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clock 08-02-2021
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Proposed Rent Control Law Might Not Be a Good Idea, Says Industry Players

Industry players have described the proposed rent control law that will stop landlords from increasing rentals indiscriminately as not a good idea.

Set to be tabled in 2021, the bill – known as the Residential Tenancy Act – will ensure that property owners do not evict tenants or raise rental rates based on whims and caprices, according to Housing and Local Government Minister Datuk Zuraida Kamaruddin.

Tang Chee Meng, chief operating officer at property consultancy firm Henry Butcher, noted that while market forces should ideally be allowed to determine rental rates, there are certain situations that may merit some form of government intervention.

He said the government may intervene after a war or natural disaster when the people may need some kind of protection or assistance to 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,” said Tang as quoted by Free Malaysia Today (FMT).

He said that Penang, for instance, enforced a rent control for nearly 40 years until 1997.

With the rents hovering way below the market rate, many buildings in the state have deteriorated as landlords did not maintain or upgrade them, he said.

Echoing Tang’s view, Melaka-based developer Anthony Adam Cho said market forces continue to be the best regulator although enforcing rent control during a pandemic is understandable.

However, proper studies have to be carried out first or the proposed law may result to more harm than good, he said.

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

Meanwhile, Carmelo Ferlito, an economist with the Institute for Democracy and Economic Affairs (IDEAS), believe that enforcing rent control would remove the incentive for developers to construct new apartment buildings or for landlords to enhance or properly maintain their property given the limited prospects of profit.

This could eventually lead to a housing supply shortage in the long run, said Ferlito, who is also the CEO of Center for Market Education.

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

Instead of rent control, Ferlito pointed to subsidies as a better way to ensure access to housing since they could be targeted to those who are in real need and would not lead to a shortage.

This article was originally published by PropertyGuru.

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