Residential Tenancies (Rent Freeze) Amendment Bill 2024

The Hon. J.S. LEE (22:11): 

I rise to speak on the Residential Tenancies (Rent Freeze) Amendment Bill 2024. While the bill by the Hon. Robert Simms is well intentioned, aiming to provide relief to renters facing escalating costs, I indicate that I will not be supporting the bill.

My opposition comes from a deep concern for the long-term consequences that this bill may have on our housing market and the broader economy. I spent a lot of time meeting with members of our community. Many of these community members are renters, and I have heard countless stories from renters struggling to make ends meet and I empathise with all of them. I recognise that this bill is born out of genuine concern by the Hon. Robert Simms for renters, and rightly so. The cost of living is rising and many are struggling. However, it is uncertain whether or not the proposed solutions are sustainable and will inadvertently exacerbate the problem.

The bill proposes a two-year rent freeze followed by annual caps based on CPI. The proposed rent freeze, while offering short-term relief, poses significant risks that could undermine our housing market and hurt renters in the long run. Experts warn that such measures can reduce rental supply, discourage investment and lead to underinvestment in property maintenance. As economist Brendan Coates of the Grattan Institute puts it:

Rent control has a seductive, intuitive appeal…but it also potentially has some big costs in the long run. If you do have rent control in place, then you are limiting the ability of the market to tell investors, developers, everyone else that we need more housing…and you can have a situation where basically the existing housing stock isn't maintained very well.

This insight underscores the danger of well-meaning policies that fail to account for long-term market dynamics. It has been documented that rent freezes can discourage investment in rental properties, leading landlords to exit the market or convert properties to owner-occupied dwellings. This reduction in rental supply can tighten availability and make it even harder for new renters to find housing. We must consider the long-term implications of such policies and ensure that our housing stock remains well maintained and liveable.

Rent controls can distort market signals, reducing housing mobility and entrenching inequality between existing and prospective tenants. We have seen this play out before in Berlin and New York and the results were far from ideal. Rent controls in these cities have shown that rent freezes can lead to black market rentals and reduced turnover, ultimately worsening housing outcomes. While this approach aims to provide stability, it fails to address the underlying issues of housing supply and affordability.

Even without intervention, we are already seeing signs of market correction. Data released by PropTrack in January showed that rents had begun to decline in over 100 South Australian suburbs. Considering this, market forces may very well be recalibrating without any legislative intervention.

We must pay attention to all the factors and consider alternative solutions that address the root causes of the housing crisis. While this bill attempts to address a real and urgent issue and may offer temporary relief, its approach may be economically risky and potentially counterproductive.

I believe that we can take on all the arguments presented for this bill tonight and use them to call on both state and federal governments to pursue more targeted and sustainable solutions, such as expanding rental assistance, increasing investment in social and affordable housing, and reforming planning laws. With those remarks, I indicate that I will not be supporting the bill.