Rental increases capped at CPI...

Discussion in 'Property Management' started by SuzyG, 11th Oct, 2018.

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  1. SuzyG

    SuzyG Well-Known Member

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    I received an email today from the Make Renting Fair campaigners asking me to sign a petition to make renting fairer by capping rent increases at CPI in the ACT.

    “Today, a new report from Domain [1] found that Canberra has the highest house rents in Australia, and the second highest rents for units - $550 and $450 per week.

    In response, we’re calling on the ACT government to protect renters against excessive rent increases.They could do this by requiring a landlord to justify any rental increase above CPI.

    Will you sign our petition asking for a fairer system for rent increases?

    While the government has dithered, rents in Canberra have climbed by at least 7% in the last 12 months. Now, we need them to take urgent action.

    While an investment property may belong to a landlord, it’s also a renter’s home. Rent increases should be fair - because nobody should have to lose their home because of an excessive rental increase.”

    ..............
    The text on their website says...

    Make Renting Fair

    People who rent deserve stable, affordable, and liveable homes.

    As part of the Make Renting Fair CBR Alliance, Better Renting is pushing for three critical reforms to make life better for renters:

    • an end to unfair evictions,
    • a fairer system for rent increases, &
    • minimum standards for rental properties.
    Please sign our petition and join the campaign!



    Dear Minister Ramsay,

    People who rent in Canberra deserve stable, affordable, and liveable homes. I support an end to unfair evictions, restrictions on unfair rent increases, and minimum standards for rental properties.




    Another in the long list of rental reforms currently being pushed across the country...

    What do you think? Will this one succeed?
     
  2. Scott No Mates

    Scott No Mates Well-Known Member

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    Absolute BS - no property investor in their right mind would want a cap on their right to increase rent at a rate which suits their property. Put it this way: Market starts to boom and moves at 10% pa for 3 years but CPI is running at 2.5% pa. After 3 years your property has increased 33% but your rent has only increased by 7.5%

    In terms of return, your cap rate has dropped ie if the property was returning 5% (say $5K on $100k) but after 3 years yield has dropped (property now worth $133k but rent is only $5,385 giving a 4% return).

    To achieve market rent, you would need to terminate your tenant annually, suffer a vacancy, pay new letting fees etc so would be even further behind.
     
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  3. Blueskies

    Blueskies Well-Known Member

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    I would consider supporting it provided it was capped on the downside too, mandatory rent increases pegged to inflation, decreases not permitted either.
     
  4. SuzyG

    SuzyG Well-Known Member

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    This type of provision is called a ratchet provision - most commercial leasing legislations make it an illegal form of rent review.
     
  5. Shady

    Shady Well-Known Member

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    Just the retail ones, still widely used in office/industrial. Nothing wrong with it at all, if you can get it.
     
  6. D.T.

    D.T. Specialist Property Manager Business Member

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    Wish govt would stop meddling in things they don't understand
     
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  7. SuzyG

    SuzyG Well-Known Member

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    This 100 times

    Like the factors of supply & demand??
     
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  8. Scott No Mates

    Scott No Mates Well-Known Member

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    The govt regulates supply via zoning of land, indirectly by interest rates/accessibility to finance (APRA) etc and demand via job creation, incentives (FHBG), immigration, decentralisation of govt agencies etc.
     
  9. Handyandy

    Handyandy Well-Known Member

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    Totally agree this would lead to greater turnover of properties which is exactly the opposite of what these people are aiming for with the whole "a renter wants a home he can call his own".

    So based on the turnover issue the next interfering step would be compulsory longer leases on the part of the tenant but tenant able to leave at a moments notice with virtually no notice and /or rent protection.
     
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  10. SuzyG

    SuzyG Well-Known Member

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    What I find alarming is that this organisation who are campaigning for better tenant’s Rights don’t seem to be aware of the flow on impacts of policies like this. So they are encouraging tenants to petition for a policy which if implemented in isolation may actually make their overall situation worse!
     
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  11. Phoenix Pete

    Phoenix Pete Well-Known Member

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    Absolutely correct..... and well put.
     
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  12. Phoenix Pete

    Phoenix Pete Well-Known Member

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    Correct !!! Commercial leases have three options when it comes to rent increases (usually on an annual basis). They are CPI, market rent or fixed percentage. Most leases have the provision for CPI increases.
     
  13. Shady

    Shady Well-Known Member

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    I haven't done a CPI increase lease for a long time, probably a year or two ago and I do a lot of commercial leases. CPI has been ridiculously low over the past few years and CPI increases are painful to administer. In theory it's easy, but in practice they're a PITA.
     
  14. Phoenix Pete

    Phoenix Pete Well-Known Member

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    They sure are a PITA !!
     
  15. Scott No Mates

    Scott No Mates Well-Known Member

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    Aren't we grateful for ratchet clauses :p
     
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  16. SeafordSunshine

    SeafordSunshine Well-Known Member

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    Fixing rents to the CPI leads to Key Money.........
    look at
    Rent control... :eek:
     
  17. Tom Rivera

    Tom Rivera Property Manager

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    Absolute madness. I couldn't even touch the surface of the potential ramifications of this if you gave me a day. It's terrifying that these people have a platform......
     
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