Implementation of Rent Freeze Poses Risk of Over 200,000 Home Sales as Victorian Landlords Opt to Withdraw from the Market
A potential two-year rent freeze in Victoria could trigger an exodus of landlords, resulting in the sale of over 212,000 investment properties. The government is contemplating several housing and rental affordability measures, including limiting rent increases to once every two years, imposing a $5 short-stay holiday rental levy for new home builds, and reducing council involvement in planning decisions.
While the property industry welcomes efforts to boost housing construction, concerns arise about potential rental home losses due to restricted rent increase timelines. Ray Ellis, CEO of First National Real Estate, predicts at least a 30% reduction in rental supply if landlords face additional burdens on top of recent land tax cost increases, interest rate hikes, and changes to the Residential Tenancies Act in 2021.
Latest figures from the Residential Tenancy Bond Authority indicate bonds were held for 706,892 homes at the end of the 2021-2022 financial year. A 30% cut could remove 212,067 rental homes from the market.
PropTrack economist Angus Moore highlights international examples showing that rent controls could lead to reduced maintenance and landlords exiting the market. It's also possible that landlords might compensate for limited opportunities to raise rents with sharper increases when possible.
Creating more housing supply is seen as the most sustainable long-term solution to the housing crisis in the state. However, caution is urged against overwhelming market forces with excessive intervention. Examples from cities like Paris and Berlin, where rent control measures led to negative outcomes for tenants and landlords, are cited as cautionary tales.
Mr. Kuestenmacher, a former Berlin resident, expressed concern that efforts to control Berlin's rental market had gone too far, affecting landlords' willingness to provide homes. He recommended focusing on increasing the housing supply as a more effective way to prevent rent hikes.
The Australian Housing and Urban Research Institute recently published a review on rent freezes, indicating that while beneficial in the short term, rent control had negative consequences for tenants in the USA in the long run.
Jennifer Beveridge, the Chief Executive of Tenants Victoria, noted signs of some landlords taking advantage of the rental crisis and called for more regulations to ensure fairness.
The Real Estate Institute of Victoria's Chief Executive, Quentin Kilian, supported reducing council involvement in planning decisions to streamline housing construction. However, he warned against imposing two-year rent timelines on landlords, as it might lead them to exit the market due to potential tax increases during that period.
In the midst of the rental crisis, it is crucial to find better solutions for the almost one-third of households in Victoria that are renters. The government's active engagement in this area is seen as encouraging by stakeholders.
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