Tread carefully on proposed rent control law, govt told

 

Rent control is not a good idea as it removes the incentive to improve or properly maintain units as the prospects of profit would be limited, says an economist.

PETALING JAYA: Property experts say a proposed law that will stop landlords from raising rentals indiscriminately should only apply to certain situations as it can distort the market.

Housing and Local Government Minister Zuraida Kamaruddin has said the Residential Tenancy Act would take into account the interest of both landowners and tenants while ensuring that owners did not raise rental rates or evict tenants at their whims and fancies.

The bill will be tabled next year.

Henry Butcher chief operating officer Tang Chee Meng said ideally, market forces should be allowed to determine rental rates.

Tang Chee Meng.

“However, there are certain circumstances or situations which may merit some kind of intervention by the government like after a war or natural disaster where the people need some form of protection or assistance to help them recover.

“This form of government control should be for a specific objective and for a specified period of time and apply only to certain housing categories. If not, it will distort market forces and create an unrealistic situation.”

Tang noted that Penang had rent control for almost 40 years until 1997 and many of the buildings deteriorated as landlords did not upgrade or maintain buildings as the rental was way below the market rate.

Melaka-based developer Anthony Adam Cho shared similar sentiments, saying market forces had proven to be the best regulator though in times of a pandemic like Covid-19, rent control was understandable.

Anthony Adam Cho.

He said proper studies needed to be carried out on the proposed law first or it could lead to more harm than good.

“Government interference in the market and rental demands will likely erode investor confidence.”

Economist Carmelo Ferlito said rent control was not a good idea as it removed the incentive for developers to build new apartments and for landlords to improve or properly maintain their units as the prospects of profit would be limited.

Carmelo Ferlito.

The Center for Market Education CEO said this could lead to a shortage of houses in the long run.

“If the supply remains below demand because the price cannot go up, then property and rental prices will remain high,” he said.

Ferlito said rent control was not the best way to ensure access to housing and that subsidies were better as they did not lead to a shortage and could be targetted at those who really need it. - FMT