A renters group says it is high time the government introduces rent controls, while an economist says such measures will make the housing crisis worse.
Newly-released documents show the government explored the idea of rent controls, but Treasury advised they could have negative results, such as incentivising more investors to sell.
The government is yet to make any announcements on a move to cap rents but Finance Minister Grant Robertson has not ruled it out.
NZ Initiative senior fellow Dr David Law said he was pleased that Treasury advised against rent caps.
He told Morning Report there were concerns about the rental market after the housing announcement which signalled landlords would increase rents.
"Rent controls will make things worse. They invariably reduce the supply of rental accommodation even further and reduce the quality of what's on offer."
He said investors would look at selling their rental properties which did not have good returns, or convert them into Airbnbs, or even leave them empty.
Law said while some European countries did have rent controls, it created a shortage of housing that "go for decades".
"There are inequality issues. It tends to be the case that higher-income people end up benefitting the most from rent controls. It reduces mobility, people don't move for jobs when they should ... you get ... large families living in small apartments. There are all sorts of huge negatives with rent controls."
However, Wellington Renters United spokesperson Ashok Jacob said rent caps were not a bad idea and the scenarios laid out by Law were already happening in New Zealand.
"We've been arguing that idea for some time. Rent control is not actually a supply issue."
He told Morning Report most people called for an increase in the supply of housing, and "that's something that needs to happen alongside rent regulation - which is something that exists in most OECD countries".
While Treasury was against rent controls, Jacob said the Ministry of Business, Innovation and Employment (MBIE) and the Ministry of Housing and Urban Development (HUD) were looking at examples around the world where rent regulation had worked.