Rents caps not off the table for Daniel Andrews government

The Andrews government says it is considering the idea of capping rents just days after slugging landlords with a new tax.

The Andrews government is considering rent caps just a day after unveiling a new tax slug on Victorian landlords and denying it would drive up tenants’ costs.

Victoria’s peak real estate body has warned the government’s latest shock proposal would be “disastrous”, while battlers’ advocates have welcomed it.

Treasurer Tim Pallas revealed caps were on the table during a post Budget speech on Wednesday, saying the government could be compelled to intervene in the state’s worsening rental crisis.

Renters have borne the brunt of hefty hikes passed on by landlords who have copped 11 rate rises since last May.

The Andrews government has opened the door open to introducing rent caps Picture: David Geraghty

Huge demand for an increasingly limited supply of rentals – resulting from a slowdown in new home builds – has also pushed up prices in many areas.

And the new levy has delivered a triple whammy, with Mr Pallas on Tuesday announcing about 860,000 investment property and holiday home owners would be stung with a tax worth an average of $1300 a year for the next decade.

With landlords immediately warning they would again pass on the extra impost, Mr Pallas on Tuesday claimed the major new tax hike would not drive up the cost of rentals.

But on Wednesday, the treasurer left the door open to the possibility of new government-imposed rent caps, while ruling out any prospect of a rent freeze as it would lead to a “massive distortion of the market”.

“We can see there is a fair degree of inequity and injustice being meted out on renters at the moment and governments will have to look at ... solutions,” he said.

“We don’t have a firm view but I do think there has to be a point where the community says this has gone beyond reason.”

Victorian treasurer Tim Pallas is a post budget address. Picture: David Geraghty

Real Estate Institute of Victoria chief executive Quentin Kilian warned introducing rent caps on landlords would be “disastrous”.

“The government is doing everything they can to undermine the ecosystem of the rental market,” he said.

“We would be urging them in the strongest terms not to consider that kind of interference or distortion to the private rental market.”

Mr Kilian said 70 per cent of Victorian landlords were “mum and dad investors” who had bought an extra property to help fund their retirements. Of those, 43 per cent were taking home less than $100,000 a year, he said.

“They’re already doing it tough,” he said.

Opposition finance spokeswoman Jess Wilson said the treasurer’s comments demonstrated the government knew its landlord tax will “ultimately flow through as a tax on renters”.

“The Andrews government needs to stop fuelling Victoria’s housing affordability and rental crisis by increasing property taxes at a time Victorians can least afford it,” she said.

Victorian Council of Social Services CEO Emma King said fair rent controls would protect renters from excessive increases.

“This is already happening elsewhere. In the ACT, landlords can only raise the rent by 10 per cent more than consumer price index (CPI) each year. This cap provides extra security and certainty for the tenant,” she said.

Ms King this week said landlords had “no excuse whatsoever” to pass on tax ­increases to renters.

It comes as a parliamentary committee on Wednesday voted in favour of establishing an investigation into Victoria’s rental crisis.