Rent controls would negatively affect the quality and supply of homes and increase costs in the long term, Treasury officials warn.
Senior department staff spoke about the impacts of rent freezes gathered from international research during a parliamentary hearing into Australia's rental crisis.
Nicholas Dowie, Treasury's housing strategy branch assistant secretary, said while rent controls might deliver benefits to existing tenants through lower prices, they also had a range of other effects.
"They negatively affect the quality of rental stock, they impose costs on future renters, lead to a reduction in rental supply, and increased rental costs in the long term," Mr Dowie told the inquiry on Wednesday.
Intervention on rent prices was found to disproportionately benefit higher income earners, he said.
The evidence showed some home owners made the decision to sell their property due to rent controls, leading to a reduction in homes available to rent.
Samantha Floreani from Digital Rights Watch told the hearing renters were being coerced into handing over sensitive data to third-party sites, with little to no regulation.
"A lack of protections for rent and digital rights and a largely unregulated rent-tech sector is already hurting renters," she said.
Ms Floreani said the platforms rarely served renters, and left them with close to no power to stand up for their rights in a tight market
Thousands of real estate agents admitted needing support to ensure they could adequately protect data, she said.
"If they (real estate agents) are going to collect that information and use that information then it is absolutely vital that they should be protecting that," Ms Floreani said.
"If they fail to do so there should be repercussions."
A renter told the hearing she had survivor's guilt after she was able to secure public housing, with so many people waiting for accommodation.
The woman spoke of the humiliation of asking her mother to help pay rent and going to food banks for support.
Another lived-experience witness told the committee the "great Australian dream" was no longer available to working people.
A survey by consumer advocacy group CHOICE found two in five renters were pressured to use a third-party platform and two-thirds of users were uncomfortable with the amount of information disclosed.
Some sites generate a score on each tenant's application, which increases if a renter ups their offer, while other platforms have mandatory fees.
CHOICE found one applicant was asked if they identified as Aboriginal or Torres Strait Islander, despite a ban on questions about racial identification in private tenancy.
In a submission, the First Peoples Disability Network Australia found those who were more identifiable as Indigenous were less likely to be accepted as rental tenants, and those who had their applications accepted were almost twice as likely to be paying more than 30 per cent of their household income on rent.
The final report on the rental crisis will be handed down by November 28.
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