Rent Rort Is The Symptom, Not The Cause.

It has been reported (in the Daily Telegraph) that “greedy landlords are rorting rents”, and that real estate agents have been caught out scheming to gouge more money from renters. This stems from a notice in the window of one agent urging landlords to increase their rents now due to market conditions, and another sending out letters to tenants warning that failure to pay on time could result in increases. While these measures certainly seem harsh, are they unreasonable or unexpected?

A landlord has invested a great deal of capital in a property and should be entitled to seek the best possible return on his investment. That means if the market is paying higher rents then he is entitled to benefit from that. That’s free market economics. In the same way, it is the job of the real estate agent, in the role of property manager, to obtain for his client the best possible return on investment. In fact, not to do so would be remiss of the agent and he would soon lose clients.

Now to balance those observations it should also be recognized that both landlords and agents need tenants or they won’t make any money. Good landlords and agents will value good tenants and treat them reasonably and fairly. Less scrupulous operators will seize the opportunity to squeeze as much out of the bottom line as they can, but to blame landlords and agents for high rents is simply not right.

The problem results from a combination of extremely short supply, high capital values, and increasing interest rates. The real problem is that governments and planning authorities have not adequately provided for the housing needs of the community, and now have the headache of dealing with the social fallout. It has reached the point where there are no simple answers, but the solution has to begin with addressing the fundamental underpinning fact that demand for housing is outstripping supply to the tune of 30 000 dwellings per year.

That’s the simple equation at the bottom of a complicated problem.