Sat. Sep 23rd, 2023
Housing crisis: Rent freeze raises risk of 200,000-plus home sales as landlords evict themselves from Victorian market
Housing crisis: Rent freeze raises risk of 200,000-plus home sales as landlords evict themselves from Victorian market


Premier Daniel Andrews has revealed the Victorian government is considering rental market interventions including stopping landlords from raising rents more than once every two years. Picture: NCA NewsWire/Nicki Connolly

A two-year rent freeze could be the final straw in a Victorian landlord exodus that would lead to the sale of more than 212,000 investment properties.

The suggestion to bar landlords from raising rents more than once every two years was one of several housing and rental affordability measures Premier Daniel Andrews said were being considered by the government over the weekend.

Others include a $5 short-stay holiday rental levy to help raise funds for new home builds and plans to sideline councils in a greater number of planning decisions.

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The property industry has widely welcomed efforts to encourage more housing construction, but the head of one Australia’s biggest real estate firms has warned he fears rental homes would be lost from the market as a result of limiting scope for rent increases beyond the current one year timeline.

First National Real Estate chief executive Ray Ellis said he feared a 30 per cent reduction in rental supply “at a minimum” if the additional burden was placed on landlords who were already considering exiting after land tax cost rises, interest rate hikes and changes to the Residential Tenancies Act in Victoria made in 2021.

Modern suburban houses on the hill in Melbourne

Rental homes across Melbourne could be sold off if landlords deem an increasing list of rental market changes and costs too hard to deal with.

Latest Residential Tenancy Bond Authority figures show they held bonds for 706,892 homes at the end of the 2021-2022 financial year.

A 30 per cent cut would wipe 212,067 of them from the market.

In Victoria last week PropTrack figures show more than 230 of the homes taken to auction (34.5 per cent) were former rental homes.

It was well above the 29 per cent national average for investment homes being sold.

PropTrack economist Angus Moore said international examples showed rent controls could result in rental home maintenance suffering and in landlords exiting the market.

Mr Moore said there was also a possibility that landlords would compensate for fewer opportunities to raise rents with sharper increases when they could.

“Creating more supply is fundamentally the only way to solve this problem long term and in a sustainable way,” Mr Moore said.

Caucasian Wood Skeleton Frame Worker

Building more homes is considered the best long-term solution to the state’s housing crisis.

Mr Ellis, a member of the International Real Estate Federation (FIABCI), also recently reviewed international rental interventions including in Paris, where in 2015 landlords were barred from raising rents above a specified index and chose to sell instead — leading to the program being axed two years after being implemented.

In Berlin, a five-year rent freeze implemented in 2020 ended a year later after a legal challenge. A study there indicated an up to 60 per cent reduction in rental listings, in part as landlords left homes untenanted while they awaited the outcome at court.

Co-founder of The Demographics Group in Australia Simon Kuestenmacher said the government risked overwhelming market forces with too much intervention.

Berlin skyline panorama with famous TV tower at Alexanderplatz. Germany

Berlin’s rental market has a troubled history of reforms leading to bad outcomes for tenants.

As a former Berlin resident, he said efforts to control that city’s rental market had gone too far and impacted the willingness of landlords to provide homes.

Instead, Mr Kuestenmacher advised focusing on efforts to increase the supply of homes as a way to keep rents from rising.

The Australian Housing and Urban Research Institute published a rent freeze review late last month that found while good in the short term, rent control had made life worse for tenants in the USA in the longer term.

But Tenants Victoria chief executive Jennifer Beveridge said they had seen signs of some landlords “profiteering from the rental crisis” and more regulation was needed to ensure fairness.

Some landlords are believed to be “profiteering” on Victoria’s rental crisis.

“Given that almost a third of households in our state are renters, better solutions for them are imperative and we are encouraged that the government is pushing the envelope in this space,” Ms Beveridge said.

Real Estate Institute of Victoria chief executive Quentin Kilian said he supported less council involvement in planning decisions which could help streamline new housing construction, but warned against locking landlords into rents for two-year timelines.

“Landlords will look at this and say if I can’t do anything with pricing for the next two years, but you are going to increase your tax in that time, then I just won’t play any more,” Mr Kilian said.

“This will make the decision a lot easier for those who are sitting on the fence.”

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