Renters, economists front senate inquiry into rental crisis amid calls for caps

Renters struggling to make ends meet are pleading with the government to make drastic changes to the system.

Struggling families and economists alike have told a senate inquiry probing the rental crisis there needs to be a cap on the amount landlords can increase rents by.

At a hearing in Brisbane, Robin, who lives with her husband and two adult children in a rental townhouse in Brisbane, told the inquiry her rent had gone up 33 per cent when she went to re-sign the lease this year.

Despite her efforts to negotiate, she chose to tighten her belt elsewhere to keep her family in the area.

She questioned how it was fair that although her landlord can only raise her rent once a year, there was nothing to stop them from hiking it $160 at a time.

She hit out at the agreement struck at national cabinet last week for all states and territories to limit rent increases to once a year – a measure already in place everywhere bar the NT – saying it was “absolute nonsense” without also implementing a strict cap on how much rent could be increased.

“Large rent increases are unreasonable in my view – it diminishes savings and undermines future prospects. We had hopes of saving for a small unit to retire in, but that now seems beyond our capacity … I don’t believe we will get there” she said.

“What will help is immediate intervention … Based on my experience, we need an immediate cap on increases, either a flat rate or linked to CPI.

“Renting should not be the system of duress it currently is … And the system cannot continue as it is. Change is absolutely imperative.

“Housing is a national emergency, and I don’t know why it doesn’t feel like that.”

A senate inquiry into the rental crisis heard from economists and renters in Brisbane on Wednesday. Picture: Gaye Gerard / NCA Newswire.

Her calls echo those of the Greens, who are threatening to block the government’s $10 billion Housing Australia Future Fund again unless the government announces more for renters.

Housing spokesman Max Chandler-Mather was underwhelmed by the announcements made at national cabinet last week. The Greens want a rent freeze, but were prepared to negotiate with the government if national cabinet had agreed to rent caps.

Mr Chandler-Mather said without caps to rental increases, tenants were being priced out of their homes.

“80 organisations representing renters and people facing homelessness agree we need to limit rent increases. We need to keep the pressure on Federal Labor and every Premier around the country to make unlimited rent increases illegal,” he said last week.

The Greens have been calling for a cap on rent increases. Picture: Dan Peled / NCA NewsWire

Economists told the inquiry that new supply would not be harmed if limitations were placed on the amount landlords could raise the rents of sitting tenants by, as evidenced in Germany.

“Regulations that control rental prices across the board carry significant economic costs, but there can be benefits from simple metrics to regulate price increases for existing tenants,” CEDA senior economist Andrew Barker said.

“By pushing returns below market rates, rent controls hold back the supply of new housing and works against mobility by locking people into favourable arrangements. Equally, however, once tenants are already living in a property, they can be in a situation of ‘economic hold up’ and vulnerable to excessive rent increases where they do not want to move …

“A solution would be only to allow rents on existing tenants to be increased in line with a local measure of rental prices (with exceptions). Such an approach in Germany has maintained a link with market rents without forming a barrier to investment.”

University of Sydney research fellow Cameron Murray told the inquiry the best outcome was more home ownership.

Noting that a major argument against capping rent is that investors will leave the market if they’re not making money off their investment properties, impacting supply, Dr Murray said it would be a good thing if landlords were to sell.

“For 150 years landlords have threatened to leave the market. It’s not clear to me where they’re going to take their money when they sell. Every sale has a buyer,” he said.

“The more homeowners there are, the fewer who are disrupted when rental prices move quickly because their homeowners are insulated from that price.

“So if we want higher homeownership, we actually can’t escape the reality that higher homeownership means landlords must sell. Otherwise we will always have 3.3 million private rental homes. We need landlords to sell. So I’d be totally fine with that.”