Rental freeze showdown is an expensive distraction

The fierce debate over a rental freeze and its possible implementation will have plenty of unintended consequences.

There’s a lot at stake in the rental freeze showdown which is a distraction from the key issues of planning, zoning and tax reform when it comes to more housing supply.

The private rental sector directly affects about 40 per cent of Australian households. There’s the 26 per cent who live in private rental housing as tenants, and there’s the 14 per cent who own as landlords.

Rental regulations have always been the responsibility of state and territory governments. The federal government has no constitutional role, but can convene the national cabinet to discuss solutions.

The federal Greens claim Labor has the power to fix the many current housing market problems by in part freezing rent increases for two years and capping future rental increases to two per cent.

There’s a lot at stake in the rental freeze showdown. Picture: NCA NewsWire / Luis Ascui

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Wise state leaders, including Chris Minns in NSW, have advised they don’t see freezing rents as part of any solution. But Victorian premier Daniel Andrews is reportedly on the brink after confirming recently his government is working on a housing supply package to be released next month.

He’s promising “one of the biggest shake-ups”. It’s possible landlords will only be able to raise the rent once every two years, and possibly with a cap on any increase.

Of course his government changed the law so only one rent increase a year has been possible since 2019.

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The plan could also include a tax on short-term accommodation bookings.

The likelihood is once one government takes a decision given the current hotbed of concern, others will follow.

A recent study found the states and territories currently only “lightly regulated rents”.

No state regulates the amount of rent a landlord may seek when first letting a property, nor limits the size of an increase, although a tenant may dispute a notified rent increase.

Rental vacancies are at near record low across much of Australia. Picture: NCA NewsWire / Luis Ascui

The ACT is the only jurisdiction to include an objective guideline in its excessive rent increase provisions kicking in where a rent increase would be more than 110 per cent of the increase in the rent component of the ACT Consumer Price Index. The landlord then needs to apply to the ACT Civil & Administrative Tribunal.

Research from the USA in 2018 suggests rent control that keeps rents below market rates has several consequences that are relevant to the Australian situation, most notably that it can reduce the overall number of rental properties as landlords sell out mostly to owner occupants.

It also leads to disrepair of the rental housing stock as landlords cease to invest in maintenance.

Reform of regulation of Australian residential tenancies processes continues, having been mostly uncoordinated at a national level. The Australian Housing and Urban Research Institute has suggested there was little evidence that tenancy law has recently impacted investment in private rental housing.

That academic conclusion could soon be up for review.