A law expert says the Government could fast track rental hike caps if the situation becomes dire, but he is "doubtful" it will happen anytime soon.
Following the Government's housing announcement last week, several landlords threatened to increase the rents on their rental properties to offset the new extra associated costs.
One landlord told The AM Show he would put the rent on his 40-plus properties up by $135 a week.
To regulate the potential increase, the Government could introduce rent increase caps.
Speaking to Newshub Nation on Saturday, Finance Minister Grant Robertson wouldn't rule them out.
"That's not on our agenda at the moment, but we will keep an eye on what happens."
Newshub spoke to David Grinlinton, a professor of Law at The University of Auckland, about how the caps could work.
How would rent hike caps be introduced into law?
Grinlinton says there are no current provisions in the Residential Tenancies Act (RTA) that would allow for changes, such as rent hike caps, to be made through regulations or executive order.
"It would require an amendment to the RTA to authorise," he says.
"The Government is no doubt reluctant to do this as it would be an interference in freedom of contract. In any event, rent can only be reviewed/increased every 12 months now, so landlords cannot increase rent before the anniversary of a residential tenancy agreement being entered into."
He says that if the Government were to introduce some controls on rent increases it would most likely insert a power into the RTA to implement rent caps in "certain situations", and for only a controlled amount of time
"Alternatively, it may be that a more enduring provision limiting rent increases to some external measure like the CPI (Consumers Price Index) could be inserted. Another possibility would be placing limits on the procedure for rent increases allowing a tenant to object, and then the matter being referred to mediation or arbitration - perhaps through Tenancy Services/MBIE."
How quickly could it be implemented?
Grinlinton says the rental hike caps would have to follow the standard process for legislative amendment in Parliament.
"This can happen reasonably quickly in an emergency situation - such as with the six-month rent freeze from March last year under the COVID-19 Response (Emergency Management Measures) Legislation Act 2020.
"Whether ongoing rent caps would be done under similar 'emergency' legislation is doubtful, so it would likely go through the ordinary legislation processes, but provided the Labour majority supports it then it could be enacted quite quickly."
He says the Government has already introduced some property price 'correction' measures which should have an effect in the medium-term, but there is an argument for "some interim price control on rents in places that are experiencing a housing 'crisis' such as Auckland".
What would happen if the Government did implement rent hike caps?
Grinlinton says many landlords and their representative organisations argue that rent caps would be another issue discouraging private landlords from entering and staying in the tenancy business.
He told Newshub caps may cause landlords to exit the industry, which would further reduce the availability of rental properties in New Zealand - supply of which has been one of the pertaining factors in the housing crisis. It could also put even more pressure on rising rents.
"The veracity of these claims remains to be seen, but there is a risk that introducing rent caps may well have unintended consequences," Grinlinton says.
"On the other hand, it could be argued that landlords have had a 'windfall' in recent times due to the increasing levels of rent they can demand, and they should not be too concerned if their ability to increase rent is limited to some measure such as the CPI - which must still give them a good return at today's rental values."