Strata redevelopment proposals expose flaws in the housing system

New South Wales' first strata title schemes are now more than 50 years old; there are also plenty of even older buildings that have been subdivided into strata units over the years. With age these buildings have sustained a bit of wear and tear (some residents may feel the same about themselves!). But many are desirably-located, in inner and middle Sydney.

Developers have had their eyes on them for some time, but their designs are often frustrated by the necessity of getting every single owner to agree to sell up and terminate the scheme. Now the NSW State Government is having a look at them too.

In its current review of strata title law, NSW Fair Trading is considering changing the law about terminating strata schemes, in order to facilitate 'urban renewal'. Suggested changes include removing the requirement of a unanimous decision by owners to terminate – instead a majority would do, with some owners having to sell up against their wishes. Fair Trading is asking for feedback on what size of majority is appropriate, and whether there should be a process for owners to collectively sell their units or participate in the redevelopment.

We think that before it goes any further in considering these details, the NSW State Government should first consider the wider housing implications of such changes. We're worried that without the State Government also committing to a stronger affordable housing policy and additional investment in social housing, these changes may result in thousands of households losing relatively affordable and – in the case of owner-occupiers – secure housing.

We have identified two groups of people who we believe would be particularly vulnerable. 

The first are older, lower-income owner-occupiers. From our analysis of data from the 2011 Census, we calculate that there are about 29 000 older, lower-income owner-occupiers (aged 60+, income less than $60K, no mortgages) living in strata schemes in the inner and middle rings of Sydney. Of this group, two-thirds (66 per cent) have incomes of less than $600 per week.

These residents may have lived in their strata schemes for many years, and have deep links to the local area. They may also have no assets other than their strata unit and, if they were forced to sell their unit because of the termination of their scheme, they may not be able to afford to buy again in the same area. This is a real possibility, especially if the market for units in the scheme is limited (because the scheme is run-down, and there are insufficient funds for repairs, there may be few or no prospective purchasers other than developers). 

In the event of the termination of their schemes, these older, lower-income owner-occupiers may be faced with choosing between buying again out of their area, or renting locally. Buying and moving may mean losing their social and cultural links and connections to local services, such as medical assistance. Renting would mean at least some time spent in the private rental market, which offers very little security of tenure. These persons could apply for social housing, but may be ineligible because of the income and/or assets criteria; even if eligible, waiting times for most types of social housing dwellings in the inner and middle rings of Sydney are between five and 10 years, or more than 10 years.  

For a group that has enjoyed low housing costs and high security, and expected to continue to do so in their old age, these may appear to be a very unsatisfactory set of housing options indeed.

The second group are older, lower-income private tenants. From the 2011 Census data, we calculate that there are about 14 000 older lower-income private tenants (aged 60+, income less than $60K) in strata schemes in the inner and middle rings of Sydney. Of this group, almost 5 000 live alone, and of these, about two thirds (66 per cent) have incomes of less than $600 per week.

Unlike owner-occupiers, these residents do not enjoy secure tenure, and the available Census data do not disclose the affordability of their housing. We acknowledge that the supply of rental accommodation in inner and middle Sydney would probably – eventually – be increased as a result of the redevelopment of older strata schemes. Nonetheless, we are concerned that when a strata scheme is terminated, these residents would face an unsatisfactory set of housing options like those faced by older, lower-income owner-occupiers. It is likely that they would not be able to rent affordably in the local area, whether during the redevelopment, or afterwards when the redevelopment of their particular scheme is complete – as the new premises will almost certainly rent for substantially more than those in the old scheme, and these renters have little prospect of increasing their incomes. They would therefore have to move away, or try to rent unaffordably locally while waiting for social housing. 

These vulnerable groups of strata residents – and other residents who may be adversely affected by urban renewal – need more than legislated safeguards in a reformed strata scheme termination process. They need a better set of housing options – better than those presented by our current planning and social housing systems and tenancy laws.  

The planning system makes provision for the development of affordable rental housing, but its approach is mostly permissive and voluntary (per the Affordable Rental Housing SEPP, and some voluntary planning agreements); there is legislative provision for a mandatory approach (under s 94F of the Environmental Planning and Assessment Act 1979 (NSW)), but the State Government has restricted this approach very narrowly to only a handful of sites in Sydney. The whole of the planning system is now under review by the State Government; it has flagged that there will be a high-level ‘Housing Supply and Affordability Planning Policy’, but there is no indication yet that it will strengthen the mandatory provision of affordable housing – or even its permissive, voluntary provision. 

The social housing system is stuck in a state of no net growth, and has been for more than a decade. Given that the population is growing, no net growth means the social housing system is declining relatively. As indicated by the waiting times above, the social housing system is no longer directed to serving people who simply need affordable housing: in most cases, an applicant must experience a crisis before they are served.  Most social housing allocations (70 per cent) are now made on a priority basis, rather than a wait-turn basis (30 per cent); five years ago, those proportions were reversed (download Shelter NSW's NSW Housing Factsheet for these figures and more).

  

Our tenancy laws enshrine insecurity by failing to give even the modest assurance that a tenancy may be terminated on reasonable grounds only. Landlords continue to be allowed to give termination notices without grounds and, under provisions that commenced with the Residential Tenancies Act 2010, there is now no discretion for the Consumer, Trader and Tenancy Tribunal to decline to order termination on the basis of a no-grounds notice. This is an injustice to the tenant receiving the notice, and makes tenants as a class needlessly insecure in their homes.

The urban renewal contemplated in NSW Fair Trading's strata review may expose thousands of people to these flaws in our housing system, and place the flawed system under further stress. We're asking that the NSW State Government  review the housing implications of proposals to facilitate urban renewal, including those relating to strata scheme terminations, with input from all interested State Government agencies, non-government organisations and members of the public, with the objective that all persons who are unhoused by urban renewal should have access to affordable, secure alternative housing in the location of their choice.