Even the idea of a rent freeze will scare landlords out of the market, according to Real Estate Institute of Australia president Hayden Groves.
The Greens have been pushing for a rent freeze to ease cost of living pressures on tenants, however the idea has received criticism.
“Not only the ones who are in the market might decide to sell, but also the other ones who are thinking about buying something in the rental market decide not to,” he said.
“That puts downward pressure on supply and rent automatically goes up the other way.”
Rent freezes are limits set by governments on how much landlords can charge for, or increase, rents and in the Australian context they could only be applied by state governments.
Mr Groves said landlords are also dealing with cost-of-living pressures, such as rising mortgages and land tax. He said while rents have gone up, mortgages have increased at a much higher rate.
He also said landlords are generally an “unsophisticated investor group” as they are mostly “mum and dad investors” who don’t own multiple investment properties.
He explained: “70 per cent of all rental houses in Australia are privately owned, and are owned by people with only one other property than the one they live in.”
Mr Groves believes if a rent freeze was implemented, it would no longer be viable for these families to invest in the rental market, which would create a shortage of properties.
He said this is already being experienced today due to the rent freeze imposed during the peak COVID-19 years. In January 2019 there were over 12,000 rental properties available on reiwa.com across the Perth metropolitan area, but there are now less then 2000.
He said supply was the number one issue, and anything that deterred investors was a problem.
Associate Professor Amity James, the discipline lead in property at Curtin University, also said a rent freeze could have unintended consequences.
She said it could create problems for tenants, who were “often the most vulnerable people in the community.”
Adding, it could lead to low quality housing in the long term as landlords won’t be able to afford to maintain or improve their properties. She also said it could increase the risk of rent bidding, despite it being banned in WA.
Dr James called for system-wide reform in the private rental sector, which she claimed would have flow-on effects to tenants struggling with the cost of living.
She said there needed to be incentives for landlords to provide longer leases, as the cost of moving between rental homes was very expensive for tenants.
She also said landlords needed to be incentivised into making utilities, such as heating and cooling, more efficient.
Both Mr Groves and Dr James identified the need for more social housing, which would provide more secure long-term homes for tenants.
Mr Groves said: “Only 3 per cent of the entire housing cohort is provided by the government, which is about half of what it was proportionally during the second World War.”
The Albanese Government’s $10 billion Housing Australia Future Fund passed parliament this week, which has guaranteed 30,000 new social houses will be built over then next five years.
Despite the Greens pushing for rents to be capped and frozen for two years, the state governments, who would be responsible for imposing a rent freeze mandate, remain unconvinced by the idea.