Has the Victorian Government finally heeded property industry advice, that tighter rental rules, mean less rental housing and higher rents?
In September 2023, the then Andrews Government, released a housing statement promising many things. Its boldest promise was 800,000 homes over 10 years. It was optimistic then and is increasingly unlikely now.
The housing statement also heralded tweaks to rental rules. Fast forward a year and nothing has happened. In fact, the Allen government stated this month that one of the slated reforms, the rental dispute forum, is not expected until sometime in 2025 with no specific month.
The proposed rental review forum is to be called Rental Dispute Resolution Victoria (RDRV). Doesn’t quite roll of the tongue, but the idea of RDRV is to deal with minor rental disputes that are clogging up VCAT allowing VCAT to focus on the larger or more complex issues. Currently disputes about minor damage or rent review can take many months to be heard at VCAT. (I do wonder if it would be easier to just give VCAT more resources and adjust the process to deal with the minor issues faster)
Other proposed changes to rental rules set out in the housing statement in September 2023 include:
- Banning all types of rent bidding. (this is where tenants offer a rent above the asking rent)
- Extending the rent increase and vacant notice periods to 90 days.
- Introduction of a portable rental bond.
- Annual training for property managers.
- Greater simplicity and privacy of rental applications.
- Rental stress support package.
The September 2023 Housing statement also addressed the issue of rent control (rent caps) and said this;
Rent control is a policy that, on the surface, appears to address the issue of affordable housing by limiting the amount landlords can charge for rent. But despite its intentions, international examples have shown rent control often worsens the housing crisis by discouraging investment in housing, reducing the quality of rentals and distorting the housing market.
Sanity prevails locally at least. While the Victorian Labor government have recognised the folly of rent controls, the Federal Greens are still advocating it.
Rental controls or rent caps are one of the most severe example of shifting the rental terms and conditions towards the renter. As per the government statement however, this is ultimately to the renter’s detriment. Not surprisingly, any other measure that shifts the needle in favour of tenants or landlords will also shift the market in the opposite direction in proportion to that measure.
In other words, if rules are changed in favour of tenants, then owning a rental property becomes slightly less attractive. The number of rental properties drops, and rents rise in the same proportion of that change. This disadvantages the tenant. Effectively the market is passing on the cost or friction of that change in rules to the tenant.
If governments want to increase rental housing, it is logical and simple to make owning a rental property more attractive. Not less. This would encourage more investors to buy rental properties, (both new and existing) thereby reducing rental rates due to more choice for tenants.
Most of the media coverage on housing focuses on social and affordable housing. This is a big issue and one that needs government action to safely house the many people in desperate need of housing. About 40% of all state governments revenue is generated from property. This should be directed back into housing for those needing it most.
Many initiatives to provide more social and affordable housing are included in the housing statement.
