The Real Estate Institute of Australia has slammed the Labor government's proposal to cap rents in Australia REIA president Pamela Bennett said capping rents would be "disastrous" for rental affordability and the property market.
Earlier this week, the Labor government said it would look at monitoring the rent costs in the private rental market and examine mechanisms to maintain affordability such as the introduction of rent capping legislation.
"To cap rents in the private rental market would be counterproductive to the objectives of improving affordability. It would reduce the supply of rental housing which would be detrimental to rental affordability," Ms Bennett said.
"If the proposal was implemented, the impact could be similar to the outcome of the Hawke Government's decision in 1985 to deny investors tax deductibility of interest payments. The market response led to an undersupply of rental property and escalating rents, before the decision was reversed in less than two years.
"The proportion of income required to meet rent payments is currently 24.8 per cent while the proportion of income required to meet loan repayments is 34.6 per cent.
"Rental affordability has been relatively stable, at around 25.0 per cent of family income, for the past three years with some slightly improvement in affordability in recent times.
"The proposal is not sustainable and when it is reversed, rents will soar. This is an extremely important issue and one that should not be taken lightly."