Victorian landlords could soon face rent controls under a new housing package flagged by the Victorian government.

A senior government source told The Sunday Age that measures being considered include limiting landlords to one rental increase every two years - up from the current 12 month limit - and potentially capping how much landlords can increase rent by.

The housing package is also expected to include a new tax on hotel stays and short-term rentals, including Airbnbs, of up to $5 per booking.

Speaking at a press conference at the Frankston Hospital redevelopment on Sunday, Premier Daniel Andrews wouldn't go into specifics but said "everything is on the table" to improve the state's rental crisis.

“There’s a very long list of different policy approaches, different things we can do. We are shortening that list down... we’ll have more to say in a couple of months’ time," Mr Andrews said.

“I think it will represent one of the biggest shake-ups in terms of delivering more housing and more housing choices and options that our state has ever seen.

“As I move around the community I think there’s nothing more important than getting more supply into our housing market, because with more supply, renters, those who want to buy, their parents, families, everybody who’s concerned about housing, will have more options.”

It comes after pressure from the Greens to do more to alleviate the state's rental crisis.

Victorian Greens renters’ rights spokesperson, Gabrielle de Vietri said the government shouldn't stop at the two-year freeze on rental increases.

“Along with a potential cap on rent increases, we also need to see an immediate rent freeze, short-stay regulations, and a stronger vacancy tax," she said.

Rent freeze could squeeze landlords out, says REIV

Real Estate Institute of Victoria (REIV) CEO Quentin Kilian said the decision to cap rents, if it goes ahead, would cause "untold damage" to the rental market in Victoria.

"What is needed is a measured approach in consultation with industry, to incentivise sustained supply, not a knee jerk reaction that smacks of political opportunism," Mr Kilian said.

“In any supply chain, and the rental market is an essential supply chain, how can you dictate to a supplier that they cannot increase their costs under any circumstances but at the same time you continue to increase costs to the supplier?

“Yet, our political leaders seem to think this is a good idea to implement. The result will be an increased and sizeable departure of rental providers, leading to much less rental stock available, much higher prices and more homelessness.” 

He said the measures could see more investors leave the market.

“If rent is capped and cannot move with the market, investors are unable to respond to cost movements such as increasing interest rates, maintenance etc. They are very likely to take their hard-earned savings elsewhere, which is what we are already seeing as a response to the increases in land tax.” 

PropTrack figures of auctions held in Victoria last week found that more than 230 of the 673 homes taken to auction were former rentals.

Property Investors Council of Australia (PICA) Chair Ben Kingsley said the rent freeze could be the straw that breaks the camel's back for property investors in Victoria.

“We’ve had 12 interest rate increases and this proposed move by the Victorian Labor Government will be the straw that breaks the backs of many property investors,” Mr Kingsley said.

“Not being able to recover some of these costs will mean some mum and dad investors will be forced to sell, and with other budding property investors snubbing Victoria because it’s too hard and too costly to hold properties, the story is going to be pretty dire for the state and for all renters living there."

Image by Thomas Pavitte via Unsplash