Paired with the right settings, ACT chief minister Andrew Barr says his territory’s rent cap model could be successfully replicated nationwide.
Mr Barr presides over the only Australian jurisdiction with a rent cap policy, which has limited increases to inflation plus 10 per cent since 2019.
The ACT model has attracted attention as Labor negotiates with the Greens over the federal government's $10 billion housing future fund.
The minor party has demanded protections from surging rents in exchange for supporting the bill.
Mr Barr said the ACT’s policy was effective because it was accompanied by a "very significant" supply-side response as well as robust rules that kept rental standards high.
"The ACT’s rent capping arrangements are a safeguard, effectively, against the most egregious forms of rental increase," he told reporters on Monday.
He said the share of housing available to rent in Canberra had lifted from 26 per cent to 31 per cent in the past decade, and the city was the second-most affordable place to rent as a proportion of incomes.
The model could work in other places if combined with a "dramatic increase in supply" and minimum standards for upgrades and repairs, he said.
The Greens want federal incentives for the states and territories to apply a two-year freeze on rents and ongoing caps of about two per cent.
Australian Housing and Urban Research Institute managing director Michael Fotheringham said this would likely spook investors and stifle new builds.
Other investors would be unlikely to enter the market if property investments became financially unviable, plus not all renters were able to buy even if more rentals were put up for sale, Dr Fotheringham said.
But a CPI-linked model like the one used in the ACT could help strike a balance for both renters and landlords.
"You could argue that the ACT model, which caps the frequency and the size of rent increases but does so in a way that recognises growth in costs for many landlords, is an attempt to do that," he told AAP.
University of Sydney research fellow Cameron Murray said the rent cap model was now the standard method for protecting tenants from bill shock but was controversial because it made landlords "a little less money".
Real Estate Institute of Australia president Hayden Groves said policymakers needed to be careful about diminishing the supply of rental properties over the longer term.
He said the international experience suggested even light-touch rent controls translated into landlords looking for alternative investments.
Mr Groves said it was too early to assess the effects of the ACT rent cap policy, noting Canberra was a small housing market that had likely experienced disruption when there was a change of federal government last year.
