The Andrews Labor government in Victoria is considering a package of measures to help ease the rental crisis – a problem familiar to much of Australia.
How tight is the market?
House and unit rentals in Melbourne have risen for the past seven quarters, a record longest stint, according to data group Domain.
The Victorian capital remains Australia’s most affordable city to rent a house, but the city’s median rental – at $520 a week at the end of June – was a record high. The 13% annual increase was also the city’s fastest since 2008.
Unit rentals rose by an eye-watering 22% for the year, with median rentals at $500 a week closing in on houses for six straight quarters, Domain said.
Regional Victoria is cheaper. House rentals were up 7.1% over the past year to $450 a week while unit rentals advanced 9.4% to $350 a week.
As elsewhere, rising population and limited new supply have strained the market. Melbourne’s vacancy rate, though, edged higher in the June quarter to 1.4%, PropTrack, another data group, said recently.
What’s being considered?
The government is mulling interventions as it prepares its housing statement for later later this year. These include freezing rents for two years and capping the annual size of rental increases, according to the Australian Financial Review.
It may also impose a daily levy on short-stay accommodation, such as Airbnb-type listings, to nudge more owners into the rental market instead.
The premier, Dan Andrews, has been coy about the final plans. Everything was on the table to help boost housing supply, he said on Tuesday. “That gives people more choice, more power, and it lowers prices.
“You want a situation where a balance is found – where the landlord is being fairly rewarded for the risk they take, the concession they make, but the person’s capacity to pay is not an irrelevant factor,” Andrews said.
Who is against a rent cap?
The Real Estate Institute of Victoria used its submission to a recent parliamentary inquiry to argue that the government had already given a “disproportionate focus” on the renter, rather than the “entire rental ecosystem”.
REIV’s chief executive Quentin Kilian, said rental freeze and a cap on increases were “the potential nail in the coffin” for an industry already slugged with higher stamp duty, land taxes and other costs.
“The impact of [these changes] will be long term and it will be massive,” Kilian said, warning of a flood of “over 200,000” properties on to the market as investors exited the industry.
The state opposition is yet to publicly confirm its position on rent caps. Jess Wilson, the shadow housing spokesperson, said the Andrews government’s “higher property taxes, ever-increasing red tape and underperforming planning system are only making Victoria’s rental and housing affordability crisis worse”.
What was needed were “coordinated reforms across our tax, planning and residential construction systems to increase the supply of new homes and put downward pressure on prices”, Wilson said.
Who supports more market intervention?
Welfare groups such as the Victorian Council of Social Service (VCOSS) have been calling for an government help. In its submission to the inquiry, VCOSS said just 2% of rental properties were affordable for those reliant on commonwealth income support, while for households living on the minimum wage, only 18% were affordable.
The most disadvantaged group were single people with or without children, on income support or a pension. Less than one in 1,000 rental properties were affordable or appropriate, it said.
Emma King, the VCOSS chief executive, said her organisation would “have no issue at all” with a two-year freeze. Rental increase caps, such as the ACT’s 110% of consumer price inflation, could work but applying a single formula across the market may be difficult.
King said the real estate sector had previously warned of the death of the industry, such as with the introduction of minimum rental standards “for things like having windows that open and close [and] having a toilet that works … This is a mantra that we’ve heard before”, she said.
Jennifer Beveridge, chief executive of Tenants Victoria, said housing was “an essential service, like energy supply”.
The Residential Tenancies Act 1997 set rules about how often rent can be increased and how the landlord notifies their intention to raise the rent, but not the amount of the rent increase.
“Some landlords are even profiteering from the tight rental market as renters, unable to find another suitable rental, are forced to accept high rent increases,
Beveridge said. “Of those who cannot pay the increase, many have told us that they are facing homelessness.”
The Greens have tied their support for Labor’s Housing Australia Future Fund to action to prevent unlimited rent increases, pushing for state and territory governments to implement a two-year rent freeze, with ongoing caps on rent increases after.
Deft changes needed
Domain’s head of research, Nicola Powell, said price freezes and caps masked “the true dynamics of the rental market”, obscuring conditions for all, including governments.
However, placing a levy on short-term stays could be “more impactful” for helping renters, particularly in holiday locations but also in the CBD areas, Powell said.
Still, unless handled deftly, more intervention could be “another reason to deter investors” at a time when rental markets were “screaming out for supply”, she said. More public housing was also needed.
If faced with rent freezes, landlords might skimp on basic maintenance or put off changes such as adding solar panels or improving energy efficiency that would actually save renters money.
And without a better demand and supply balance, landlords would find ways of “jumping through the caps that are in place”, Powell said.
