For Landlords

Rental Cap for Klang Valley – Yay or Nay?

With the rising rent prices due to a variety of factors such as the increasing median home values and growing demands from a new generation of millennials as well as “Gen Z” that are coming into the workforce and many more, concerns have been raised about whether the increment is harmful in a long term for new renters or renters that are looking to change places.

There’s even suggestion by various parties to introduce rental caps to combat the surge in prices that do not seem to stop anytime soon. But is this rental cap even good in the first place? Let us look deeper into this and find out more.

Rental cap – to put a ceiling on the rent costs

At a glance, introducing rental cap seems like a win for renters – they are assured to cheaper rent costs and do not have to worry about the costs going up too much in the long term.

In addition to that, people from the lower socioeconomic group can also stand a chance to secure rent at an affordable price, which could certainly help with reducing homelessness.

On the other hand, landlords could benefit from this as well – a tenant that stays longer with good record payment ensures a sustainable return of investment. As such, landlords do not have to spend on a massive holding power to retain their property while waiting for a new tenant. Seems like this rental cap policy isn’t too bad at all huh?

Real-world works differently

On paper, this may sound like an awesome plan, a terrific framework that could help the poor while not hurting the homeowners and investors all the same.

However, the real-world is a different game altogether, where unknown external factors would lead to entirely different outcomes that were unforeseen previously. This is true, even for rental caps, which in reality drives a totally distinct situation – one which tourism rent housing supply slumped.

Why does this happen? Due to the lesser gains from the caps, landlords are then forced to repurpose their houses entirely, sometimes even reselling it for new development projects.

Consequently, there will be fewer houses to offer to possible new renters as well as fewer homestays as options for travelers, and with the increasing demands, the bubble of rental caps would have a higher tendency to burst. This could also affect communities on a larger scale – repurposing often forces tenants to move out, and with the supply on the low, these renters often find themselves on a bind with no other option but to pay more for their next rented accommodation.

A Middle Way

Now you might think rental caps as not a good idea. No, don’t go there yet. There’s still a middle way to solve this: by offering tax credits, discounts as well as welfare payments on a case-by-case basis rather than a blanket price cut, this will balance out the real-world effects by readjusting the supply and demand for rent places.

This way, the vulnerable group will still get protected without harming the interest of others. Like Black Eyed Peas said, ” Can you meet me halfway, right at the borderline”.

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