Australian rent freezes (or rent caps), which aim to help with making homes more affordable, affect not only renters but also you as a landlord.
But knowing what to expect and what they mean can reduce your anxiety and prepare you.
Here is what a rent freeze and rent cap mean:
- A rent freeze stops landlords from raising rents for a certain period of time.
- A rent cap limits how much rent can increase and is often based on inflation.
As many people are struggling with rising rent on an income that isn’t keeping up, it can be harder to find an affordable living space.
These steps could help ease the burden on renters; and as a landlord in Australia, you shouldn’t worry about the rent freeze.
What you need to stay on top of is ensuring your building is well managed if you have somebody looking after it for you and a good tenant who treats your property as their own.
By doing this, you can handle any rental market changes without worry.
2 Arguments For vs. Against Rent Freezes and Rent Caps
There are many people who are against theses freezes and caps and can have many arguments why, but the same can be about those who are for these steps.
Here are 2 big points for each:
For:
Rental prices are rising fast in Australia, with renters seeing rents increasing by double digits.
Therefore, the Australian Greens proposed rent freezes and caps as solutions to the high-cost housing issue, helping those struggling to keep up with the price jumps.
Here are the reasons why rent freezes and rent caps have been implemented:
1. They Help Make Housing More Affordable for Tenants
More than half of low-income renters face stress over high rent prices. Rent freezes and caps offer a way out, making homes more affordable.
The Greens suggest a two-year rent freeze. After that, a 2% cap on rent hikes every two years would be implemented.
This plan aims to give people a chance to match their wages to the cost of housing.
Supporters see rent control as a source of much-needed stability for tenants. It can keep the rental market from getting even tighter, with too few places to rent.
By stopping huge rent spikes, housing can stay within reach for more people. This is especially important for those with lower incomes.
2. They Prevent Landlords From Raising Rents at Unreasonable Amounts
Rent control prevents landlords from dramatically increasing rents. Because of the housing shortage, rents for new leases are increasing by about 10% yearly.
This trend can lead to landlords pushing prices at an unreasonable amount. Rent freezes and caps would keep rentals affordable.
It would provide a borderline for landlords to avoid raising rent too much. This could prevent many people from financial hardship or even from losing their homes.
Against:
On the other hand, experts say rent freezes could worsen the housing crisis. They argue against rent control policies and explain why rent freezes don’t work long-term.
1. They Discourage Landlords From Investing in Rental Properties
In Victoria, over 70% of investors own just one property, and 43% earn less than $100,000 annually.
These laws cut their income further, making investing in rentals less appealing and selling their home more attractive.
Landlords provide a lot more homes than public housing in Australia. Rent freezes and rent caps lead to fewer homes for rent.
Australia has already seen a drop in available rentals.
2. Impact of Rent Freezes and Rent Caps on the Housing Market
Lower rents can discourage developers from building more. Germany, France, and Sweden face this with fewer investments and homes.
Germany’s experience with rent freezes in Berlin in 2020 made things worse. Ireland’s freeze caused investors to sell their properties, leading to more homelessness and issues.
Looking at San Francisco’s story with rent control shows there are drawbacks. Rent control there shrank the rental market by 15%. The result? Rent prices went up 5.1%.
Australia relies heavily on private landlords for rent housing. If these landlords are pushed away, the small public housing system will be put under more pressure.
What Landlords Need to Know About This New Rental Regulation
If you’re a landlord in Australia, recent news about rent freezes and caps can create possible changes in the rental market.
However, both the state and federal governments have made it clear that rent freezes or caps won’t solve housing affordability issues.
They are working to increase the number of new homes available for social housing. This approach aims to address the long-standing shortage.
If rental regulations come, they will be fair. They might look like what many Canadian provinces have, setting a maximum increase in rent each year.
For example, in the ACT, rent can only go up by a percentage of the Consumer Price Index (CPI) plus 1.1 times the CPI.
This means that for a $400 weekly rent, there will only be around a $22 increase.
If you set your rent right from the start and check it yearly, rent freezes won’t affect you that much.
Although many renters support the idea of rent controls because of the tough market, we need to learn from history.
In Australia, rent controls were mainly used during tough times, such as the Great Depression and World War II.
However, things haven’t fallen that far at this time, and the rent freezes and caps are not expected to become severe. Potential rent changes are expected to be fair for everyone.
Final Thoughts
Rent freezes and caps, provides a solution for Australia’s rental problem. But, it can also cause other issues for the property market and investors.
How Landlords Can Adapt
If you’re a landlord, it’s crucial to stay informed and adapt to these changes. Here are some tips to help you manage potential rent freezes and caps:
- Stay Informed
Keep up with changes in rental regulations and any news on rent freezes or caps. Understanding the implications can help you make informed decisions.
- Review Your Finances
Assess your financial situation and how potential rent limitations might impact your investment.
Consider alternative income streams or adjustments to your property portfolio if necessary.
- Prioritise Property Maintenance
With limited rental increases, maintaining your property’s condition becomes even more crucial. A well-maintained property attracts and retains responsible tenants.
- Find the Right Tenants
Choosing reliable tenants who will care for your property is essential. Look for those with a history of responsible tenancy and good references.
Partner with Beere Property for Peace of Mind
At Beere Property, we understand the importance of finding tenants who treat your property with respect.
Our years of experience ensure that we match you with the right individuals, minimising the risk of property damage or maintenance issues.
Don’t let rent regulations stress you out. Let us help you find tenants who value your property as much as you do.
Book a call to learn more!