Rent Freeze – Is this the perfect answer?
The Queensland government has introduced a National Rent Freeze legislation, which comes into affect from July this year.
The rent freeze prohibits the landlord from increasing a tenant’s rent within a 12 month period. This stands if one or all of the tenants remain in the unit. The rent can be increased if the existing tenants choose to vacate the property and a new lease is created, however you can’t evict the current tenants just to get new tenants who will pay the higher rent.
What does this mean for renters?
Stability, predictability and peace of mind.
Potentially paying higher than market rent to begin with as the owner will be predicting the next 12 months when they set the rent.
What does this mean for the landlord?
Possible unexpected financial hardship – This would only happen if the tenant is currently on a 6 month lease which is new or had a rental increase on their last lease. The landlord may have been expecting to pout the rent up at the end of their lease, and now is prohibited to.
What it means for Realty Road and Oxford Mews & Residential renters and landlords:
No change for most people.
As a company we already have leases in place for a 12-month period which as a tenet mean we freeze your rent for that time. This is to give the stability and peace of mind to both owners and tenants. We already do an involved market analysis and track expected growth, then set the rents accordingly. The only time I will suggest a shorter lease, is at the start of a tenancy, where we have new tenants moving in.
In this case we would have to impose the rent freeze, however the 6 month lease still gives us flexibility to end the lease. Evicting tenants mid-lease is not easy, therefore a short lease gives us the clean break if we deem the tenants to be unsuitable. It works the other way too, that if the tenant feels they’ve moved into an unsuitable place, they’re not having the stress of breaking lease.
As with any legislation, there are exceptions for special circumstances. While the rent freeze is in place, landlords may seek exceptions for specific circumstances, such as significant property renovations or improvements that warrant a rental increase. However, these exceptions will be subject to scrutiny to ensure they are genuine and reasonable, and must be agreed upon by all parties.
Long term I don’t see the rent freeze having a big impact on the rental crisis or housing market. I think what we hear in the media is only the extremes of what’s actually going on. From what I see most landlords and property managers are being fair and reasonable when it comes to rent increases. I also see that most tenants are appreciating that the cost of living is rising across the board for investors too, so can appreciate where the owner is coming from when there is an increase put in place.
Perhaps the rent freeze will negatively impact the confidence of new investors who see it as being too restrictive if the cost of owning a house increases significantly throughout the 12 months. This could prompt them to put their money in likes of shares instead of real estate, which will only have a negative flow on effect to the rental crisis, however I don’t see this being a major concern for seasoned investors who have already whether a number of storms in the past few years. As always in real estate, only time will tell.
