- Greens Party recently introduced rent control bill for Tasmania
- Bill was voted down by both Labor and the Liberals
- Despite the best intentions of politicians, unintended consequences exist
In an article written over a month ago, the unintended consequences of rent control were explored.
Compared to the United States, Australia has had no widespread outcry for rent control. However, the Residential Tenancies (COVID-19 Response) Act effectively introduced rent control temporarily, banning rent increases which ended this month.
Despite being intended to only be a short-term solution to rental housing affordability, the article predicted that if rental stress continued to become a more prevalent issue in major cities, rent control is likely to gain popularity with the public and particular political parties as a longer-term policy option.
This prediction turned out to be right, with the Greens party clamouring for rent control in Tasmania this month.
“The Real Estate Institute of Australia has stated Tasmania’s rental affordability is now the worst in the nation. Tenants here spend on average 29.5 percent of their income on rent – well above the national average.
“It is only a sliver below the widely accepted measure for housing stress, which is 30%. The numbers all point to the need for rent controls.”
Cassy O’Connor, Tasmania’s Greens MP
The party recently looked to introduce the Residential Tenancy (Rent Control) Amendment Bill 2021 (changes the 1997 bill), which puts stronger limitations on rent increases modelled on the ACT’s (despite the fact that rental housing affordability has declined in the ACT according to a 2020 REIA report).
However, this move was voted down yesterday by Labor and the Liberals in parliament.
The Greens did not mince their words and were quick to call out the two major parties for their unanimous vote opposing their latest bill.
“This was to be expected from the Liberals – a party with a long track record of prioritising profits for the propertied class over rights for those who are not. We were, however, shocked that Labor lined up alongside them,” said Ms O’Connor.
Unintended consequences
Despite the Greens party’s best intentions to make rental housing more affordable, good intentions do not necessarily translate to good outcomes. And unfortunately, history has shown rent control to be rife with unintended consequences, causing far more harm than good.
The effects of rent control are well studied and documented.
The immediate unintended consequence is a shortage of rental accommodation, which creates long waiting lists. While rent control may be good for those who already occupy units, this comes at the expense of everybody else on the outside, who must now compete for the limited remaining stock.
Rent controls can also discourage developers from building more low-rent housing, causing the shortage of rental apartments to become even more severe. This further damages housing affordability, hurting those people which such policy originally intended to help.
Despite providing short-term relief to those able to secure a rent-controlled apartment, in the long-term, it can disincentivise residential construction, decrease affordability, fuel housing deterioration, and create a misallocation between tenants and rental units.
The Property Tribune communicated with Steven Rowley, Professor of Property in the School of Economics, Finance, and Property at Curtin University.
He affirmed these established dangers of rent control, saying that such policies do distort markets, particularly if applying only to certain areas.
“Australia is heavily reliant on mum and dad investors who want to retain some flexibility over their asset. Rent controls reduce such flexibility and may have a negative impact on the supply of rental stock making rental housing less available.
“Additionally, there is some hope there will be more institutional investment in rental housing going forward, and rent controls could be a disincentive to investment.”
Steven Rowley, Professor of Property at Curtin University
Instead of rent control, Professor Rowley suggested the government should ensure an appropriate supply of affordable social housing.
“An expansion of rental housing supply should be the policy setting which controls rent levels. Rental tenancy reform should deliver options that offer some short-term protection to tenants who cannot afford large rent increases, but controlling rents long term is not a sensible policy option outside social housing.”
