Tuesday, December 1, 2015

Renting laws in review - the case for change

In case you've missed it, our renting laws are under review.


The last time this happened was way back in about 2007. We made a number of recommendations that would improve stability, liveability and affordability for tenants and other renters in New South Wales.

Some of these were ultimately taken up and are working relatively well, or just need a tweak to get them working a little bit better. Others were rejected outright - such as our suggestion to introduce 'just cause evictions', and do away with landlords' ability to end tenancies without a reason.

At the time, Fair Trading said:
The review does not find sufficient justification for NSW to become the first State to introduce "just cause" only evictions. To do so would have serious implications on the rental housing market. In any event, trying to list all valid reasons would be a difficult or impossible task. Landlords should retain the ability to issue notice without stating a reason. However, there needs to be a greater deterrent against the issuing of notices without grounds, when the landlord really wants to end the tenancy because the tenant has allegedly breached the agreement. This is a matter of natural justice, and tenants should have the right to defend themselves against any claim being made.
(... you can read more about that here).

In the aftermath of that review, the law was eventually changed. Not only did landlords retain the ability to issue notices of termination without needing to state their reason, tenants lost the right to prevent eviction by drawing the Tribunal's attention to the circumstances of the case. We made quite a fuss about it at the time - you can read more here.

As was alluded to in Fair Trading's earlier review, the idea that strengthening tenants' rights would have 'serious implications on the rental housing market' is an oft-drawn bow. Even when getting down to the minutiae of rights and obligations, any suggestion that landlords can't simply do what they like with their property - or worse, that they'll have to spend a bit of money in order to manage their investment - leads to cries of foul. This, too, is something we've talked about before - you can read more here.

But the changes that were, and the changes that weren't made to renting laws in the wake of the last review need to be considered in a new light: the residential housing market is no longer what it was.

The proportion of renter households in New South Wales is growing at a faster rate than the population generally. It was 27.5% in 2001, up to 30.1% in 2011. Various data suggests this will have increased again - perhaps quite substantially - when the next Census occurs.

  • Tax data shows that between 2009-10 and 2013-14, almost 85,000 properties were added to the New South Wales rental market.
  • Lending and finance data from the ABS shows that NSW's landlords borrowed almost $70 billion in the 2014-15 financial year - up from around $51 billion the previous year and $35 billion the year before that - to fund their investment in property.
  • Only a small percentage of this borrowed money is used to fund new housing supply - almost all of it goes towards purchasing established homes.
  • Vacancy rates have been hovering at around 1.6% for Sydney.
  • By comparison, the number of renter households in New South Wales grew by 43,000 between 2006 and 2011 according to Census data.

And at the 2011 Census, almost 40% of renter households were families with children.

The housing market continues to be dominated by investor landlords, and an absence of new owner-occupiers entering the market means more people are renting for longer. The need for stability, liveability and affordability for renters only ever grows in importance.


3 comments:

  1. The fact that the dominance of ownership is that of investors and 40% of the rental market is rented to families with kids is despicable. One does't need to be a mathematician to see that the future looks bleak for those who simply can't afford a home to house the future tax paying population of Australia. Have we gone mad? Surely those who produce and educate the next generation of Australians need a secure permanent form of dwelling and community? The sooner we strip the fat from the investment market i.e. negative gearing, the better. You build a thriving long term economy through people being incentivised to work towards self funded retirement and not government dependance.

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  2. Hi slapitman,

    You make an extremely important point, but let's not get carried away here! A couple of quick and easy changes to renting laws will make a huge difference to tenants' sense of permanence and security in their homes. There is an opportunity to that right now.

    That said, we must also keep our energies focused on tax reform at the federal level. Raising the rate and broadening the base of the GST is not reform, it's just a fiddle.

    For something a little more in-depth on how renting laws and tax settings affect long-term tenants and their children, check out our post "What's up with Generation Rent?" from October 2013 - http://tunswblog.blogspot.com.au/2013/10/whats-up-with-generation-rent.html.

    Cheers,
    Ned.

    ReplyDelete
  3. What will it take to introduce a minimum standard to rentals? The landlords are having their cake and eating it too. They can rent a dump and get negative gearing bonuses. Minimum standards will also mean the racket being run by real estate agents and owners will have to cease. Should it be the legal responsibility of the RE Agent to ensure a rental meets minimum standard? I think so. If councils do not approve a dump for rental then the rental is illegal and the tenant compensated with the rent returned.

    ReplyDelete

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