As the national rental crisis continues to bite, housing and tenants’ advocates want a discussion about the merits of capping the size of any rent increases levied by landlords.

Perth’s rental scarcity is among the worst in the country with a vacancy rate of just 0.3%, five percentage points below the national rate according to Domain’s latest rental report.

The tight rental market has pushed median weekly asking prices in Perth up to $553, representing an 11.2% increase over the 12 months to January.

Curtin University Professor at the School of Accounting, Economics and Finance Steven Rowley says the problem stems from a basic demand and supply issue.

“It’s really quite a terrible situation. I think we’re in crisis. That is exactly the right word for it. Until we get a lot of new stock pumped into that private rental market, we’re not going to see any improvements.”

Steven Rowley, Curtin University School of Accounting, Economics and Finance Professor

University student Lachlan Byrne has felt the sting of the current rental market. He moved out of his on-campus accommodation when he saw rental increases on the horizon.

Mr Byrne says he was paying $170 a week when he lived at Erica Underwood House in Bentley. Asking prices now start out at $235 for the same accommodation. He says he would have moved out sooner but he struggled to find alternative accommodation in the current tight market.

Are rental caps the answer?

To address the crisis, the Queensland government has announced it is “seriously considering” a rental increase cap policy.

Variations of this strategy are already used in Germany, Ireland, Scotland, Spain and in the ACT.

Steven Rowley explains that rental increase caps are usually linked to CPI which is a measure of inflation.

“It just means that the landlord cannot increase rent by more than a given percentage during a given period of time,” he says.

Professor Rowley says a rental increase cap policy would be good for tenants, but its benefits may come at a price, creating less incentive for landlords to keep their properties in the rental market.

“I think we need to be very careful about introducing measures that would have a knock-on impact on supply. I’m in favour of restricting rent increases to help tenants, but we’ve got to look at what it could potentially do to the supply side.

“The last thing you really want is to reduce supply any further in the current market because that just means fewer properties available for the same number of people trying to rent so it’s a double edged sword, really,” Professor Rowley says.

No grounds evictions

Concerns have also been raised about current legislation under which a landlord can evict a tenant at any time with no grounds.  

“You would have to structure the rent cap very carefully. We have got ‘no grounds’ eviction so a landlord can get rid of a tenant, effectively anytime. If they were seeking to increase their rent, they could potentially just get rid of a tenant and then increase the rent,

The Make Renting Fair coalition has placed ending unfair evictions at the top of its list of priorities for government to address. It wants a policy that ensures reasonable grounds are required for ending a tenancy.

The Make Renting Fair coalition also calls for policy to stabilise rent increases through a mechanism that caps unfair rent increases.

Circle Green Community Legal is a part of the Make Renting Fair campaign. Green Circle tenancy lawyer Alexander Wittkuhn says drastic rent increases cause serious problems, particularly for the most vulnerable tenants.

“We support reforms to the Residential Tenancies Act. Green Circle is part of a campaign to make certain reforms to our renting legislation in Western Australia and changes to stabilise rent increases. We would welcome a conversation about what measures might be best to address that particular issue.”  

Mr Wittkuhn says however that Green Circle has not endorsed any particular model for stabilising rent.

Build-to-Rent, a solution?

The rental availability crisis has seen a surge of Build-to-Rent developments across Australia. This is where institutions, large scale investors or developers deliver purpose-built private rental dwellings, they then become the owner and managers.

The Urban Development Institute of Australia (UDIA) has signalled that it backs the Build-to-Rent strategy.  In a submission made by UDIA to the Western Australian government this week, it recommends support for Build-to-Rent programs in the 2023/24 State Budget.

Specifically, the UDIA urges the government to provide a 50% land tax exemption for Build-to-Rent projects with a minimum of 20 dwellings. It also encourages the federal government to amend managed investment trust and goods and services tax settings to support Build-to-Rent.

“I think the one glimmer of hope on the horizon is that we might see a number of these Build-to-Rent type properties on the private rental market,” Professor Rowley says.

“We simply need to get more private rental stock into the market and that’s really difficult, but I think the government has to play a role and start thinking about how it can deliver directly or in partnership with developers a big increase in private rental stock.”