The Real Estate Institute of the ACT (REIACT) is deeply concerned  about the recent CPI figures for rentals in the ACT, which limit landlords to rent increases of less than  1% annually without being deemed “excessive”.

This restriction poses significant financial challenges for landlords providing rental housing in the ACT who have already faced substantial increases in  other charges, such as interest rates, land tax, Rates, Body Corporate fees and insurance. Land tax alone has been an increase of 5% in the past 12 months. 

In real terms, this means, on a property with a current rent of $580 per week, the maximum a  landlord can increase the rent is $5.74 per week. 

Furthermore, many real estate agencies in the ACT are small businesses which offer property  management-only services, and they charge a percentage of rent received as a management fee. In  the case above, they would only receive an increase of around 40c per week or an extra $20 per year for managing that property.

This is sending those small companies to the wall when trying to keep their businesses running in employment costs alone. 

The cap on rental increases, which does not reflect the true cost of maintaining rental properties, will deter future investment in the rental market, especially when coupled with further mandatory  upgrades also being proposed in the latest review of minimum standards. 

“The current policy is unsustainable for landlords who are already absorbing rising costs in multiple  areas.

The current cap on rental increases that fails to consider the broader economic context will  inevitably lead to a decline in the quality and availability of rental properties along with the Agencies  who manage them,” REIACT CEO Maria Edwards said.  

“This is particularly hurting Mum & Dad investors, many of whom have worked hard to secure their  financial future and that of their children. Capital gains from investment properties are often used to  self-fund retirement or to provide adult children with a deposit to purchase their own home, what is  the incentive anymore for ACT investors who are currently going backwards financially. 

“The ACT government must recognise the adverse effects of this policy on the rental market. We  urge policymakers to consider a more balanced approach that protects both tenants and landlords.

It is time to ‘scrap the cap’ and develop a strategy that ensures the sustainability of rental housing in  the ACT, no other jurisdiction in Australia has adopted such regressive policy and Canberra renters  will ultimately pay the price,” added Edwards.