Rents are rising more than six times faster than wages

She warned that the federal government’s target of building 1.2 million homes by 2029 would not solve the problem in the short term.

Grattan Institute economist Joy Moloney agreed that while building more homes was important, it would do little to help people currently experiencing rental stress.

“The most important step the federal government can take is to continue to increase rental assistance for the most vulnerable,” Moloney said.

“Globally, the rate of homelessness is not high, but if rents remain high, there is no doubt we will see more homelessness.”

He said historical underinvestment in social housing was another factor putting more people at risk of homelessness and the government needed to ensure more social housing was provided.

‘It takes the pressure off’

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He said there were also benefits to limiting the amount of rent increases landlords could pass on to tenants, something that varied from state to state.

Regulation in the Australian Capital Territory is arguably the strictest: landlords there can only increase rents by 10 per cent above Canberra’s current rental inflation rate, and only once every 12 months.

Moloney said this was better for tenants than in other states, where tenants often had to appeal to the Civil and Administrative Tribunal to protest rent increases, which he called an arduous process.

“This takes pressure off tenants because it provides an external benchmark for how much rent increases are allowed. If landlords want to increase rents more, they need to prove there is a legitimate reason.”

However, he said the rule was unlikely to work in other states because the Australian Bureau of Statistics only measured the consumer price index for rents in capital cities, not regions, and the ACT had no regions because the entire state was considered Canberra.

Mr Moloney said slowing immigration rates, capping international students and people starting to move back into renting would help improve the situation for renters.

“But can we get back to a period where rent growth is in line with inflation? That depends on new housing construction,” Moloney said.

The fundamental problem

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Conisbee said that’s a challenge not only because of the labor shortage but also because of taxes and regulations that make it more expensive to invest in new housing, especially in inner-city areas.

“Look at Collingwood in Melbourne. Collingwood is really cool, it’s a great place for young people and there are a lot of apartments there. It’s very affordable, even now you can get a two-bedroom apartment, fairly new, for about $600,000 to $650,000,” she said.

“But developers are now saying you can’t build a house for $650,000 in Collingwood anymore and it could cost $800,000 to $900,000 to build a similar house. So that’s the fundamental problem,” she said.

Still, she said rents would eventually return to levels in line with wages, but it would take longer than expected.

Separate data from SQM Research on Wednesday showed capital city rents fell 0.5 per cent in the year to June 4, the first significant monthly fall since April 2020, indicating how long it may take to ease rental pressures.