martin said.
“We should be looking around the world to see how other countries have successfully implemented rent control for the long term, without being too prescriptive now about any particular method.”
