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ANGE:

From Schwartz Media, I’m Ange McCormack. This is 7am.

The government says its key policy on affordable and social housing is set to pass the senate this week – after securing the support of the Greens yesterday.

Audio excerpt– Anthony Albanese:

“I am indeed very pleased that the Housing Australia Future Fund now has majority support in the Senate.”

The Greens had hoped to force the government to support a cap on rents…

Audio excerpt – Max Chandler-Mather:

“The bottom line is we weren't able to convince the Labor Party to care about the one third of this country who rents.”

ANGE:

But after months of tense debate over the idea, they will pass the bill without a commitment to a rent freeze.

Audio excerpt – Adam Bandt:

“$3 billion that will help renters is now going out the door thanks to the Greens. And now we will use that same pressure, and that same power, to push for a rent freeze and rent caps.”

ANGE:

So how did rent caps become such a sticking point? Are they even possible in Australia? And do they actually work?

Today, Honorary Research Fellow in Urban Geography and Planning, and contributor to The Saturday Paper, Dr Kate Shaw, on why rent controls in Australia are so controversial.

It’s Tuesday, September 12.

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ANGE:

Kate, here in Australia, the debate about rent control has become very politicised and there's a lot of conflict around whether they actually work or not. What is the criticism as to why rent control wouldn't work here?

KATE:

It's unfortunate that the current federal government has completely fallen into line on this orthodoxy.

Audio excerpt – Anthony Albanese:

“This isn't an SRC. This is a national government. This is a national government. And what national governments have to do is put forward real solutions to issues.”

Audio excerpt – Julie Collins:

“Secondly, of course, Mr. Speaker, the experts and the evidence tells all of us that it would make the situation worse, that it won't work. Indeed…”

KATE:

We have the Minister for Housing, Julie Collins, in and out of Parliament declaring quite confidently that experts agree that rent controls don't work.

Audio excerpt – Julie Collins:

“When you look at the evidence that is being cited by others, the evidence shows that it reduces supply significantly by up to 15%. The other thing that it shows is the quality of the stock diminishes over time.”

KATE:

Well, she is mistaken. Experts do not agree on this very important point.

So there are two main strands to the argument against rent controls. One is that if maintenance costs exceed rental income, that that will result in poor property maintenance, the other is that a blanket suppression of rents will suppress new builds, will actually reduce the amount of supply. And both of these cases have a basis. They're not completely plucked out of the air, but they're nowhere near as categorically substantiated or universally enacted as much as the people say they are.

ANGE:

So Kate one of the arguments against rent control is that if we instilled rent control, that, you know, housing supply would be impacted. What do you make of that argument?

KATE:

Well, the argument that rent controls cause a reduction in supply is one that is pretty regularly wheeled out. And in fact, Kos Samaras made this argument, I think, in the podcast and in his piece a few weeks ago, there was a case cited in Paris where rent controls were instituted in 2015 and repealed in 2017, two years later. Kos attributes that to a massive reduction in housing stock in that time. In fact, that wasn't the reason for the repeal at all. It was just an administrative jurisdictional matter. When it went to the court the court ruled that rent controls couldn't just apply on a citywide basis, they needed to be regional across the whole of France. And so, in 2018, the national government re-legislated for rent controls to apply across the whole of France, and currently rent caps apply now in 24 cities in France. Rent controls have actually had a very good effect across France, and there are very few instances where new-build housing supply is affected at all.

ANGE:

I want to ask about one of the arguments put forward about poor property maintenance and the idea that if there were rent controls, it would disincentivize… or mean that landlords have less funds and opportunity to keep properties maintained to a good standard. Why wouldn't that be the situation that plays out if we did have rent controls? And isn't that a concern when, you know, plenty of renters already struggle to get their landlord to fix the leaking tap or, you know, maintain their property to a good standard?

KATE:

The case that all of the opponents to the rent control roll out is that of New York, and New York in particular did suffer from a rent freeze that was set below market level in the interwar period in the thirties and forties and after the Second World War. That was to prevent profiteering, because obviously there was a housing shortage after the Depression. However, in the land of the free where property investors do it for the purposes of making money, there was strong kickback against the fact that they couldn't make as much money as they wanted to, or as much money as they could. And so even when they could actually afford to improve the properties and maintain them, there was a refusal. So we ended up in a situation where a lot of New York's housing stock was obviously old, but also becoming dilapidated.

ANGE:

And New York is often held up as an example of how rent control can be flawed, but that was a long time ago. Are there more contemporary examples of where we see rent control working today?

KATE:

Yes, certainly most countries in Europe, and North and Western Europe in particular, and quite a few states in the US. Other countries like Scotland, Ireland, Canada all have rent caps in place, and have for many, many years. Overall it's standard, it doesn't raise many eyebrows. There's always pushback, but as far as the countries are concerned, there are very few negative effects.

And when there are negative effects, governments can respond to those. And they can adjust the rent cap, and they can have clauses to help people in hardship. You know, owners, for example. So it's not as though it's this kind of fixed, immutable, you know, communist blanket on everything that is going to terrorise small private landowners out of the market entirely.

But I think the way through this is always to look at who the beneficiaries are of these arguments.

ANGE:

We’ll be back after this.

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ANGE:

Kate, We're talking about rental controls and the arguments put forward by certain groups and politicians even, who insist that they won't work. Can you tell me a bit about where this rhetoric has come from?

KATE:

Oh, look, it's an article of faith. It comes out of the neoliberal political paradigm that started with Reagan and Thatcher in the seventies and eighties. Since then, it has become so broadly accepted by those who advocate it, that it is unquestionably correct. Who are they? They’re the classical and neoliberal economists, the think tanks, the economic institutes, the real estate lobby, developer organisations and lobbyists. They're perpetuated by mainstream media and conservative media.

Audio excerpt – Unknown:

“Why don't you like the Greens idea of a rent freeze for two years followed by a rent cap? What's the difference between the two?

Audio excerpt – Brendan Coates:

“So the freezing rents and then a street rent cap where it can only rise by 2% every 24 months…”

KATE:

And in essence, all of these organisations represent the beneficiaries of property price increases.

Audio excerpt – Brendan Coates:

“Is a bad idea because it risks doing more harm than good. It may help some renters today but what the problem is that the reason why rents are rising so sharply at the moment is because we have a shortage of housing.”

KATE:

So for example, Brendan Coates and Joe Maloney from the Grattan Institute, which is a kind of a centrist think tank, they specifically talk about the reduction in San Francisco of new builds.

Audio excerpt – Brendan Coates:

“So, for example, in San Francisco, where rent controls have been in place, you know, studies have concluded that they've resulted in less housing being built than otherwise would be the case.”

KATE:

And they make reference to an article which doesn't make any reference whatsoever to new builds. It is solely about the existing rental market. I don't know if it's laziness, I don't know whether it's sleight of hand, it's hard to examine the motives of people that perpetuate this orthodoxy, but there is a lot of disinformation as well as misinformation around.

ANGE:

And Kate, what could implementing rent caps in Australia look like? What would the impact actually be if we got there?

KATE:

Okay, so rent controls in Australia, they would have to be flexible. They would have to be capped to small increases, as is the case in the ACT. Rents are capped in the ACT to 110% of inflation, so it can only go up at a small rate. That would have to be accompanied by mandated standards in property maintenance. It would also have to be linked to eviction controls, and in particular the abolition of vacant possession so that tenants can remain in properties even though they change over, and most importantly, it would need to be coupled with a much greater institutional role in housing provision. I'm specifically talking about pension funds— or in Australia, superannuation funds — that have trillions of worker’s dollars in contributions, which provides a low yielding but low risk, you know, very steady income stream because that stream is backed up by government guarantee. So it's a string of policy initiatives that need to be made at the same time.

ANGE:

Kate, there's always tension in housing policy politically because I guess for renters to win someone else — you know, a landlord, an investor — has to lose, which, you know, is an uncomfortable idea for politicians who want to win elections. So what will it take for renters to be the group that are favoured politically, or even just put on an even playing field to home owners?

KATE:

It's not that we have to affect political decisions by mobilisation, because it's it's impossible actually, because I mean… unless we're talking like serious revolution, those who are powerless just do not have the resources, and the wherewithal, and the structures to enable them to affect political decisions on a regular and consistent, and comprehensive basis. What will win this for the tenants is the strength of the argument, and for enough people to see the inequities.

I think the consequences of inaction are going to be pretty dire. There are already people sleeping in their cars at unprecedented levels. Our society is becoming more and more unequal and, well, the consequences can end up in terribly, terribly nasty, and not productive situations.

ANGE:

Kate, thanks so much for your time today.

KATE:

You're welcome.

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ANGE:

Also in the news today…

Police in New South Wales say they will cooperate with any investigation into Spanish Football chief Luis Rubiales for grabbing and kissing a Spanish player during the ceremony at the end of the women’s world cup.

After weeks of clinging to his position, Rubiales finally resigned on Monday, following Spanish player Jenni Hermoso making a police report in Spain, alleging sexual assault.

And…

Justin Trudeau and his entire delegation were left stuck in India on Monday after the Canadian prime ministerial plane broke down on the tarmac.

The plane, which is operated by the Canadian air force, suffered from a mechanical fault that could not be fixed overnight and looked set to force Trudeau and his team to make other travel arrangements.

I’m Ange McCormack, this is 7am. We’ll be back again tomorrow.

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