With property prices spiralling and supply constricted, renting a house has become as difficult as owning one. Existing policies which primarily focus on increasing home ownership have not addressed this issue adequately and do not offer enough relief for those who depend on rental housing. Hence, when the Ministry of Housing and Urban Poverty Alleviation recently published its task force recommendations to spur growth of rental housing, understandably it raised expectations. The task force has come up with a legislative framework and a set of incentives to facilitate more investment and improve supply, but it is unclear how the proposed benefits would effectively reach those in need. The task force has argued that restrictive rent control legislation and low rental yields have kept about 11 million houses, which are now vacant and locked up, away from the rental market. To encourage property owners to deploy more houses for rental purposes, it has recommended amendments to the rent control Act and suggested that the government should discontinue the practice of arbitrating rents. Another important recommendation is to treat rental housing as a non-commercial activity and direct authorities to lower property tax and service charges on them. The idea is that this would have a cascading effect and increase rental yield, which in turn would bring more investment in rental housing.
In principle, this is a welcome move. The government should ensure that financial incentives are given only to housing units that are less than 60 sq m in area, assuming the threshold size for an affordable house. The success of this measure would depend on the adequate availability of such smaller dwelling units in the housing market. The task force has also suggested that the government should encourage private companies, which together employ about 11.5 million workers, to provide rental housing for their employees. The money invested in this should be admissible under corporate social responsibility expenditure. This appears like a productive measure, but it carries the danger of being misused to create luxury assets and large dwelling units. The policy should unambiguously focus on producing affordable rental houses. It is important to amend legislation to take care of property owners’ concerns, but it should also factor in tenants’ interests. Measures such as protection of tenancy deposits, as advocated by the Tenant Charter in England, must find a place in the regulatory framework. The state should make efforts to encourage more first-time home-buyers. For this, it is not enough to implement schemes such as Rent to Own; incentives for buying second and third homes should also be reduced.