Chapter 3Immediate financial relief for renters
I think 'crisis' is the keyword here. We are in the midst of an incredible rental crisis right now, and it's akin to the crisis that faced renters on the brink of potential eviction during the COVID period.
2.1As discussed in the previous chapter, boosting the supply of social and affordable rental housing is a long-term solution to the rental crisis that will take years to come to fruition. The evidence from this inquiry points to the need to provide urgent relief to the many renters currently experiencing unbearable hardship.
2.2Inquiry participants broadly pointed to two mechanisms to provide immediate relief to renters: raising the levels of government assistance and support payments, including Commonwealth Rent Assistance (CRA); and introducing some form of rent control.
2.3This chapter focuses first on the financial pressures faced by renters due to rising costs of rent, then explores the government financial supports available to renters and the adequacy of these supports to alleviate rental stress. Finally, the chapter explores the range of rent control measures that can be put in place to ease the financial burden on renters.
The financial pressures faced by renters
2.4As outlined in the committee’s interim report, rents have been increasing at an alarming rate and scale, placing renters under immense pressure. For example, the Service to Youth Council (SYC), a non-profit organisation operating in Adelaide, stated that ‘each week, tenants report rental increases in the order of $100 - $300 per week, which prices the tenant out of their home’.
2.5According to the Tenants’ Union of New South Wales (NSW), rent-related tenancy disputes are becoming increasingly prevalent:
Data we have received from the NSW Civil and Administrative Tribunal (NCAT) suggests applications by renters for matters relating to rent and other payments (a strong indicator of applications challenging excessive rent increases) increased by around 50 [per cent] in 2022 compared to 2021. This is almost double the number of applications being made annually prior to Covid.
2.6Ms Fiona Caniglia, Executive Director of Q Shelter, spoke of the impacts that substantial rent increases have on renters:
In the context of Queensland, people have faced unreasonable rent increases, beyond CPI [Consumer Price Index]. It has impacted their ability to afford other essential items, like utilities, food, education and being employed …
2.7The committee heard of private renters resorting to skipping meals and medication, declining social invitations, and taking on additional work or selling personal items to meet rising rental prices.
2.8The Salvation Army’s 2023 Red Shield Report, At Breaking Point, found that ‘most respondents struggled to get by’ and that:
More than one in three (35 per cent) private renters reported finding and maintaining a safe and affordable place to live, as well as becoming homeless, were some of their greatest challenges of the past 12 months.
Assistance from governments
2.9Inquiry participants widely recognised the importance of financial assistance from governments, in the form of income support payments and CRA, to assist individuals to meet the rising cost of rent. The Australian Human Rights Commission (AHRC), for instance, underscored the need to consider ‘the relationship between the rental crisis and social security policies’, while Uniting WA described these payments as:
… the key social safety net support [for renters], enabling individuals and families facing vulnerability to remain in their homes or enter the rental market. These initiatives aim to address disparity in our community, working to end homelessness and enhance housing security.
2.10A range of stakeholders identified reforms to income support payments, including CRA, as ‘the most immediate responses available to governments’ to alleviate the impacts of the rental crisis.
2.11Ms Linda Forbes, Law Reform Officer at Economic Justice Australia (EJA), highlighted the dire situation for many renters across the country who require immediate support while waiting for long-term measures to boost rental supply:
In terms of re-tweaking the system and all these excellent proposals, even if the wheels started turning tomorrow to put those in place, there are people in abject poverty and crisis right now who are facing homelessness, including those really vulnerable cohorts.
2.12Likewise, Mr Simon Schrapel, Chief Executive of Uniting Communities, emphasised the urgency of rental unaffordability issues, saying ‘we need to be looking at how we get more money into low-income renters' pockets now’.
Commonwealth Rent Assistance (CRA)
2.13As explained in the committee’s interim report, CRA is a ‘non-taxable income supplement provided to eligible social security payment recipients’. CRA aims to assist low-income individuals and families who rent in the private market or from a community housing provider to meet rental payments.
2.14At March 2023, there were approximately 1.3 million recipients of CRA, with an annual government outlay of $4.5 billion. The Australian Government announced a 15 per cent increase to the maximum rates of CRA from 20September 2023, bringing the estimated expenditure for 2023–24 to $5.5billion. This is the largest increase to CRA in 30 years.
2.15CRA is the ‘largest housing assistance measure’ provided by the Australian Government. As the City Futures Research Centre (CFRC) explained, ‘in the absence of legislative regulation for affordability, [CRA is] Australia’s primary policy means for improving rental affordability’.
2.16However, many inquiry participants gave evidence of the inadequacy of CRA, citing issues with eligibility rules and the rate of CRA, and the high demand for state and territory rent assistance to supplement CRA.
2.17The Antipoverty Centre argued that raising the base rates of income support payments would more effectively address the rental crisis than reforming CRA.[28] Given the myriad issues with CRA eligibility and the amount of payments, the Antipoverty Centre submitted that ‘increasing CRA is a pathetic, inadequate, exclusionary response to the housing crisis’.[29] Ms Kristin O’Connell, representing the Antipoverty Centre, told the committee that CRA ‘treats welfare recipients as a money-laundering device’ by enabling private investors to build their wealth through charging CRA recipients higher rent.[30]
Eligibility for CRA
2.18To be eligible for CRA, a person must:
… qualify for an eligible social security payment, more than the base rate of Family Tax Benefit Part A, or an eligible Department of Veterans’ Affairs service pension, income support supplement or veteran payment, and pay or be liable to pay more than a minimum amount of rent, called the rent threshold, for their principal home.
2.19The amount of CRA a person receives varies depending on their relationship status, number of children, and whether they are sharing accommodation. Treasury and the Department of Social Services (DSS) explained that:
Rates differ by household type with single sharers on the lowest rate ($123.20, including the 15 per cent increase and indexation) and households with 3 or more children on the highest rate ($245.42, including the 15per cent increase and indexation) …
2.20Various inquiry participants highlighted that the current eligibility rules fail to target the renters who are most in need. Researchers from Curtin University pointed to the ‘high misallocation or targeting error rate’ for CRA—approximately 18 per cent of low-income private renters experiencing rental stress are not eligible for CRA, while 23 per cent of CRA recipients are not experiencing rental stress.
2.21The Public Interest Advocacy Centre (PIAC) observed that:
… the payment favours families with children, who are over-represented amongst income units who are not experiencing housing stress but still receive CRA, over people who are single, who make up 80 [per cent] of low income private renters in housing stress not receiving CRA.
2.22Various inquiry participants argued that eligibility for CRA should better ‘reflect housing need’ by providing support to all low-income renters who are experiencing rental stress, including those not receiving social security payments. The Australian Housing and Urban Research Institute (AHURI) also noted that the Australian Government would save an estimated $1.2 billion annually if eligibility requirements were changed in this way.
2.23However, several submitters pointed out that there are constitutional barriers to widening the eligibility for CRA. Per Capita noted that ‘CRA is constitutionally limited to being a supplementary payment to recipients of a social security payment’. In order to circumvent this and expand eligibility to people not in receipt of social security payments, Per Capita proposed that CRA be:
… reformulated as a Commonwealth-State and Territory program, with the Federal Government making grants to state and territory governments to pay CRA to persons deemed eligible by federal standards.
The rate of CRA
2.24The committee heard that although CRA goes some way to alleviating rental stress for low-income households, there is still a large proportion of CRA recipients experiencing rental stress.
2.25On one hand, Per Capita acknowledged that:
… around two-thirds of low-income CRA recipients would be in moderate to very severe stress if they did not receive CRA. This incidence plunges to 34 per cent after CRA is taken into account.
2.26On the other hand, Curtin University researchers emphasised that over a third of people on low incomes who receive CRA remain in rental stress:
… with nearly one in five paying more than 40 [per cent] of their income in rents and one in ten paying more than 50 [per cent] of their income in rents after taking CRA into account (Ong et al. 2020).
2.27Inquiry participants welcomed the 15 per cent increase to the maximum rates of CRA as part of the 2023–24 Budget,and acknowledged that this is expected to decrease the proportion of CRA households in rental stress by three percentage points. Despite this, inquiry participants maintained that CRA ‘remains in urgent need of reform’ and called for a further increase in CRA.
Proposals to raise the rate
2.28Mr Brendan Coates, Economic Policy Program Director at the Grattan Institute, advised that CRA:
… should be increased by at least 40 per cent. In fact, some of our more recent work looking at the adequacy of retirement incomes would suggest that if you wanted to make rent assistance adequate for a retired renter so they're no longer in poverty, then the rate maybe needs to double.
2.29Several inquiry participants supported a 50 per cent increase in CRA from the 2022 rate (a further 35 per cent on top of the Australian Government’s recently announced increase).
Indexation of CRA
2.30Various inquiry participants recommended that CRA be indexed to market rents rather than the Consumer Price Index (CPI). Inquiry participants explained that since its introduction CRA has been indexed to CPI, meaning that it has kept up with general inflation but has failed to keep pace with the rising cost of rent. Ms Linda Forbes of EJA noted that ‘rent assistance bears absolutely no relation to the private rental market, particularly in capital cities and regional centres’.
2.31Inquiry participants also pointed out that the amount of CRA a person receives should ‘take into account differences in rent prices across different parts of the country’ in order to meaningfully alleviate rental stress.
Addressing inequities in payments
2.32As mentioned in the interim report, renters living in share housing receive smaller CRA payments based on the rationale that there are ‘economies in sharing’. However, Ms Linda Forbes of EJA challenged this rationale, stating:
… those economies [of living in share housing] really come in only when sharing with a partner, not sharing with friends or sharing by reason of necessity because your home can't be returned to because it's been flooded, or you've lost your rental accommodation.
2.33She remarked single sharers should not receive a lower rate of CRA than single non-sharers who pay the same amount of rent.
State and territory rent assistance
2.34Some state and territory governments offer rent assistance to supplement CRA. Such assistance includes the Australian Capital Territory (ACT) Government’s Rent Relief Fund (the Fund), the Victorian Government’s Private Rental Assistance Program (PRAP) and the Northern Territory (NT) Government’s Rent Choice Private Rental Subsidy Scheme.
2.35The ACT Government’s Fund, for instance, ‘provides grants for up to four weeks’ rent, capped at $2,500, for low-income households in the ACT’s private rental sector’ who are experiencing ‘rental stress or severe financial hardship’. The ACT Government submitted that ‘demand for the Fund has been high’.
2.36Uniting Vic.Tas observed that ‘frontline practitioners report significant challenges in meeting demand for PRAP as rental prices soar’ and added:
Our practitioners report that the available pool of PRAP funding has not grown commensurate with rental increases.
2.37The growing demand for these forms of rent assistance at the state and territory level strongly indicates the inadequacy of CRA.
Income support payments
2.38Many submitters identified that the current rates of income support payments are insufficient to enable low-income households to cope with the rising cost of living, especially rising rents.
2.39Furthermore, Anglicare WA remarked that ‘social payments are not appropriately indexed and in fact push recipients deeper and deeper into poverty’, while Headspace noted that ‘JobSeeker payments have not increased in real terms since 1994’.
2.40The Council of Single Mothers and their Children (CSMC) cited research demonstrating that poverty for families on working age income support such as Jobseeker ‘increased from 30 per cent to 66per cent between 1993 and 2017’.
2.41EJA argued that income support payments, including rent assistance, ‘are grossly inadequate for meeting rent commitments for all cohorts of income support recipients’, and that ‘private renters reliant on social security income support are in a state of perpetual financial crisis’.
2.42Everybody’s Home similarly noted that ‘the pace and size of rent increases are far outstripping these [income support] payments and pushing more Australians into poverty and housing stress’. Additionally, the Tenants’ Union of Tasmania cited research that concluded that ‘people on income support cannot afford to rent in the private rental market’.
2.43A number of inquiry participants directed the committee’s attention to Anglicare’s Rental Affordability Snapshot, which highlights the experience of income support payment recipients and minimum wage earners when trying to find a rental. The Snapshot tests how many properties listed for rent on a given day are affordable (that is, cost no more than 30 per cent of a household’s income) for low-income households. The Snapshot shows that extremely few rental properties are affordable for Australians on income support payments.
2.44Mr Lynton Sheehan, representing Woden Community Service, explained that for people on income support payments such as JobSeeker, 117per cent of their income would be required to meet the average cost of rent in the ACT.
2.45Inquiry participants, including landlords, told the committee that landlords often automatically reject rental applications from income support recipients because their incomes are too low.
2.46Submitters largely welcomed the increase to income support payments announced in the 2023–24 Budget, but underlined that this increase is not enough to make a significant difference to recipients’ experience of financial and rental stress.
2.47A large number of inquiry participants called for an increase to JobSeeker and Youth Allowance to match pension levels, and several proposed increasing all payments; with many suggesting that raising them to at least the poverty line would be appropriate. Some submitters called for a general review of income support payments to assess their adequacy and effectiveness.
JobSeeker
2.48Many submissions noted that the JobSeeker payment is inadequate to meet rising rental costs and the overall cost of living. Everybody’s Home noted that ‘the weekly rate of JobSeeker is barely above half of the Henderson poverty line’.
2.49Anglicare’s Rental Affordability Snapshot found only four properties across Australia which were affordable for a single person on the JobSeeker Payment.
2.50EJA related lived experience stories from people on JobSeeker who found that the JobSeeker rate is not high enough to pay rents even at the lowest end of the private rental market. This included the direct experience of Michaelia who ‘had been solely dependent on JobSeeker Payment since her husband left her 6 months previously, and this was not enough to cover the rent for her small apartment’; and Clodagh, who shared a bedroom with her youngest daughter in ‘a tiny 2 room apartment’ and was regularly forced to go without food in order to afford to look after her children.
2.51Dani, who appeared as a witness before the committee, found that the JobSeeker payment could not cover his rent:
It was a really reasonably priced unit. It was cheap for a unit, but it was just you can't cover it on JobSeeker.
2.52EJA also related the story of Mick, who:
… said he found it extremely difficult to cover his rent and all of his basic household expenses. This often meant Mick ran out of money in the second week of his fortnightly payment period, leaving him with no money for public transport, and unable to attend job interviews that weren’t within walking distance of his home. He also often couldn’t afford to top up the credit on his phone, which made it hard for him to engage with employers and employment service providers - sometimes leading to his payments being suspended, increasing his hardship, and making it more difficult for him to pay for the costs associated with job hunting.[91]
2.53The committee received evidence of high rates of rent stress among JobSeeker recipients. According to Homelessness Australia, 63 per cent of those receiving JobSeeker payments in 2022 were rent stressed. A recent survey from the Australian Council of Social Service (ACOSS) found even higher numbers: 94per cent of those surveyed on JobSeeker and related payments were in rental stress, and 53 per cent were paying more than 50 per cent of their income in rent.
2.54Compared to other payments, The Salvation Army found that those receiving JobSeeker payments:
… spent a higher proportion of their household income (44 per cent) on housing and were more likely to experience housing stress and extreme housing stress than those on other Centrelink payments.
Youth Allowance
2.55Inquiry participants’ findings with regards to Youth Allowance were much the same, if not more extreme, since Youth Allowance is paid at a lower rate than JobSeeker: young people on Youth Allowance find it extremely difficult to find and pay for rentals in the private market.
2.56Headspace highlighted that eligibility rules are complex and can work against young people:
… a 19-year-old on Youth Allowance currently receives 85 per cent of the amount of income support paid to a 22-year-old on JobSeeker despite their circumstances and costs being almost identical.
2.57The Rental Affordability Snapshot demonstrated that there were no rental properties across Australia affordable for a single person on Youth Allowance.
2.58The Youth Affairs Council of South Australia (YACSA) also drew the committee’s attention to the fact that this lack of affordable housing for young people on Youth Allowance leads to ‘“hidden” forms of homelessness like couch surfing, severely overcrowded housing, and unsafe living situations’.
2.59Uniting Vic.Tas drew the committee’s attention to the fact that, alongside the ‘grossly inadequate’ rate of Youth Allowance, there are significant barriers for young people to access interventions to prevent homelessness, and argued that governments should continue to develop supports for this cohort.
2.60Anglicare WA related the story of a renter who was worried about where they were going to live after the end of their lease, since they struggled to pay their rent even in community housing.
Disability Support Pension
2.61While the Disability Support Pension and the Age Pension are paid at higher rates than JobSeeker and Youth Allowance, the committee heard that people on these payments are still struggling with the cost of living and finding affordable rental housing in the current market.
2.62The Rental Affordability Snapshot found that only 0.1 per cent of rentals were affordable for a single person on the Disability Support Pension.
2.63Ms Linda Forbes, representing EJA, highlighted that, due to the barriers to accessing the Disability Support Pension, many Australians with disability are on JobSeeker instead, which is a considerably lower payment.
2.64Children and Young People with Disability Australia (CYPDA) noted that the Disability Support Pension does not adequately cover the costs of living, including housing, for people with disability, particularly because the cost of living is higher for people with disability. CYPDA also cited research showing that, in 2019, 11.2 per cent of Australians with disability were living in unaffordable housing, compared with 7.6 per cent of people without disability.
2.65The Financial Wellbeing Collective related a story from John, who was forced to transition to relying on the Disability Support Pension and Family Tax Benefit, totalling $1,268 per fortnight, when his rent was $1,000 per fortnight; and who was told it might take up to two years to place him in community housing.
2.66Anglicare WA shared a story of a Disability Support Pension recipient who was ‘terrified they’ll increase it [my rent] again and I’ll either lose my home or have to cut out even more essentials’.[108]
2.67The committee also heard from an anonymous submitter on the Disability Support Pension who lives ‘with the fear of being made homeless as there are no private rentals or share homes available for older disabled women’, and who has already been informed by local homeless services that ‘they don’t have any suitable accommodation for [her]’ if she is evicted.[109]
Age Pension
2.68Inquiry participants told the committee that the Age Pension is failing to make renting affordable for older people.
2.69The Rental Affordability Snapshot found that only 0.4 per cent of rentals were affordable for a single person on the Age Pension.
2.70Housing for the Aged Action Group (HAAG) highlighted that the low level of the Age Pension means that ‘older people are either forced to live under tremendous rental stress or being forced to find share housing options that are likely untenable’.
2.71HAAG provided a lived experience story from Ruby, who ‘experienced severe rental stress’ while on the Age Pension, paying ‘over half of her fortnightly income to her landlord’ and having to take ‘extreme measures’ to survive, such as disconnecting from the gas network and limiting electricity usage.
2.72Mr Peter Redshaw told the committee how, on the Age Pension, he ‘would never be able to afford … to rent in the private rental market’, and even in social housing his rent is around 40 per cent of his income.
2.73AHURI explained that addressing the generational divide in asset ownership will require ‘greater income support for households in older age’.
The effect of COVID-19 supplements
2.74Submitters noted that, during the COVID-19 pandemic, income support payments were supplemented for a period of time, and that this resulted in people having greater capacity to afford essentials, including rent, and, in many cases, escape poverty and homelessness.
2.75The Southern Homelessness Services Network (SHSN) explained that the coronavirus supplement enabled income support recipients to ‘avoid homelessness’ and to avoid having to make the choice of ‘whether to pay rent or eat’.
2.76CSMC argued that this demonstrates that raising the rate of payments can have a meaningful effect on poverty, and therefore that ‘the current levels of poverty are a policy choice’.
2.77Homelessness Australia found that rental stress among JobSeeker and Youth Allowance recipients more than halved in 2020 when they were also receiving the coronavirus supplement.
2.78Legal Aid NSW also ‘observed a significant reduction in social housing tenants seeking assistance in relation to rent arrears, during the period when Jobseeker was increased’. The St Vincent de Paul Society National Council similarly observed that the significant decline in people seeking accommodation assistance in NSW in 2020–21 was partly attributable to COVID-19 relief measures.
2.79AHURI cited research demonstrating the effectiveness of raising income support payments during the pandemic:
… income support interventions were far more effective in safeguarding homes … than direct interventions, for example through eviction moratoriums or rent relief measures.
Increased pressure on community organisations
2.80A wide range of inquiry participants testified that charities and other community organisations have been carrying the burden of supporting renters in the absence of adequate government assistance. This was captured by The Salvation Army’s submission:
In the 2022–23 financial year, 88 per cent of people seeking emergency relief are those reliant on government payments. This demonstrates how the JobSeeker payment, along with the social security system as a whole, fails to act as a safety net for those experiencing economic hardship, relying on the charity sector to fill the gap.
2.81The St Vincent de Paul Society National Council confirmed that:
… housing stress has significant spillover effects on the welfare and community sector, with individuals experiencing housing stress being 70per cent more likely to seek help from welfare and community organisations.
2.82The committee received evidence from a variety of organisations that renters are the largest cohort of people accessing their emergency relief services. For instance, Ms Sarah Pennell, Chief Operating Officer of Foodbank Australia, told the committee:
Last year the Foodbank hunger report highlighted that almost half—46 per cent—of food insecure households in Australia are renters. This is twice as many as homeowners with a mortgage. We also know these food insecure renters tend to be younger and that the cost-of-living expense is the primary reason why they are food insecure—so this is why the rental crisis is tipping them further into distress. We also know that 60 per cent of food insecure renters received food relief more often last year than the year prior, so the situation is absolutely getting worse.
2.83Uniting Vic.Tas also recorded rising demand for their food and emergency relief, tenancy assistance, mental health support, and financial counselling and support. They submitted that:
… people who come to us for support continue to tell us that a lack of affordable housing directly affects their ability to better their circumstances and look forward to a positive future.
Rent controls
2.84Throughout the inquiry, some participants suggested various forms of rent control to regulate the price of rent and alleviate the financial burden on renters. However, other participants also noted that some options for rent control may have unintended consequences, including potentially reducing rental supply and increasing homelessness.
2.85States and territories already regulate the frequency of rent increases. In most jurisdictions, increases are limited to once every 12 months, while some jurisdictions limit increases to once every six months.
2.86All states and territories have mechanisms for renters to dispute ‘excessive’ or ‘unreasonable’ rent increases. Generally, legislation states that the relevant state or territory tribunal may have regard to a number of factors when considering whether a rent increase is excessive or unreasonable, including: the amount of the last rent increase; the period of time since the last rent increase; the landlord’s outgoings or costs in relation to the premises; any work done to the premises by or on behalf of the tenant; the state of repair of the premises; and market rates for comparable premises.
2.87The ACT is the only jurisdiction to provide a specific guideline for the amount by which rents can be increased. As explained in the interim report, the regulations state that the ‘prescribed amount’ by which landlords can increase the rent is 110 per cent of the increase in the rents component of CPI for Canberra. If landlords wish to raise the rent above the prescribed amount, they must obtain written consent from the tenant or prior approval from the ACT Civil and Administrative Tribunal (ACAT).
Views on regulating rents
2.88A large number of inquiry participants supported some form of regulation of rents. Many pointed to the hardship that renters are experiencing as a result of ‘unsustainable’ and ‘unbridled’ rent increases. For example, Mr Thomas Chailloux, Policy Officer at the Homeless Persons Legal Service, said that:
… we are seeing rent increases that are completely unaffordable for our clients. Sometimes it almost feels as if the rent increase is voluntarily set at an unreasonable level to force the person out of the property. … So, people are already doing it tough and now it is just becoming impossible, and the recent modest increase in CRA has not kept pace with that.
2.89Submitters argued that limits on rents are needed to:
enable renters to afford necessities such as health care;
enable renters to feel secure and plan for their future;
enable renters to remain in their communities and maintain access to their social and employment networks;
protect renters from landlords using rent increases in a punitive or retaliatory manner; and
protect renters from opportunistic profiteering or price-gouging.
2.90For instance, Anika Legal, a community legal service in Victoria, submitted that:
Rental control will have a two-fold effect:
A slowing down of ever-increasing rent rises that are pushing rents up and up—especially in capital cities—and forcing people out of their homes and communities.
A stop to rental providers using punitive rent increases, or threatening to, in order to resist actioning renters rights or requests—something that we see too often through our services.
2.91Likewise, Better Renting, a community of renters, called for limits on rent increases because they argued that:
Limits are not just an affordability measure—they also support stability for both individual households and for neighbourhoods. They recognise the legitimate interest that tenants have in being able to remain in their home, and so part of their benefit is making it less likely that households are forced out by sudden and large rent increases. This also functions at the neighbourhood level, helping to preserve greater economic diversity and stability within neighbourhoods, with all the benefits that this brings at the community level. Rent controls also curb the market power of landlords, limiting the ability of landlords to extract economic rents.
2.92The committee heard that any regulation of rents should be accompanied by the removal of no-grounds evictions. If landlords are able to evict tenants without grounds, submitters suggested that ‘tenant flipping’ may occur, whereby ‘landlords … turn over tenants more frequently so that any rental increases are not subject to statutory or contractual restrictions’. As PIAC explained:
… reform of no grounds evictions to prescribe grounds is a pre-requisite to regulation of rent increases amounts. Otherwise, landlords who wish to raise the rent can simply evict the current tenant through a no grounds eviction and re-advertise the property at a higher price.
2.93On the other hand, multiple inquiry participants opposed the regulation of rents, arguing that such regulation would severely impact property investors and lead to a reduction in the supply of affordable rentals. For example, the Grattan Institute suggested that ‘in the long term, strict forms of rent control … risk reducing both the quantity and quality of housing available’.
2.94Treasury and DSS argued that rent controls ‘can lead to a reduction in the number of rental properties, drive up market rents and create rental market inefficiencies’. Dr Michael Fotheringham, representing AHURI, stated that ‘the blanket provision of rent caps is harmful’.
2.95Landlords and real estate peak bodies emphasised that such regulations would reduce investors’ rental yield and cash flow at a time when they are ‘facing rising cost pressures’ including increased mortgage, strata and council rates, insurance premiums, land tax, and maintenance and repair costs. Property Investment Professionals of Australia (PIPA), for instance, claimed that:
… a typical investment loan of $450,000 has seen interest rates rise 400 basis points since May 2022 (as at time of writing). This reflects $18,000 in additional interest charges per year, or $356 per week – a figure well in excess of rent increases.
2.96Some submitters warned of a decline in the standards of rental housing as landlords may be unable to afford maintenance.[161]
2.97Various submissions claimed that limits on rents would disincentivise new investment and cause existing investors to either sell their properties or move them into the short-term accommodation market.
2.98A number of landlords argued that limits on rents would unfairly punish them for trying to save for their own retirement. One property owner wrote:
The majority of rental property owners are mum and dads with single properties, not large corporates or wealthy individuals with numerous properties. … These investors, ourselves included ,are [sic] trying to establish a long term income stream for retirement funding, thus reducing the burden on the woefully inadequate aged pension scheme.
2.99A ‘mum and dad investor’ from Queensland stated that ‘the rent control measures recently introduced by the Queensland government have negatively impacted us and our view on supplying our rental properties to the market’.
2.100Various submitters contended that rather than regulating rents in the private market, governments could more effectively address rental affordability by boosting the supply of rental housing (especially social housing) and increasing financial assistance for renters.
2.101Conversely, several inquiry participants cast doubt on claims that landlords would exit the private market if rents were regulated. For instance, Better Renting submitted:
We tend to be sceptical of this argument, given that it comes from the real estate industry which otherwise favours higher rents, and also because it’s the very same argument they use against everything else, from mandatory smoke alarms to giving renters the right to have a pet. Belying the Henny-Penny claims made by the industry, despite years of iterative rental reform in Australia and other jurisdictions, the sky has never yet fallen in.
2.102Mr Joel Dignam, Executive Director of Better Renting, suggested that landlords’ decisions about whether to divest are more influenced by their life circumstances (including whether it is a good time for them to realise their capital gains), rather than tenancy regulations.
2.103Dr Cameron Murray of the University of Sydney suggested that investors selling their properties may in fact have positive outcomes by giving renters the opportunity to become homeowners:
… the fewer landlords there are, the more homeowners there are. That’s if they sell en masse. … So if we want higher homeownership we actually can’t escape the reality that higher homeownership means landlords must sell.[171]
2.104Further, several inquiry participants indicated that the concern about rent controls leading to a decline in the standards of rental housing could be addressed by the introduction of minimum standards for rental properties.[172] Other inquiry participants pointed out that maintenance costs are tax deductible for investors due to negative gearing.
2.105While NT Shelter acknowledged that ‘higher interest rates and mortgage stress will inevitably result in the need to consider rent rises’, they called for regulation to ensure that rent increases are ‘fair and reasonable’. Similarly, the National Association of Renters’ Organisations (NARO) submitted that regulation could ensure that rent increases are ‘chiefly associated with improvements in service or housing quality’ in order to compensate landlords for their efforts while keeping rents manageable for renters.
2.106Anglicare WA emphasised the urgency of the current rental crisis and the need for immediate protection for renters from excessive rent increases.
2.107Some inquiry participants supported rent controls but not rent freezes, such as Mr Travis Gilbert, representing ACT Shelter, who stated that ‘I think a rent control rather than a freeze is something that is workable. My fear with an actual freeze is that we would see eviction rates start to increase’.
2.108While The Salvation Army recommended ‘reforms to stabilise rent prices including by setting clear limits for rent prices and increases’, Ms Jennifer Kirkaldy, the General Manager of Policy and Advocacy, noted uncertainty about the potential effectiveness of rent freezes: ‘We, the Salvation Army, don't have a formal position. We haven't yet seen enough evidence to show that a freeze on rents is actually going to help.’
Mechanisms to regulate rents
2.109Submitters pointed out that various types of rent regulations exist in many overseas jurisdictions. Per Capita noted that:
A large proportion of countries operate some form of rent control as part of their housing policy, usually at the municipal or state level. … around half of European Union (EU) countries operate a form of rent control, as do regions of Canada, the USA [United States of America], Korea and Japan.
2.110Rent controls are generally categorised into three ‘generations’, with the first generation being the strictest:
first generation rent controls include ‘rent freezes’ and are ‘effectively a dollar limit on how much can be charged to rent a home, often in reference to a state mandated set of rules’;
second generation rent controls regulate ‘rent increases between tenancies’ while ‘allowing rental adjustments to reflect things such as the costs of refurbishment’; and
third generation rent controls regulate ‘rent increases within tenancies’ while ‘allowing a return to market levels between tenancies’.
2.111Several inquiry participants indicated that first generation rent controls have been the focus of much of the econometric research on rent controls to date, and this has ‘obscur[ed] the diversity of rent regulation and the plausible benefits of well-designed regimes’. Per Capita, for instance, noted that ‘carefully designed’ second or third generation rent controls ‘may reduce the prevalence of rent spikes and tenant insecurity’.[189]
2.112AHURI noted that the impacts of rent controls depend on a variety of factors, including ‘existing rental tenancy protections, ... the availability of sufficient rental supply, and … the duration of leases’. AHURI warned that ‘care needs to be taken in generalising from the results of [international] research’ because ‘there are many different ways of regulating rents, and many different housing systems contexts’.
2.113Similarly, Treasury and DSS noted that:
Caution should be exercised applying like for like when comparing international examples with Australia’s unique rental market and its demographic composition.
Limits on rent increases
2.114Inquiry participants proposed a range of ways to design regulation on rent increases, such as a mechanism for challenging excessive or unreasonable rent increases, and limits on the frequency and amount of rent increases (sometimes referred to as ‘rent caps’).
2.115National Cabinet has agreed in ‘A Better Deal for Renters’ to:
Move towards a national standard of no more than one rent increase per year for a tenant in the same property across fixed and ongoing agreements.
2.116As noted above, most jurisdictions already regulate the frequency of rent increases to once every 12 months,[197] while some jurisdictions limit increases to once every six months.[198]
2.117Inquiry participants held divergent views about the desirability and efficacy of the different types of regulation on rent increases.
Challenging excessive or unreasonable rent increases
2.118As noted above, the main way that Australian residential tenancies legislation regulates rent increases is by providing for renters to dispute ‘excessive’ or ‘unreasonable’ rent increases.
2.119A range of inquiry participants supported the strengthening of provisions in residential tenancies legislation that allow excessive or unreasonable rent increases to be challenged.
2.120Criticism was levelled at existing regulations for placing the onus on renters to challenge rent increases. Submitters noted the various barriers that renters face when challenging rent increases, such as ‘fear of retaliation, lack of awareness of their legal rights, and language barriers’, lack of capacity and access to timely legal services, as well as ‘asymmetry of information, with market data far more readily accessible for landlords and property managers than tenants’.
2.121Additionally, the legislative provisions that require renters to challenge rent increases within a certain period of time were said to impose timeframes too short for renters to be able to ‘make a relatively complex application to court’ and obtain legal advice.
2.122A number of submitters complained that comparable market rents are usually the chief consideration when tribunals assess whether a rent increase is excessive or unreasonable. The Tenants’ Union of NSW argued that in the current rental crisis, market rents do not reflect the fair market value of a property:
… the failure of the rental housing system—with tight supply and little to no regulation of rents—has generally resulted in current market rents not being in line with what the community considers ‘fair market value’. ‘Fair market value’ is generally considered to be a price both parties are willing to enter into, where both are acting in their own best interests and are free of undue pressure.
Under the current system, rents are being set at a price that renters are 'willing to pay', that is—they accept the rent increase and may not move out—but this is only because they feel forced to. They are facing undue pressure given the current housing crisis.
2.123As such, the Tenants’ Union of NSW argued that market rents should be given less weight when determining whether a rent increase is excessive or unreasonable, and considerations should be broadened to include the ‘renting household’s ability to pay an increase and more general affordability concerns’.
Limiting both the frequency and amount of rent increases
2.124Inquiry participants claimed that limiting the frequency of rent increases alone would not be effective as landlords would simply increase rents by a larger amount on the occasions that they are allowed to increase rents.
2.125In Queensland, for example, where legislation restricts rent increases to once every 12 months, Q Shelter observed a ‘surge in what people [landlords] are asking at that one time a year, and then that can cause people [renters] to quit their tenancy’. Likewise, Dr Amy MacMahon, MP for South Brisbane, submitted that the Queensland restriction on the frequency of rent increases is having ‘perverse outcomes’ such as:
… landlords evicting people after 6 months to get around the 12-month limit, tenants being asked to submit fraudulent tenancy agreements to get around these rules, and extreme rent increases.
2.126Catriona, a private renter in South Brisbane, testified that her real estate agent had issued a notice of lease termination in an attempt to raise the rent and circumvent the legislative restriction on rent increases.[212] She quoted an email from the agent stating:
Under the new rent cap legislation, the owner is unable to increase the rent again within a 12 month period. Moreover, the current rent of $500 is well under market value. The average rent is now $550 to $580 for a one-bedroom, unfurnished apartment. Given the big jump in the owner's mortgage repayments and the inability to increase the rent until next year, the owner has no other choice but not to renew the lease.[213]
2.127In recognition of these concerns, the Queensland Government released a discussion paper inviting suggestions for potential further reform to its rent increase regulations.
Limits to rent increases
2.128Inquiry participants suggested limiting the amount of rent increases to the rent component of CPI; average wage growth; or a flat percentage amount.
2.129Energetic Communities argued that:
Limiting increases to CPI is fair to both parties. It maintains returns to landlords, including through capital growth, whilst providing affordability, predictability and stability to renting households.
2.130The South Australian Council of Social Service (SACOSS) described the proposal to limit rent increases to CPI as ‘fairly modest’, pointing out that it would not significantly curtail rent increases:
… the most recent CPI data shows that even with the current rent price hikes many landlords would be unaffected by limiting rent increases to CPI. Over the last year (June Quarter 2022–June 2023) the CPI for rent in Adelaide increased by 6.9 [per cent], as did the general Adelaide CPI. (The later [sic] was 6 [per cent] nationally). So, a CPI cap on rent increases would still allow for a 6 [per cent] increase (or 6.9 [per cent] increase if done on the Adelaide data), but this would still be beneficial because it would prevent more excessive rent increases.
2.131Submitters acknowledged that there would need to be limited exceptions where rents could increase by more than CPI, for example where the landlord has made substantial improvements to the property.
2.132Mr Shane Rattenbury MLA, Attorney-General of the ACT, told the committee that there is no evidence that the ACT’s CPI-linked guideline for rent increases has negatively affected rental supply:
In the ACT, rental yields in housing investment remain strong, which indicates that, even though we've got well-advanced and well-developed tenant rights, investors continue to enter into the market and offer properties. I can point to the fact that, in the 10 years from 2012–13 to 2022–23, the number of rental properties in the territory has increased from 37,000 to 56,500 and, as our submission notes, the rental yields have continued to be very strong as well.
2.133The ACT Chief Minister has stated that the ACT’s rental caps ‘only work when accompanied by a very significant supply-side increase’.
2.134The ACT Government has also noted that the ACT guideline is not a strict rent cap as it does not prohibit landlords from raising rents above the prescribed amount, but rather, requires landlords considering a rent increase above the prescribed amount to obtain written consent from the tenant or obtain prior approval from ACAT.
2.135Both NARO and the ACT Council of Social Service (ACTCOSS) expressed support for the ACT rent regulations, arguing that the regulations have provided certainty and stability for renters without diminishing rental supply.
2.136While the Grattan Institute supported regulations linked to CPI to protect renters from ‘large, sudden rent increases’, it suggested that the guideline for rent increases:
… should be set much higher than that currently in the ACT—such as between 1.5 times and twice the growth in the benchmark rental price index—in order to avoid distorting rental prices in long term.
2.137The Grattan Institute further proposed that ‘more granular’ rent increase guidelines should be developed to reflect the differences in rental market conditions across the country:
… the ACT is a relatively homogeneous rental market covering a small geographical area. The rental component of CPI is likely a much more suitable benchmark for a market such as the ACT than for the states. For example, it could be distorting to use the Brisbane CPI to benchmark rent increases in Townsville which is 1,350km away.
2.138Tenants Victoria urged governments to cap rents pursuant to a ‘fairness formula’, a proposal that was supported by a number of submissions. Tenants Victoria underscored that a fairness formula would recognise ‘housing as a human right and an essential service’.
2.139Tenants Victoria did not prescribe what such a fairness formula would look like, but ‘left it up to the policymakers to work on a formula’ that would relieve the pressure on ‘people facing unsustainable rent increases’. The value of a rent cap in alleviating the burden on renters was reiterated by a submitter who stated, ‘a cap of rent increases is desperately needed until affordable rental properties become available’.
2.140Ms Amy Frew, Director of Client Services at Tenants Victoria, emphasised that rent caps would offer renters security of tenure, allowing renters to plan for their future and avoid having to relocate, though Tenants Victoria noted that it ‘hasn’t endorsed a rent freeze for Victoria’.
Limits on rents for new tenancies
2.141Submitters differed in their views about whether limits on rent increases should apply only to sitting tenants, or to new tenancies as well.
2.142Some argued that the restrictions should only apply to sitting tenants and that rents at the start of new tenancies should continue to be set by the market because ‘high new tenancy rents … would operat[e] as a price signal to bring new supply to the market’. Additionally, submitters argued that regulating rents for new tenancies would be practically difficult as it would:
… requir[e] the authorisation of some agency to determine new tenancy rents, including where the dwelling has not been let before; new records recording rents so determined; and investigations and enforcement processes where no contract yet exists between parties.
2.143Conversely, others argued that limits on rents should apply ‘to the property rather than the tenant’, so that landlords would not be able to evict a tenant for the purpose of re-advertising the property for higher rent.
International experience
2.144Several submitters pointed to limits on rent increases that are in place in the Netherlands, Canada, Germany, Ireland, Scotland, Sweden and Spain as successful examples of rent controls.
2.145Several submitters highlighted that the Netherlands currently limits rent increases to once every 12 months and sets the maximum for each increase at one percent above inflation.
2.146Ms Penny Carr of Tenants Queensland indicated that many Canadian provinces ‘have had limits on rent increases plus just-cause evictions for many years, and the sky hasn't fallen in’.
2.147In Germany, rents are capped for sitting tenants at a percentage above a reference rent that is set by a local authority. This ‘aims to prevent landlords from significantly increasing rents above the average market rates’. The Committee for Economic Development of Australia (CEDA) stated approvingly that the German approach ‘has maintained a link with market rents without forming a barrier to investment’. According to the Western Australia Council of Social Service (WACOSS):
… the Global Research Head of Aberdeen Standard Investments wrote in the Financial Times that the German experience has demonstrated to them that rent control has benefits for both landlords and tenants due to the stability and predictability that it creates.
2.148In Ireland and Scotland, annual rent increases are capped in certain areas designated as ‘Rent Pressure Zones’ (RPZs) ‘based on evidence of excessive rent increases, high demand, and limited housing supply’ in those areas. The regulations create exemptions for new builds and properties that have undergone significant upgrades. CFRC submitted that this sort of regulation would:
… protect tenants from high rent increases that might otherwise put their housing at risk, while more or less maintaining the real value of the landlord’s return on their investment.
2.149In Sweden, rents are ‘set through collective bargaining between the national tenant’s union and rental providers’ in an effort to ‘maintain stable and predictable rental costs for tenants while ensuring a fair return on investment for landlords’.
2.150In Spain, caps on annual rent increases were introduced in late 2022. Rent increases are currently capped at two per cent, and that cap will increase to three per cent in 2024. Since the introduction of these caps in certain municipalities in Barcelona, the committee heard there has been a reduction in rents in these areas without reducing rental supply.
2.151Conversely, several inquiry participants disagreed that these rent controls have been effective overseas. PIPA stated that Irish rent controls had been ‘devastating to its tenant population’ as small landlords had exited the private market enmasse, leading to a severe shortage of rental housing. In a similar vein, CEDA claimed that Swedish rent controls have ‘lowered the supply of rental dwellings in some locations, discouraged mobility and led to long waiting lists for rental housing’.
2.152Critics of rent caps commonly pointed to New York City (NYC) to demonstrate the risks of rent controls. NYC contains a combination of rent-controlled and rent-stabilised properties—the rent of rent-controlled properties can increase ‘up to a ceiling rent determined by a rent control board’, while rent-stabilised properties are subject to restrictions on the frequency or amount of rent increases. Submitters claimed that rent controls in NYC lowered the value of properties that were subject to the controls; reduced the mobility of renters; and led to a misallocation of housing stock. For example, one submitter cited a property investment publication that stated:
With price mechanisms distorted, individuals may consume more housing than they need, as seen in New York, where large rent-controlled apartments are occupied by empty nesters, while young professionals and migrant workers struggle to find housing. Rent control also tends to create a divide between 'insiders', who are lucky enough to secure a rent-controlled home, and 'outsiders', typically newcomers who face decreased housing availability and increased market rates.
2.153Some inquiry participants argued that San Francisco’s restriction on rent increases had contributed to gentrification, as property owners sought to avoid the restrictions by converting their properties to condominiums and selling them for high prices.
2.154REIQ said that rent stabilisation in St Paul Minnesota had also disincentivised property investment:
… property developers and financiers withdrew permit applications and projects after the law was passed and the city quickly acted to repeal the law due to the detrimental impact it had on the housing market.
2.155Some investors noted that there are ways to circumvent rent caps, for example by ‘massively increas[ing] their rents as much as possible to provide a buffer for the situation where rents cannot be increased’ and resorting to subletting:
… e.g. one individual will lease 10 properties at a capped rate, and then sublet them to prospective tenants at a much higher rate (e.g. using AirBNB, classified advertisements etc)
Rent freezes
2.156A range of inquiry participants called for temporary rent freezes to provide emergency relief for renters. Some submitters argued that a rent freeze would be an appropriate response to the urgency of the current rental crisis.
2.157Some suggested that a rent freeze would break the cycle of unlimited rent increases and make rents manageable for people on lower incomes. CFRC pointed out that:
… the notion of such a freeze in ‘emergency conditions’ is far from alien to Australia; the height of the COVID-19 pandemic saw such action implemented across much of the country. In the circumstances prevailing at the time of this Inquiry—the extraordinary rent increases seen over the past three years—there is some justification for arguing that a different kind of housing market emergency is indeed ongoing.
2.158Likewise, Mr Christopher Carr of WEstjustice, a community legal centre in Victoria, testified that rent freezes and caps were historically used in times of crisis; and supported the imposition of these rent controls during the current rental crisis:
We have historically capped rent, frozen rent, in Victoria and I'm sure in other jurisdictions. Rent, I believe, was capped in Victoria during the Great Depression. … We capped rents after World War II for returned servicemen. We froze rent increases during COVID just recently. I don't view their current circumstance facing renters as all that different to those circumstances. … This is an economic crisis which has health impacts as well on people. I would support the freezing and capping of rent increases.
2.159Professor Libby Porter of RMIT University supported the introduction of rent freezes to ease the pressure on emergency services:
… we must consider rent freezes. Otherwise, what we'll have is just continuously burgeoning numbers of people on waitlists, where they will never get any access, and fronting up to homelessness shelters where there is no capacity to house them safely and adequately at all. Those sectors are stretched to breaking. We must control and freeze rents urgently.[270]
2.160Dr Cameron Murray of the University of Sydney noted that Scotland, Catalonia and Berlin had enacted temporary rent freezes in recent years.
2.161Several submissions recommended implementing a nationwide rent freeze for two years, followed by a cap on rent increases. The ACT Greens submitted that a rent freeze should be enacted in combination with other measures as part of a holistic housing reform package, ‘including building or acquiring more public, social and affordable housing’.
2.162On the other hand, a range of inquiry participants opposed the introduction of rent freezes, expressing concern that rent freezes may have ‘unintended consequences and … operate in a prohibitive manner’. Numerous landlords stated that investing in residential rental properties would no longer be financially viable for them if rent freezes were implemented. Daryl, a private investor, stressed that if rents were frozen, investors would struggle to meet rising holding costs:
If you freeze rents are the costs incurred by the private property investors also to be frozen? I doubt it. Is the federal government going to freeze values that they assess capital gains tax on? I doubt it. Are the state governments going to freeze the values and the rates that land tax is assessed on? I doubt it. Are the local authorities going to freeze rates, water and sewerage costs? I doubt it. Is the government going to force insurance companies to freeze insurance costs, which are going through the roof at the moment, and force tradesmen to freeze their building and maintenance costs? I doubt it.
2.163Other inquiry participants pointed out that expenses related to investment properties are tax deductible due to negative gearing.
2.164According to some submitters, international experience had demonstrated that ‘hard rent controls, such as rent freezes, have significant potential downsides’. For instance, Mr Andrew Barker, Senior Economist at CEDA, commented that:
Countries that have introduced … rental freezes across the board have ended up having a situation where there's been less new housing supply coming on, there's been queuing for the available rentals and people who are in those rentals don't move because they know they're in a very good situation. That undermines housing mobility, which is important for labour mobility and the functioning of our labour market.
2.165Treasury and DSS cited research that showed the negative effects of Berlin’s rent freeze:
In their study of Berlin’s brief 2020 rent freeze, Hahn et al. (2023) found that although advertised rents dropped significantly, there were rapidly growing asking rents in unregulated surrounding areas—highlighting a substitution effect. Hahn et al. (2023) also noted a significant decline of advertised rental units, hindering renters’ flexibility. First time renters, particularly young people, faced difficulty in finding a place to live and Hahn et al. (2023) are seeing evidence the drop in rental housing supply may be a permanent decline instead of transitory.
2.166However, Mr Leo Patterson Ross, representing NARO, pointed out that Berlin’s rent freeze had lasted less than two years, which he argued was not enough time to properly assess its impacts.