A policy that caps residential rents was always going to get headlines for politicians.
Any suggestion to keep the cost-of-living down - now, will sound like a good idea in the current environment.
But according to the REIV rent freezes and caps are a naive view of the wider economy. And I agree.
Rising rents are a symptom of a problem, not the problem itself.
The problem is lack of supply.
Rent regulations only make the problem worse by driving away investment and exacerbating the lack of supply, making it almost impossible for people to find a rental.
With Victorian vacancy rates already under 2%, any reduction in supply will make matters worse for renters.
That's why the Real Estate Institute of Victoria, has launched a major advertising campaign attacking the proposed residential rental cap, outlining that the policy’s introduction will increase homelessness.
The Victorian-wide print, digital, editorial and social media campaign, backed by industry, states that while a rent freeze might save renters some money in the short term, it could actually cost them a place to live.
Citing failed attempts of introducing rent caps in Stockholm, New York, Berlin and San Francisco, the REIV suggests that a better approach would be to create policy that incentivises increased housing supply.
“Rent freezes are a naïve view of the wider economy,” the advertisement states.
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“Rising rents are a symptom of a problem, not the problem itself. The problem is lack of supply.”
REIV CEO Quentin Kilian said that with Victorian vacancy rates already under two per cent, any reduction in supply will make matters worse for renters.
“Thousands of rental providers are selling up their investment properties to get out of a market that is far too regulated, taxed and tinkered with, 90% of REIV Members have already reported an increase in sales appraisals from their landlord clients” Mr Kilian said.
“To add another shortsighted, ill-considered condition, such as a rent cap, is just wreckless – it will without doubt increase homelessness as more investors leave the market and could possibly harbour a black market rental sector.”
Historically low vacancy rates.
realestate.com.au data for metro Melbourne (July 2023) shows new rental listings are down nine per cent year on year, the lowest since 2010.
The REIV has outlined other concerns, including:
- housing quality being compromised as rental providers are unable to spend on maintenance while keeping rental income frozen.
- the rent cap policy is not means tested, overseas experience shows that this can lead to current renters refusing to move even if they can afford to, making the property unavailable to someone in need; and
- likelihood of the emergence of a black market of sub-renting, where tenants may sub-let at soaring costs, as rental caps only apply to property owners and are not applicable to current tenants;
Mr Kilian said that following the Victorian Government’s failure to engage industry, his organisation had to act.
“As the the peak body of a sector that employs more than 15,000 people who in turn support millions of renters and hundreds of thousands of mum-and-dad investors, we are flabbergasted by the consideration being given to such destructive policy.
We were compelled to take affirmative action and inform Victorians of the disastrous impacts of such a decision.
“We hope the campaign helps educate all property particpants and ensures that all sides of politics listen to experts in the field.
Maybe then Victoria will see some thought-through policy that has a positive impact on housing affordability.”
