Thursday, January 10, 2019

Do politicans vote with their property interests?

With recent news about Government ministers opposing no grounds reform, we thought it timely to look at whether politicians' votes are affected by their property interests.

Back in August 2014 Dallas Rogers wrote for The Conversation about how property-owning politicians might influence policy. He said:
It is important to note that research doesn’t show a causal link between property holdings and decisions of politicians. But it would be imprudent to assume prima facie that the property holdings of Australian politicians do not play a role in their political thinking, especially as this thinking relates to housing, taxation or even superannuation policy.
In April 2017 both the ABC and The Sydney Morning Herald ran stories about Federal politicians who owned property, many being landlords in the private rental market. They found that Australia's 226 federal MPs declared on the register of interests that they own 561 properties. You can view the ‘Register of Members Interest’ for Federal pollies here. These stories ran at a time when housing affordability was receiving daily coverage in the media and policies on negative gearing and capital gain tax were very much in the public spotlight. Now that these issues appear firmly cemented in the public debate, we might expect to see more articles in the run up to the federal election.

Anyone can check what properties NSW state politicians have disclosed by trawling through the ‘Register of Disclosures by Members of the Legislative Assembly as at 30 June 2018’. The equivalent for the Legislative Council is still hard-copy only but available to look through at Parliament House. Here is a summary. We have excluded two MPs who have not been required to make disclosures since they took their seats.

NSW Parliament
133 Members of the NSW Parliament own 256 properties; average number of properties owned is 1.9 and the highest disclosed is 10. 42 are landlords of residential properties and a further 10 are possible landlords of residential properties: that is, up to 39% of MPs are landlords of residential premises.
Legislative CouncilLegislative Assembly
41 Members of the Legislative Council (excluding 1 new MLC) own 69 properties; average number of properties owned is 1.7 and the highest number owned is 6.
11 are landlords of residential properties and a further 6 are possible landlords of residential properties: up to 42% are landlords of residential premises.
92 Members of the Legislative Assembly (excluding 1 new MLA) own 187 properties; average number of properties owned is 2.0 and the highest number owned is 10.
31 are landlords of residential properties and a further 4 are possible landlords of residential properties: up to 38% are landlords of residential premises.

Party Affiliation
Liberal Party49 MPs average 2.1 properties and 39% are landlords or possible landlords of residential premises.
National Party23 MPs average 2.3 properties and 48% are landlords or possible landlords of residential premises.
Labor Party46 MPs average 1.6 properties and 33% are landlords or possible landlords of residential premises.
The Greens6 MPs (excluding 1 new MLC) average 2.2 properties and 83% are landlords or possible landlords of residential premises.
Shooters, Fishers and Farmers Party3 Shooters, Fishers and Farmers Party own one property each. None appear to be a landlord of residential premises.
Christian Democratic Party2 MPs own one property each. Neither appears to be a landlord of residential premises.
Animal Justice Party1 MP owns one property. They do not appear to be a landlord of residential premises.
Independents3 Independents (excluding 1 new MLA) average 2.0 properties and two are landlords or possible landlords of residential premises.

Unfortunately the information above is not the full story. There are possibly properties we don't know about: undisclosed because they are held by companies, trusts and self-managed super funds. Some, but not all, MPs do declare such properties.

Others keep them out of the public gaze through the disclosure rules. For example, it is clear that properties owned by the spouses of politicians don't generally need to be disclosed, but it is likely to cause some change in the way a politician votes. Whilst most MP’s don’t declare this information because it is discretionary, some (from across the political spectrum) do. At the same time, some assert that when deciding whether they need to declare a property 'income' is interpreted to mean 'net' income - which may end up meaning a negatively geared property held by a trust never needs to be declared at all.

Does owning property affect the way a politician votes?

In NSW we put this question to the test in September and October when Parliament was voting on the Residential Tenancies Amendment (Review) Act 2018
 

A vote in the NSW Legislative Council was very close to passing an amendment abolishing ‘no-grounds’ evictions. That vote ended up dividing along party lines with Labor, the Greens, and the Animal Justice Party supporting change and Liberal, National, Shooters and Fishers and Christian Democratic Party voting against change. The equivalent vote in the Legislative Assembly also divided on similar lines, with the three Independent MPs joining with Labor and the Greens. Counter-intuitively this means the party with the highest percentage of landlords amongst MPs, the Greens, voted for change.

It also means landlords did not uniformly oppose fair renting laws through ending no grounds evictions.  In fact, more than a third (18 out of the 42) of voting landlords in NSW Parliament voted to end unfair evictions- only a little less than the proportion of MPs overall.

So what is going on? We think the nine news story demonstrated it clearly - these decisions are made before the vote, inside parties, and it is there that any influence occurs. We know some within the Liberal and National Parties support ending unfair no grounds evictions - but they were overruled. This is why processes around conflicts of interest are so important!

But on the bright side we also know some landlord politicians do choose to vote for fairer renting laws. We might be optimists, but we also think this means our parties should question any assumption that landlords will never support a party that acts fairly. Just like people who rent their home, we believe there are a range of views. We are confident that, just like some politicians, some voters who are landlords can see past their own particular financial interests and support a fair, balanced renting system. Whether it is their family, their friends, or other members of their community - there is someone who is negatively effected by unfair evictions remaining as they are.


Monday, December 17, 2018

Big numbers and good intentions: Labor's Affordable Housing Plan

The Federal ALP conference is happening in Adelaide at the moment, and one of the big early announcements was a plan to build a lot of 'affordable' housing. This can probably be treated as the first big housing announcement of the coming election campaign. Check it out here.


It has been met with near-rapturous support from community housing providers and their supporters, like the Everybody's Home campaign. Others, like ACOSS have been more circumspect. And some on twitter have raised some concerns. Let's dig in to what the policy is, and what we might expect to deliver.,

At its heart, this would be a reboot of the National Rental Affordability Scheme launched in 2008 by the then ALP government. Originally intended to create 50,000 'affordable housing' dwellings, the program was ended in 2014 with less than 40,000 properties either delivered or approved. The first dwellings built are coming to the end of their 10 year commitment this month, making this announcement from Labour timely. This NRAS 2.0 follows a similar model, scaled up to creating 250,000 'affordable housing' dwellings, though with some notable exceptions.

NRAS 'NRAS 2.0' proposal
Open to individuals and corporations Only open to corporations
Must be managed by an 'approved participant' - can be for profit or not-for-profit Must be managed by a 'registered community housing provider' - most, but not all, are NFP
Leased to people on low to moderate incomes, at 80% or less of market rent Leased to people on low to moderate incomes, at 80% or less of market rent
No restriction on resident's immigration status Not open to "international students, foreign workers and other non-residents"
Scheme length: 10 years per dwelling. Scheme length: 15 years per dwelling.
Subsidy in 2018/19 dollars - $8335.75 pa from federal government, and $2,778.58 pa from state governments. Subsidy in 2018/19 dollars - $8,500 pa from federal government. No detail on whether state governments will also contribute.
TOTAL $111,921.30* TOTAL $127,500 (plus any state contribution)

*It is open to the investor to exit the scheme at any time without penalty (apart from no longer being paid the subsidy) and we are aware of some instances where they did, or where the property stopped being eligible for the subsidy. It is unclear whether the proposal will operate similarly.


While a commitment to addressing housing issues is welcome, this is a limited model in a number of ways. There may be good reason to doubt whether it will deliver the 250,000 dwellings promised, and whether 80% of market rent is any kind of good way to ensure the dwellings are actually affordable.

The subsidy is very generous - anywhere on market rent of $815 or less receives more in subsidy than they give up in discount. At lower rents (anything below $407) the owner receives more than double the discount.

By closing access to private investors Labor are clearly hoping for more 'institutional investors'. This does not mean not-for-profit housing necessarily, nor necessarily better-behaved landlords. Just under half of the current NRAS properties are managed by for-profit providers.

There are a few obvious paths to funding. The federal National Housing Finance and Investment Corporation acting as a bond aggregator might lend to community housing providers for them to build and operate "NRAS 2" properties directly. The subsidy from this proposal would make the financial viability of those loans much easier to meet.

Inclusionary zoning models of the type able to be required under planning mechanisms like SEPP70 are also likely to utilise the proposal. Property developers in areas using inclusionary zoning rules will need to set aside some housing in large developments for affordable housing, and this payment will in many cases more than repay the lost revenue from that requirement. That's not an excellent result, as it is merely cost-shifting from the private sector to the public sector.

It is also very likely to form part of for-profit build-to-rent models because it will make those development propositions much more attractive.

There is a big question mark then over how many properties will actually be built. Labor promises to deliver 250,000 dwellings, but they aren't building them - the private sector is building. Labor has flagged the return of the National Housing Supply Council - a very welcome move - to help make sure properties are delivered in areas of need. But limiting properties to particular areas, and particular investors, means it is less likely that a match will occur and the right investor will be able to build in the right location. Will this limit how many properties actually get built?

What else can Labor do? Frankly it is an indictment of Australia's housing policy environment that they don't seem to be considering a large public housing build. Recent AHURI research demonstrated how much more sensible a publicly run housing program is, being by far the most cost-effective approach. And after development costs, directly running public housing is already cheaper than the rent. So why pursue such costly approaches?

In large part, it is because of a collective decision for an ongoing, bipartisan and cross-sectoral approach to housing which restricts access to social housing and casts its provision as welfare or even charity. While it is perhaps most enthusiastically pursued by conservative politicians, it is perpetuated by many in the not-for-profit housing sectors from advocacy to academia. One of the key ways this happens is by distinguishing 'affordable' housing from 'social' housing mostly along income lines. Because 'affordable' housing is only to be delivered by non-government organisations, this means that the non-government part of social housing can be subsidised by higher rents collected in affordable housing, but the government part cannot.

Consider that if instead social housing eligibility was opened back up to moderate incomes the cost to both construct and maintain would become much easier to manage. This is far better for all residents. The need for a complicated model such as 'affordable' housing would disappear, as would the stigma attached to social, and particularly public, housing. This is not an easy shift, as it would be important to ensure those on the lowest incomes aren't jettisoned, but with commitment it could happen.

Public housing has many advantages over the private market - it can be built where it is needed, without having to wait for the private sector to determine market conditions are favourable. It can be built in the type most suited - both dwelling structure and size - to the local conditions, rather than to what works out best for an investment manager. It has disadvantages too - shared with other social housing providers - of being a large bureaucracy that can struggle to respond to individual needs and often has nothing to offer tenants in being part of decision-making processes.

What is needed is a real conversation about the ways in which Australia can be housed, and a real vision for our housing system. Who can deliver that?

Monday, December 10, 2018

Factchecking the fourth estate

Media reporting of housing issues is a mixed bag. It certainly has gotten much better over time, and journalists and readers are becoming more educated. Over the last week there have been three instances we thought it was worth picking up on.



It was incredibly disappointing that in the same week that Choice, National Shelter and National Association of Tenants Organisations launched 'Disrupted' with excellent coverage across the nation, both of Sydney's main papers had a crack at our public housing tenants. And then the ABC dropped a clanger on Sunday.

The Sydney Morning Herald
Nine's Sydney Morning Herald
First on Tuesday, the Sydney Morning Herald ran with a story based on an Audit Office report which amongst many other elements found that the repairs bill in public housing had risen to $413million in the 2017-18 year.

The story opens with the line; "Cleaning up rubbish when tenants move out and maintaining ageing properties are pushing up social housing bills, with new figures showing expenses have soared 50 per cent in four years."

Does the claim stack up?

First the costs. They certainly have increased over the last few years. It is noticeable that since the current maintenance contracts started in April 2016 the costs have ballooned.

The Audit Office are pretty sharp, so they noticed the increase in costs, asked the Land and Housing Corporation for an explanation.From the report

LAHC advise the following main reasons for higher expenses:
• more calls from tenants requesting maintenance as they now have direct access to the contractors’ call centres
• reduced call response time
• regular pop-up events with contractors on hand at social housing sites
• age of residential portfolio and the increasing costs to maintain
• higher costs due to damage and rubbish removal from properties when they become vacant.
So LAHC advised four other reasons for increased expenses before anything related to tenants potentially acting to create repairs costs. All four also have an element which can reasonably be argued to have increased costs since the contracts started. The most interesting is the apparent latent demand from tenants needing repairs done - the claim from LAHC is that they were not previously calling, or perhaps their calls not being picked up. This suggests that the maintenance bill should actually have been much higher in previous years, and what we see now is in part a catch up. This makes a lot of sense given NSW's infamous and ongoing shortfall in maintenance budget.

The higher costs due to damage and rubbish removal on the other hand doesn't necessarily follow the same path - is LAHC claiming tenants are causing more damage and leaving behind more rubbish? It appears that the Audit Office accepted these claims without any evidence, or at least the evidence is not included in the report.

It would have been worth asking for instance, if the damage and rubbish removal costs are before or after seeking the tenants contribution. These are ordinarily costs that the tenants' would be held liable for and money sought to be repaid. It is pretty important to check whether this is the remainder, or if in fact it is the gross amount - before tenants have paid any money back.

The Herald journalist also accepted the claim without question, and in our opinion unacceptably, promoted this last point to be the leading cause of the increase.

This claim does not stack up. It vilifies public housing tenants and the Sydney Morning Herald needs to take responsibility for its role in boosting a spurious claim and taking an unfair and unevidenced swing at public housing tenants instead of scrutinising the claim itself.

The Daily Telegraph
Perhaps vexed by the Herald stealing its traditional patch of giving oxygen to baseless claims about repairs, the Telegraph stole back attention on Friday with this headline.
Murdoch's Daily Telegraph
The article is really talking about a trial in 20  units  which will run over the next three years. Check out what we know about that here.

What we're more interested in is the headline and opening paragraphs. This is entirely misleading. First, applicants will not have to 'get a job'. It's not even a possible outcome of the trial. Even the most feverish anti-tenant commentators acknowledge there are many people for whom that's just not appropriate.

Second, no public housing homes are funded by tax-payers. As we've said before: not one dollar of money raised from taxpayers is paid to public housing tenants or otherwise credited to their rent accounts. Not one dollar. Tenants pay money to FACS, not the other way around.

This claim was not only untrue, but also needlessly mean and irresponsible. It has caused immense distress amongst public housing tenants who are now afraid that though they may be old, living with disabilities or caring full time for dependants or children they will be forced to either find employment or be forced from their home

The ABC does it better

Oh Aunty, why are you in this list? Okay, they didn't engage in tenant-bashing, but they did pen this article on renting reform in Queensland (which sounds like it is going very well indeed - NSW is really starting to look left behind). 



But the article originally included this tidbit.
 Last year, more Australians bought their seventh home than those who bought their first, and research from PRDnationwide shows the number of first home buyers in Brisbane has fallen almost 4 per cent."Last year, more Australians bought their seventh home than those who bought their first." Sounds legit - we all know that buying property is easy if you lay off the avocado. But...

The claim really doesn't stack up. Over the last year 115000 bought their first property to live in, according to the ABS (http://www.abs.gov.au/.../Detai.../5609.0September%202018...). And in total the ATO reckons there were 20,000 people who owned 6 or more properties in 2015-16 (the latest data available. Check it here: https://www.ato.gov.au/.../taxation-statistics-2015-16/)

While the property market is changing and we are seeing more landlords consolidating the number of properties they own is changing, it is very unlikely to have changed so dramatically in just two years. The number of Australian residents who are landlord (or more specifically, are disclosing rental income) has grown from 7.3% of the population in 2005-06 to 8.7% in 2015-16. People receiving rental income from 6 or more properties is almost literally still the domain of the 1% - from 0.06% of the population in 2005-06 to 0.08% in 2015-16.



What may have happened is that someone looked at the 20,000 people who owned 6 or more properties and added all their properties up - collectively, they own more than 120,000 properties. This is higher than the number of people who bought their first property - but this is not the claim that was made, and doesn't tell us much anyway since they didn't all buy their properties in just the last year.


To their credit the ABC corrected the line to show the source of their information:
State Housing Minister Mick De Brenni said that last year, more Australians bought their seventh home than those who bought their first, and research from PRDnationwide shows the number of first home buyers in Brisbane has fallen almost 4 per cent. 

The Minister has not yet disclosed where he got his figures from, or whether they might be mistaken. Why would the minister want to draw attention to this? And why are we, with a clear interest in better renting laws calling attention to it?

It is for two reasons. First, because it is an attempt to set up
greedy corporate landlords as a bogeyman to avoid dealing with the trickier issue that in Australia we have created millions of people as small-holding landlords who only have one or two properties. In many cases quite unwillingly, these landlords are being used to justify not implementing the necessary reforms for a fair renting system. It is much easier to set up a bogeyman - but in doing so we may end up implementing policy proposals which avoid dealing with the issues. One good example of this is a semi-frequent call to limit negative gearing to one property per person. 

It also furthers the cultural idea that buying property is a good thing to do. Pushing back on that idea may be quite subversive in property-obsessed Australia, but it is necessary to get buying property back to it being at least a neutral endeavour.

By the way, people don't buy homes. They buy property. People make homes by living in them. Fact check that!

Update: The claim that more people bought their 7th property than their first has also been comprehensively factchecked by both The Conversation and The New Daily and found to be lacking by them as well. The ABC has deleted the reference entirely from the original article.

Opportunity Pathways trial - what you need to know

On Friday, Family and Community Services Minister Pru Goward was widely reported - initially via the The Daily Telegraph - as announcing a new program aimed at incentivising applicants and tenants in public housing to get a job. Goward’s framing of the new program – or at least her framing as reported via the Telegraph – suggests the requirements could apply to all tenants. The Daily Telegraph headline reading: “Want a house? Get a Job. Public housing tenants face tougher employment rules”.

If you read through for the detail it turns out what they are reporting on is a trial aspect of part of the broader Opportunity Pathways program about to be rolled out across NSW.


The trial will involve 20 properties in Punchbowl and Towradgi (in the Illawarra region). Applicants who ‘opt in’ for the trial will have their applications for housing moved through the priority waiting list (‘bumped up the queue’) and will get housed quicker. In return the applicants will be required to engage in education and/or job seeking requirements. Without further detail we're presuming these requirements might look similar to Centrelink’s ‘mutual obligation’ requirements with supports – such as connection to jobs or study, help writing resumes and interview technique tips - provided through a tendered external provider engaged specifically to deliver the Opportunity Pathways program.

Under the trial tenancies will only be 6 months in length. At the end of the 6 months the tenant’s engagement will be assessed. If they are no longer ‘engaging’ as required and haven’t met agreed goals they will be ‘assisted’ out of public housing. If they have found and maintained a job they will be moved into community housing or into the private rental market. So kicked out either way it seems … or in the Minister’s words "increase the number of tenants positively exiting the social housing system".

So much stick, but where’s the carrot?

We're very interested to see what forms of assistance are provided to tenants evicted at the end of 6 months because they didn't meet agreed ‘goals’ to ensure they find alternative housing, i.e. ensure they're not kicked out straight into homelessness. And given the current private rental market what assistance will be provided to tenants evicted after 6 months for finding and keeping a new job to ensure they're not moving immediately into ‘rental stress’.
TL;DR
The Opportunity Pathways program is a trial involving 20 properties in Punchbowl and Towradgi over the next 3 years.
The program is ‘opt in’. Applicants that ‘opt in’ will be provided earlier access to housing but will have to agree to undertake education and employment requirements of program.
If ‘successful’ the program may be rolled out to other areas across the state (note: this does not mean that the program would apply to all tenants, would like remain ‘opt in’ if expanded to other areas).
Some follow up questions we asked FACS and their answers:
  • When will the trial begin? 
FACS response: The Opportunity Pathways trial will commence from February 2019 and run for three years.
  • How will applicants access the trial? We understand that people will come from the waiting list - will applicants be approached en masse or individually. 
FACS response: Applicants on the Housing Register who may meet eligibility for the trial will be approached individually to be informed about the trial, to assess their suitability and gauge their interest in participating.  The program is completely voluntary and should an applicant not wish to participate, this will not affect their status on the register or future offers.
  • How will they be assessed for suitability for the program? That is, will there be some assessment for likelihood of success to avoid people agreeing to terms which are inappropriate for them.   
FACS response: Yes, participants will be assessed for likelihood of success. Suitability assessment will include their willingness and capacity to engage in education, training and employment goals.
  • What will be the eligibility criteria at review (at end of what we understand to be a 6 month tenancy agreement)?
    - i.e. on what basis can a tenancy agreement be terminated rather than extended? 
FACS response: Lease renewals are subject to continuing engagement in education, training and employment goals.
  • If becomes apparent that tenant is meeting all requirements of program but nonetheless continues to be eligible for social housing at review what will future agreement/social housing tenancy look like? - i.e. will there be a possibility of shifting to longer tenancy agreement (2, 5, 10 year agreements) and/or removal of 'special requirements' of program (in situations where tenant's circs change and requirements deemed no longer appropriate). 
FACS response: The trial provides six month leases that can be extended up to a maximum of three years. Eligibility of participants for further housing assistance at the end of the period will be subject to their circumstances.
  • Would this require relocation?
FACS response: See prior answer above.
There is a future briefing mid December. We'll keep you up to date on any further details about the Program we are able to share.

We're keen, for example, to know more about what will be considered measures of 'success' for the trial. Will FACS be tracking all applicants and tenants who take part in the program once they are evicted to find out their housing outcomes over the full duration of the trial? Though not consulted before the announcement of the program, we're hoping that FACS sensibly consults with the housing and homelessness sector as part of its evaluation!

Note: Post was edited 13 December to add in responses provided by FACS regarding the Opportunity Pathways trial.

Friday, December 7, 2018

Disrupt landlords

This is a slightly modified version of opening comments I made to the recent AHURI conference Disrupting the housing market in a session called 'New technologies, ethics and regulation'. Check out all the presentations here:

L-R: Sidesh Naikar, DSS; Nerida Conisbee, REA Group; Leo Patterson Ross, TUNSW; Prof Chris Pettit, UNSW City Futures. Photo Credit: AHURI


I frequently find myself arguing both against particular disruptions that show up, while wishing for serious disruption in our housing sector which is failing so many. In my few minutes I’ll make some observations about why we aren’t getting what we need.

We need to examine each change to our housing system with eyes open. It can be obvious to examine who benefits or suffers from change, but sometimes we can forget to also examine the impact of retaining the status quo.

We rightly point out that rent-bidding apps like Rentberry are not nearly as transparent as they claim and forces tenants to compete with other tenants to pay the highest rents possible. What we can miss is that allowing a real estate agent to set the rent based on what they think the market will bear is definitely untransparent and forces tenants to compete with other tenants to pay high the highest rents possible.

Similarly with online platforms which allow ever greater information to be gathered – they allow discriminatory behaviour. But it is na├»ve and demonstrably wrong to think that pen and paper applications and face to face viewings don’t also facilitate this.

The problem is with our competitive private rental market, which encourages people to use pre-existing biases as a shortcut to choosing a tenant, rather than the particular apps themselves.

It can also be easy to identify issues only within the frame of how a disruption is impacting the system without acknowledging the pre-existing systemic issues the disruption may highlight or exacerbate. This has been an ongoing issue in studies but particularly in media reporting around short-term letting.

In many ways, this relates to the democratisation of data - it is rarely put in the hands of practitioners or people with lived experience who ask different questions of the data.

Most data concerning the private rental sector in Australia has been created by and for the real estate industry, to aid investors who seek to enhance their investment decisions. The data is held in the hands of people who seek to profit from either holding the data or from the decisions which can be made from the data.  Controlling the data helps control the narrative which is a key tool used by all those in power – this is why rent increases are often reported in positive ‘growth’ terms rather than a negative phenomenon of loss.

The government and NFP sectors are not immune from this either, holding great data sets which are not made available to the public, or are made public only after being sanitised and asked the questions which are safe to ask from the data holder’s perspective. Given both the importance of providing shelter, as well as the degree of subsidy the public provides governments, community orgs, private investors and academics, there should be no reason why data created with the benefit of those funds shouldn't be as open as possible.

So, what do we need to do? So far disruption in Auatralian housing has ultimately designed to maintain the status quo. assist landlords and investors not tenants. it's interesting that Airbnb and Uber, as much as they are problematic otherwise, both set out to disrupt the service provider, hotels and taxis, not the traveller or the passenger. In Australia, tenancy disruptors like TrustBond, Snug, and others try and present as being for tenants, but I believe they realised that the power rests heavily with the service provider and since they don't have a plan to disrupt the physical supply of rental housing, they have sought to either reduce service provider costs without any benefit flowing to end user or eke out essentially private taxes from end users. This is particularly been the case with alternative bond loan products which claim to replace cash bond but actually protect current landlord interests by maintaining their current costs and risk profile, while extracting a fee from the end user tenant to access the product.

We need to disrupt landlords, of all sorts. The disruption needs to happen at three levels – first the current legal and social framework needs rewiring by either people or governments. We need to rebalance the relationship between landlords and tenants and recast the provision of housing as an essential service to be delivered to the people who need it when, where and how they need it. This will be the great disruption for many landlords. While we do that, we open up the data and let people ask the questions that need to be asked of our housing system. Those two things open up opportunities for disruptors, whether for profit or not, to seek to improve tenants lives, rather than just joining in the pile-on of people seeking to rake money off them.

Friday, November 9, 2018

The sale of Millers Point properties has ended: it has made inequality worse

The view from the old Workers Flats in High Street, Millers Point

End of the Millers Point sales program

With the sale of the final two terrace houses on Saturday, 3 November 2018, Property NSW announced the end of the Millers Point sales program. Announcement of the successful tender for the sale of the Sirius building is expected any day now.

We'll take this moment to reflect on a number of ways to remember this chapter.

On 19 March 2014 the Hon Pru Goward, Minister for Family and Community Services, announced that ‘high value public housing property assets on the Sydney Harbour foreshore will be sold with the proceeds to be reinvested into the social housing system across NSW’. You can check out her media release at the time here. It said that relocating the residents and sales were expected to be completed within two years. In April 2015 the NSW Government placed a figure of $500 million on the projected estimate of proceeds.

Since the Minister’s initial announcement the Tenants’ Union of NSW has repeatedly called on the NSW Government to allow tenants to remain, especially the elderly and those with strong links to the area. A campaign to allow residents to stay was not successful, other than a handful who remain in properties where the sales have been deferred.

Also, very soon after the announcement, the film-maker Blue Lucine started recording the community's efforts to resist the sell-off. The resulting documentary called 'Eviction' is a powerful record of the way this sad attack on Sydney's heart was carried out. We are privileged to have been present at screenings of 'Eviction' with members of the community. The next viewing will be at Parliament House in Macquarie Street on 20 November 2018.

By December 2016 the NSW Government had sold 133 properties for $349 million. By that time we had started predicting that total proceeds from the sale were going to hit $680 million, well in excess of the $500 million. We and the community argued that this gave the Government the ability to retain some of the housing, particularly the Sirius building.

At the time of the third anniversary of the announcement to sell all public housing properties in Millers Point, we were saying:
'Come on NSW Government, allow the remaining older residents a real choice'. This may be ageing-in-place in their current homes and, an alternative that is supported by the residents, retain some of the units within the Sirius Building and some of the workers cottages for a semblance of a social mix. It's not too late! A win-win situation! You'll make your money and older residents still there can stay.
Our and others' pleas fell on deaf ears.

With the sale of the final two terrace houses at the beginning of November 2018, our records show that total proceeds from the sales of 189 properties is $609.6 million. One real estate agency, McGrath Real Estate, has been responsible for sales totalling $518.9 million.

The median price was $2.5 million. Prices ranged from $1.4 million for a terrace house to $26 million for a flat complex. On top of this, the NSW Government has collected a bonus of $33 million in stamp duty (not counting the stamp duty on subsequent sales).

The figure of $609.6 million excludes the sale of Sirius building and the deferred sales of the 28 units set aside for existing tenants. Estimates in the media for the sale of the Sirius building range from $120 million up in May 2018 to $150 to $180 million in August 2018. This leads to an estimate of the total windfall from sales of over $760 million.

Proceeds from the sales

As of September 2018, the NSW Government reports here that a total of 1,121 residential units for social housing had been completed and a further 260 residential units were under construction using proceeds from the Millers Point sales program. It is unclear whether it is accurate to characterise these dwellings as funded from Millers Point sales - the required level of transparency to assess the claim does not exist. There are also inconsistencies with these claims.

In April 2015, the NSW Government projected proceeds of $500 million. They also said the money would be 're-invested into some 1500 new social housing dwellings, allowing more people on the waiting list to be housed faster'.

Today, although the proceeds have climbed more than 20% higher to over $600 million and another 30% to over $760 from the sale of the Sirius building all but guaranteed, the government is stating that only 1381 homes have either been built or been funded. Based on the original claim in 2015, we should be seeing 1800 properties built or funded already, with a further 500 or so in the development pipeline. This discrepancy has not been accounted for.

Regardless, in March 2018 we wrote here that the construction of new dwellings from the proceeds of sales of Millers Point properties represents small growth only in provision of new social housing stock across NSW.

We also have argued that the NSW Government is wrong to cannibalise existing public housing stock to build new social housing dwellings. This is especially at a time when the NSW Government has a budget surplus of over $4 billion. Indeed, Hal Pawson from the City Future's Research Centre at the University of NSW concludes that none of this booty has been channelled into expanding social and affordable provision. He argues that Housing NSW is overselling its social housing commitment.

The residents

And what of the residents who were forced to relocate? The film 'Eviction' highlights this in a visceral way. The obviously strong ties in the community - with neighbours caring for each other as if family - makes the separation from community all the harder to watch.

A Swedish study by Danermark, Ekstrom and Bodin found premature deaths amongst older residents forced to relocate. (This study is cited on page 70 of Cred Community Planning’s ‘Social Impact Assessment of the potential social impacts on the existing Millers Point community, and the broader social housing system, that may result from the sale of any further Social Housing in Millers Point’, prepared for the NSW Land and Housing Corporation in 2013.) Time may well show that this also is the case with Millers Point. We are aware of at least two suicides and other recent deaths.

Professor Alan Morris of University of Technology Sydney interviewed residents leading to a report for Shelter NSW which is discussed here and here. Professor Morris argues that 'place' attachment was profound and the removal announcement and the actual move were devastating. Those whom he interviewed spoke of deep sadness and anxiety at the thought of leaving. Residents who had moved told of their isolation and melancholy at having lost their social network.

We have argued that the forced relocation of residents of Millers Point highlights the failings of Government when only lip service is given to ‘ageing-in-place’. In 2015 and 2017 the Tenants' Union of NSW made submissions to Elder Abuse Inquiries of both the NSW Legislative Council and the Australian Law Reform Commission (ALRC) here and here. We argued that a government policy, in itself, may constitute a form of elder abuse. We submitted that the NSW Government’s decision to relocate all the social housing tenants in the suburb of Millers Point is an example of systemic elder abuse.

In October 2017 Professor Morris published an article in The Conversation called 'Last of the Millers Point and Sirius tenants hang on as the money now pours in'. Here, he argued that the NSW Government may be patting itself on the back for generating hundreds of millions of dollars by displacing the public housing tenants in Millers Point and the Sirius building. However, it's actions were the planned, deliberate and irreversible destruction of an historic community. The primary focus was on revenue and expenditure. The human costs of policy making were pushed to the side.

On 14 November 2018 Professor Morris will be launching the book entitled Gentrification and Displacement: The Forced Relocation of Public Housing Tenant in Inner-Sydney, Springer, 2019. Professor Morris draws on in-depth interviews and examines the forced displacement of public housing residents in Millers Point, Dawes Point and the Sirius building in The Rocks, and considers the build-up to the government deciding to relocate the residents, strategies deployed to pressure tenants to move, as well as the social and personal impacts of the displacement.

One of the most powerful lines in the film 'Eviction' has a main protagonist pondering who will live in his home when he's gone. So who are the new residents? We have glimpses: it's turned from struggle street to billionaire's rowmodel/author and partner from family of merchant banker have come and gone; 'it’s again the home of a gentleman'. And, of course, 'Kent Street' now is known by some as 'Rent Street', because of its many Airbnb listings.

Recently, Rupert Legg of University of Technology Sydney published an article in The Conversation, called 'Making developments green doesn’t help with inequality'. He linked the development at Barangaroo with the plight of the residents of Millers Point:
The NSW government announced the sales [in Millers Point] after Barangaroo’s effect on the surrounding areas began to take place, realising the increased profit to be made. As a result, the development is not only exclusive on the inside, it has also contributed to the displacement of the disadvantaged from surrounding areas. ... Barangaroo is a missed opportunity: instead of promoting social equality, it has made inequality worse.

Friday, November 2, 2018

What you need to know about renting reform in NSW: Part 3

We're back with more information about the Residential Tenancies Amendment bill which has passed and is now an Act. It will take effect at a so far unannounced date in the future - presumably before the election in March. In this series of posts, we examine what is proposed and what the changes will mean for renters in NSW. If you haven't already, check out Part 1 and Part 2. Many of these proposals are good, or have potential to be so. Whether they strike the right balance will often depend on whether unfair 'no grounds' evictions remain in the Act. Others have short-comings which will need to be revisited in the future.


Condition Reports

Currently the Act mandates that a landlord must give the tenant two copies of the condition report before or when the tenant signs the residential tenancy agreement. The tenant must then complete and give one copy of the condition report to the landlord or landlord’s agent not later than 7 days after receiving it.

The proposal before government is that the landlord must, before or at the time the tenant signs the residential tenancy agreement, give to the tenant two copies, or one electronic copy, of the completed condition report.

This is a positive change as it more clearly places a burden on the landlord to provide the condition report. The report's purpose is largely to support a landlord's claim on a tenants bond.

Information Statements

Currently the Act does not mandate that the landlord sign any statement acknowledging that they are aware of and understand their rights and obligations as a landlord.

The proposal before government is that the landlord or landlord’s agent must not enter into an agreement unless they have signed an acknowledgment on the agreement that the landlord has read and understood the contents of a rights and obligations information statement that sets out the landlord’s rights and obligations under the Act and any other Act or law in relation to the proposed residential tenancy.

We support this amendment - though are skeptical of its effectiveness. A better approach to improving landlord awareness of rental laws may be placing more obligations on real estate agents to prevent their landlord from breaching the agreement or an education system such as Utah's 'Good Landlord' program and a proper registration program to recognise that landlords are providing an essential service, and need to be fit and proper persons for such an important role.

Rent Receipts

Currently the Act is silent on the use of email as a method of supplying rent receipts. In this absence the Electronic Transactions Act 2000 may apply.

The proposal before government will allow rent receipts for rent paid by cheque to be sent by email to an email address specified by the tenant.

We support this amendment. Our only concern is that tenants may feel pressured to supply an email that they rarely access. This will need to be monitored.

Smoke Alarms
Currently the Act is silent on smoke alarms other than being captured in a reference to a landlord’s statutory obligations relating to the health or safety of the residential premises. All residences are required by the Environmental Planning and Assessment Regulation 2000 to have smoke alarms installed. Smoke alarms are likewise mentioned in the Standard Form Agreement as being a statutory requirement for all residential premises.

The proposal before government is that repairs to smoke alarms be carried out as a matter of urgency. The Manner and time frame by which these repairs are to be carried will be prescribed in the regulations. Breach of this section may result in a maximum 20 penalty units. A tenant can undertake urgent repairs to smoke alarms and be reimbursed accordingly as per the regulations.

This amendment came out of a coroner's report into the tragic death of a child. We support this amendment although we are yet to see the regulations. We do not envisage any problems with the drafting of the regulations.

Employee & Caretaker Evictions

Currently the Act treats the eviction of tenants generally equally - 'at fault' evictions occur because of the tenants behaviour, not because of any personal characteristic. 'no fault' evictions occur because of some change within the landlord or the property, and not because of any personal characteristic of the tenant.

The proposal before government is to treat employees differently to other tenants. Tenancy agreements with tenants who are on periodic agreements who also happen to be employees or caretakers (as defined in section 9 of the Act) will be able to be terminated with as little as 28 days notice. It is intended to assist a landlord employer more easily evict their tenant employees and largely justified on a misunderstanding of the range of ways a section 9 agreements can be formed - the amendment was pushed heavily by the farming industry, particularly aimed at seasonal employees, but the implications are much broader.

We do not support this amendment. Employers ending employment agreements and tenancies should be able to plan around the transition. Employee arrangements are broader than just farms, and this will cause unfair outcomes. The arrangements are not fixed contracts with a forseeable end date which mean the tenant does need sufficient time to find a new home – it is not clear why they are deemed to deserve less than the other tenants. If anything they should be afforded extra time to move out given that they are potentially facing not just homelessness but unemployment.

Our recommendation was and remains that employee & caretaker evictions require the same notice period other tenants do - 90 days in a periodic agreement. There has been no reason given why landlord employees can't work around this period - it appears to be pandering to poorly run businesses rather than legitimate issues with the notice period.

Expansion of Rent Arrears Process
Currently the Act treats rent arrears differently to other breaches of the agreement. You must be in breach of the agreement for 14 days before a notice can be served, and generally if you 'rectify the breach' (buy paying the rent owed) before you are evicted, you can prevent that eviction from occurring. This is a sensible difference which gives tenants more time to fix the problem, and means landlords are less likely to suffer rent arrears losses.

The Act is changing to also include water and electricity charges in this different scheme, and we think this is sensible. Rent arrears and water charges often go hand in hand, but currently, if a tenant is given an eviction notice for owing $1000 for rent and $10 for water, and pays off that $1010 they will still be evicted - under this change, they will not.

We think this is a good change however, the rent arrears process currently has a big flaw in it which needs to be corrected. Where a person has a past history of rent arrears, the landlord can ask the Tribunal not to allow them to stay even if they do pay off the current rent arrears. Originally this was introduced to prevent tenants paying 'on the court house steps' and playing games with the system. Unfortunately it was broadened to mean that even minor, and quickly remedied rent arrears can add up to an eviction. It should be amended to apply only to circumstances where tenants wilfully paying late as originally conceived.

Asbestos & Termination

Currently the Act is silent on asbestos other than a being captured in reference to a landlord’s statutory obligations relating to the health or safety of the residential premises. Under clause 458 of the Work Health and Safety Regulation 2011, if more than 10 sqm of bonded asbestos sheets, or any significant amount of loose or crumbling asbestos, is to be removed from the premises, the removal must be conducted by a licensed removalist.

Once these amendments take effect, tenants in properties that have been listed on the Loose Fill Asbestos Insulation (LFAI) Register during the term of the agreement or listed on the Register prior to the agreement being entered into and that fact was not disclosed to the tenant may terminate the tenancy early without compensation to the landlord under section 100 of the Act.

The LFAI system already allows for some compensation from government to landlords, but prior to this amendment tenants can find themselves trapped in potentially unsafe environments with unfair break costs. This is a sensible amendment.

Expansion of use of Rental Bond Interest Account


Part of the deal when the Rental Bond Board was created and tenants bonds started being held in trust there was that the money would be spent on the renting system and particularly in the interests of tenants. Currently the Act mandates that the Secretary may make a grant or loan, on the  recommendation of the Board and with the approval of the Minister, from the Rental Bond Interest Account for the following purposes:
(a) establishing and administering tenancy advisory service,
(b) schemes for the provision of residential accommodation,
(c) education about tenancy laws and the rights and obligations of landlords of landlords and tenants,
(d) research into matters relevant to the relationship of landlord and tenant,
(e) other activities for the benefit of landlords and tenants.

The amendment will allow the Secretary to also make a grant or loan from the Rental Bond Interest Account for 'other consumer protection purposes.'

We have not been given any further information about what, if any, consumer protection services/products the Fair Trading envisage could be funded from the Rental Bond Interest Account. We do not support bond money being spent on anything other than the renting system – otherwise, bonds would be better left in tenants pockets.

Database Listing Offences
Currently the Act mandates that offences can be penalised by fine or imprisonment but is never or very rarely enforced to be act as an effective disincentive.

The proposal before government creates two new offences:

(1) A maximum penalty of $2,200 for a landlord or landlord’s agent who lists personal information about a tenant or co-tenant in a residential tenancy database if that tenant or co-tenant terminated an agreement in circumstances of domestic violence.

(2) A maximum penalty of $1,100 for a database operator who charges a fee for giving a copy of personal information that is in the residential tenancy database to a person who is the subject of the personal information.

We support this amendment on the proviso that there is effective use of enforcement powers from Fair Trading. Currently enforcement through the use of penalties rarely occurs.

Enforcement generally
While not an amendment itself, it is worth a note that a number of amendments have been to add new penalties to the Residential Tenancies Act 2010, with the intention of regulating bad behaviour by landlords. We have mentioned a few times that the rate of enforcement is very low, and this causes us scepticism about the effectiveness of this strategy - but how low is it?

Over the two years 2016-17 and 2017-18, there were more than 5200 complaints by tenants. Around 1000 allegations of offences were investigated and found to have breached the Act, with the vast majority of those being given either a warning or "education". Just 24 people were fined, at an average fine of less than $500. So very few instances of verified breaches of the Act resulted in enforcement action - and very minor enforcements at that.

We have encouraged the Minister and NSW Fair Trading to consider the message that this low level of enforcement sends to landlords and real estate agents who do the wrong thing - that chances are you'll face no consequences for breaking the law. On the other hand tenants are routinely evicted for not following their obligations. Is that a balanced approach?

If the Act is to include these penalties, then we need to have a rigorous and fearless approach to applying them, otherwise their ability to regulate behaviour is unacceptably weakened. Tenants are mostly pushed to enforce the law themselves - but at great personal risk of jeopardising both their current and future homes.