Friday, August 26, 2016

Bonds for public housing?

The notion of rental bonds for public housing tenancies has been floating around for years. Government Ministers who take responsibility for the Land & Housing Corporation - the legal entity that actually owns all the public housing in New South Wales - are forever looking into the idea of taking and holding large sums of tenants' money, to retain in the event of a cleaning or repairs bill at the end of a tenancy, to see whether it would give them access to money that they can't otherwise recover from tenants of limited means. Usually, they conclude the cost of running such a scheme would outweigh any benefit it could produce for the Government landlord.

Public housing tenants are already liable for the negligent or intentional damage they cause during their tenancy, just like every other tenant in New South Wales. But, unlike every other tenant in New South Wales, they are also legally required to enter into and make good on agreements to pay their debts to social housing landlords. Throwing a bond into the mix won't really add much that isn't already being achieved, but it will add a whole lot of new work for whoever has to take, hold and refund all of that money. Then there is the financial imposition it would place upon all public housing tenants - necessarily on low incomes, as a condition of eligibility - rather than just those who do cause damage to their property during a tenancy.

The latest iteration of this idea seems to have taken a different turn. In one of his first media engagements as Social Housing Minister, Brad Hazzard said “[A bond] reinforces the message that if you do something bad to this property that you don’t own, you will lose some money to fix it.” Then, in the Future Directions for Social Housing document released in January this year, it was announced that FACS Housing would:
Introduce public housing rental bonds for all new tenants through an approach that mirrors the private market rent bond scheme, reinforcing tenant responsibility in regard to rent arrears and tenant damage, as well as helping to prepare them for transition to the private rental market. To commence during the second half of 2016, the bonds will be applied to new leases and will be equivalent to four weeks market rent, capped at $1,400. Tenants will be able to pay the bond in installments over two years, which will be administered by the Rental Bond Board.
In shifting away from a cost recovery strategy to one of encouraging tenant responsibility and capacity building, it seems that Government may have decided to push ahead with a public housing bonds scheme after all, even if it comes at a new cost to taxpayers.

There's a strong likelihood that it will come at a cost to public housing tenants, too, even after putting aside the difficulties most tenants living well below the poverty line would face in paying fortnightly instalments for two long years. A quick investigation of how well the Land & Housing Corporation handles "tenant damage" matters reveals a couple of systemic problems they will need to address, if their scheme's objectives are not to be doomed from the start.

The first is that they are notoriously bad at completing ingoing condition reports. As this 2008 article from Robert Mowbray shows, the problem is a long standing one. There are recent examples, too, indicating this problem hasn't yet been addressed. Examples such as the tenant who signed up for a new tenancy late last year and still hasn't received a condition report. Apparently the local FACS staff have said they'd just like to add a few things to it before they hand if over. Then there's the tenant who recently moved from one property to another, whose new condition report notes a "clean, undamaged and working" exhaust fan in the kitchen - except that there isn't one... And what about the time FACS staff referred to a condition report that was compiled many years before the tenant they were trying to recover damages from had even signed a residential tenancy agreement and moved into the property? Before a Tribunal, no less!

But even where ingoing condition reports are compiled, whether poorly or otherwise, they seem to have far less importance placed upon them than an outgoing inspection. According to one Tenants' Advocate, “we constantly see ingoing condition reports prepared by FACS Housing that have little or no detail in them and no photos. Every single item is recorded as clean, undamaged and working. Yet the outgoing report is always extremely detailed with photos and every single item is recorded as not clean, damaged and not working.”

The second issue flows from the first. Without a reliable condition report, tenancy managers are unable to establish what, if anything, the tenant should actually be held liable for. To get around this, it seems a common practice has arisen whereby the entire bill for bringing a property back up to re-lettable standard is passed on to the tenant. Sure, there will be times when this includes some cleaning and repair costs that a tenant is liable for, but it can push a bill that a tenant is only partially liable for into the stratosphere. As one Tenants' Advocate was informed by local FACS workers when questioning such a bill - "this is standard procedure".

The Brown Couch knows of a situation where a "tenant damage" bill exceeding $7,000.00 was more than cut in half when a Tenants' Advocate became involved, questioning a number of costs that were clearly not the tenant's responsibility. These included replacing worn-out kitchen appliances that the tenant had been making do with for some time, and the cost of restoring parts of the property that had been vandalised after the tenant had vacated. In that case, it also included some costs that the tenant agreed they were liable for, and was happy to pay. But that is not always so.

The Land & Housing Corporation also raises debts in situations where they shouldn't, such as against a former tenant who had been escorted from her property after an extreme domestic violence incident. The property had been trashed after she'd left, and FACS staff were well aware of this. They noted on her file that she should not be charged for the damage, but a debt was raised nevertheless. Even after discovering their mistake it took a very long time for the debt to be waived after it had been raised in the system.

In yet another example, a bill of several thousand dollars was reduced during conciliation in the Tribunal, because FACS staff knew they were trying to charge the tenant for things she wasn't responsible for. Then the tenant reminded the FACS' representative that her rent was in advance and she was entitled to a refund. When all was said and done the Land & Housing Corporation actually owed the tenant about $90.00. That's something that should have been picked up well and truly before making a Tribunal application, and it shows the work the Land & Housing Corporation has before it if it wants a rental bond scheme to be seen as anything other than a way of harvesting tenants' money more easily.

You'll forgive us if we seem to be going on about this a bit, but it really can't be stressed enough. Tenants should not be asked to embrace a scheme that is designed to encourage personal responsibility and capacity building unless the system within which it is to operate is responsible, and has the capacity to deliver on its undertakings. When it comes to the Land & Housing Corporation's approach to "tenant damage" and related debt recovery, no such system exists. If we are ever to see such a system, the necessary reform to policy and practice will not come from placing new expectations upon tenants, but on the landlord.

There are many reasons why bonds for public housing tenancies are a bad idea. Even if we ignore them all, the introduction of a bonds scheme would be premature. The public housing landlord needs to get its own house in order first.


  1. "The public housing landlord needs to get its own house in order first."
    Enough said!!

  2. Isnt there limited liability for tenants on damage and the landlord should then rely on landlords insurance?

  3. Indeed, the first poster is right.
    Housing NSW has to first ensure that the first responder's- (the phone call centre), actually know what they're talking about and any repair carried out by a contractor is carried out properly and correctly.
    No more of the "Maintenance has been placed on "Future Works Program", even if it is a light switch. I was told to put a piece of tape over it, so I would not use it.
    I called in my own electrical contractor, paid for it, then asked for re-reimbursement
    That was forthcoming after a fair bit of correspondence.
    Housing NSW seems to be the worst landlord anyone can have.
    They do not care for the properties themselves - allow them to fall into disrepair, mostly by omission.

  4. What about situations where we are forced to do our own repairs. Where is our remedy for unfair enrichment? Housings idea of market rent are theirs not the markets especially if its to calculate bonds. In addition, we take out their bins, we do their patch up jobs, we adhere to good neighbour policy and live/exist in suburbs we want to transfer from. If u want the same benefits as private landlords then we want strata management, negotiable terms and conditions, higher income limits to subsidy and the list goes on... We all dare to dare ideas like this or is it dream?


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