There are renewed calls from tenant advocates for caps on rent increases in NSW as the state is in the grips of a chronic rental crisis.
Experts are pleading for housing to be regulated like other essential goods and services, in a bid to ease the largest cost of living pressure on renters that is crushing household budgets, and an increase to the number of rentals available.
Tenants face rising rents at the same time as groceries and petrol are getting more expensive.Credit: Ben Rushton
In Sydney, house rents jumped 19 per cent since the pandemic began and outpaced annual wage growth more than five times in the year to June.
In regional NSW, tenants are facing displacement and homelessness due to rents spiking 30 per cent since 2020, outstripping average annual wage growth up to seven times in the past year in the hardest-hit council areas.
Rents have risen around the country, and house rents have also reached record highs in Melbourne, Brisbane, Perth, Adelaide, Canberra and Hobart, on Domain figures.
At the heart of the problem is a chronic shortage of housing, experts agreed, but they said a cap on rent hikes would help alleviate the financial pressure on households until supply is addressed.
Greens MP Jenny Leong has introduced a private member’s bill to NSW parliament that would legislate a cap on rents in line with inflation, an end to no-grounds evictions and a ban on rent hikes in disaster areas. Leong said a cap was the easiest way to help struggling renters.
A private member’s bill proposes capping rent increases in line with inflation.Credit: Janie Barrett
“People are focusing on the cost of groceries and the cost of petrol, and while they are all significant to people, in almost every case the cost of people’s housing is by far the most significant cost in their day-to-day lives, and we know renters are bearing the brunt of those costs because they’re being hit with rent hikes,” Leong said.
“The easiest way to ease the pressure on people who are suffering from the increased cost of living right now would be to put rent controls in place.”
Housing experts say the measure would be an immediate solution to alleviate financial pressures on struggling renters.Credit: Janie Barrett
The practice of capping rents is common overseas and has previously been in place in Australia but in more recent decades has come up against strong resistance.
Some housing experts said a complete rethink of accommodation was needed and it should be considered as an essential good and regulated as such – like health, energy and education – although others warned it could lead to a reduction in the number of rentals and a two-tier system of tenants.
UNSW senior research fellow in the City Futures Research Centre Dr Chris Martin said it was a fair policy response to windfall gains at the expense of renters.
“The building itself is only going downwards in quality because it’s depreciating over time. It’s getting older, it’s getting worn and torn so the idea that rents are above CPI really must reflect an increase in the location value, and the landlords do absolutely nothing to deserve that,” Martin said.
“If anything it’s the people who live there that make locations valuable and desirable. It shouldn’t be landlords who benefit from it.
But others say the proposal would reduce the number of rental properties available as investors sell out of the market.Credit: Peter Rae
“There are other basic needs where the cost is regulated, whether that’s health or education or energy. There is regulation of the cost of other basic needs, and we can do that for rent as well.”
But independent economist Saul Eslake said the response was a short-term and ineffective fix and did not address the underlying problem of the rental crisis.
“I would say rent controls are at best a short-term palliative but do nothing to address the underlying problem of the shortage of rental properties,” Eslake said, adding it would discourage additional private investment in rental housing and create a privileged class of rent-controlled tenants.
“There’s obviously a problem. The answer is to increase the supply of rental properties. Governments ought to be increasing housing supply directly or indirectly by providing more financial support to community housing providers, or restricting the conversion of rental properties to short-term rentals.”
Tenants Union NSW chief executive Leo Patterson Ross said governments had failed to increase the number of rental properties until now and rent controls would be an immediate solution to alleviate financial pressures on renters, alongside an increase in rental properties in the long term.
“The issue with rent control not fixing the supply problem is true, but also part of the point is the industry is not building enough and probably will never build enough,” Patterson Ross said.
“There is not a realistic pathway that they would build enough stock that is affordable to the community.”
He said there are standards in place to ensure essential products and services are safe and accessible, and housing needs to be treated in the same way.
“We approach housing without the conception of it as an essential service. We’ve set up various structures and investor expectations,” he said.
Real Estate Institute of Australia president Hayden Groves said while it was an interesting idea in theory, it would turn investors away from providing rental properties.
“That’s the problem the REIA has with any form of rent control … what happens is investors say ‘I’ll sell that asset and that’s out of my control, the return on my money is too poor,’” Groves said.
He said that it would effectively reduce the number of rental properties: “It’s a bad idea, you’ll have more of a flight out of rental properties.”