The proposed overhaul of the rental market in Victoria, which includes a rental cap and/or rental freeze for up to two years, is a counterproductive move that will have unintended consequences. The primary concern is that this will lead to a reduction in the supply of rental properties and, consequently, an increase in homelessness.
While it is acknowledged that rental households are facing financial challenges, it is argued that the best way to support them is to make more rental properties available rather than taking rental stock out of the market. Many property owners have already had to deal with higher holding costs due to increased interest rates, insurances, tenancy reform compliance costs, and the recently introduced Covid Levy land tax costs.
Furthermore, implementing a rental cap or freeze would discriminate against property investors and treat them differently from other small business owners. No other government in Australia’s history has imposed such a pricing freeze on small businesses. There is no evidence of systematic price or profit gouging in the rental market. Most rental increases can be justified by the increased holding costs borne by property owners.
The unintended consequences of these proposed measures are significant. Some investors may choose to sell their properties due to the escalating costs of owning a rental property in Victoria. Others may switch their properties to short-term rentals instead of long-term rentals. This reduction in private investment may lead to less rental supply, increased household density per investment property, and a higher risk of homelessness. Moreover, some investors may preemptively raise rents in anticipation of a two-year cap or freeze, further burdening tenants.
Additionally, these measures may deter new investors from investing in Victoria, leading them to explore alternative property markets with more favorable investing conditions and accommodating governments. This would result in reduced rental supply and less stamp duty revenue for the state, exacerbating the already record levels of debt.
Furthermore, the lack of rental availability in Victoria may pose a challenge in attracting the best and brightest immigration talent to the state. Finally, implementing a rental cap or freeze would present administrative challenges and risk the emergence of a shadow rental market.
It is important to voice opposition to these proposed measures and urge the Victorian Labor Party to reconsider. The unintended consequences of such policies are too great for the state of Victoria. It is crucial to prevent these measures from being implemented rather than dealing with the consequences afterwards.
To make a difference, it is essential to provide feedback to state members of parliament, engage with the media, and share concerns on social platforms. By making our voices heard, we can challenge the notion that these policies are politically favorable and bring attention to the economic impact they would have. It is crucial to emphasise that prevention is always better than treating the consequences later on.
