Making sense of social housing in NSW

Social housing operates within a complex glob of morphing policies and procedures, prodded by occasional shifts in public policy at both a state and federal level that draw various laws, instruments and agreements into contact with one another in a range of ways. A sound working knowledge of the sector in its entirety can take years to develop, and once established could fall apart within an instant should one glance away at precisely the wrong moment.

A case in point is last year's announcement that the management of large swathes of tenanted public housing properties will be transferred to community housing landlords in New South Wales, in keeping with the Council of Australian Governments' (COAG) National Affordable Housing Agreement (NAHA), which was negotiated during the early days of the Rudd-Gillard-Rudd Government era. The announcement of the Management Transfer Program sparked some discussion here on the Brown Couch, and across the broader sector, about just who these community housing landlords are. How do they come to be in the business of housing people from the public housing waiting list since they're not run by the Government of NSW?

The plot thickens, as the results of the Program's tendering process have now been announced. Over the next couple of years, management of around 14,000 tenanted public housing properties across six different regions is to be handed to nine community housing landlords who are already operating in other parts of the state. So... now is a good time to take a look at what it means to be a "social housing" landlord in New South Wales.

Given we've already mentioned the NAHA, we should note it is the intergovernmental agreement that determines who takes responsibility for what within our housing systems across Australia. As an agreement among the Commonwealth, state and territory governments it is a static document, although it is intended to be renegotiated and updated from time to time. It has been altered quite a bit since its series of predecessors first took form: established in the 1940's as the "Commonwealth State Housing Agreements" as something of a post-war nation building scheme; and it is currently being renegotiated as a "National Housing and Homelessness Agreement".

Regardless of form, or name, these agreements have generally all set out to achieve the same objective: to set the conditions under which the Commonwealth would give funding to the states to run their public housing schemes. These agreements have been broad enough to allow each state and territory to run their housing programs as they see fit, as indeed they do. A strong focus of the current agreement has been to shift the delivery of housing assistance and services away from government to the not-for-profit sector, and successive NSW Governments have responded - indeed contributed - by attempting to consolidate and build our community housing sector. Notably, this included the regulation of the sector in 2010, with a state based scheme that has since been replaced by the National Regulatory System for Community Housing. It also included the establishment of a single waiting list for housing assistance, accessible through a portal known as Housing Pathways, under which any participating landlord could both process applications for and make offers of subsidised rental housing to eligible households.

In this context our language and legislation has come to reflect the idea of "social housing". With this term we could be referencing either or both of its constituent parts: "public housing" or "community housing"; and for practical purposes the only difference is whether the landlord is the government or a not-for-profit agency who has been contracted by government to provide the same essential service. Of course, things become more complicated when we consider the public policy implications of this rhetorical shift, as it gives our still predominantly neoliberal governments easy cover to withdraw from the direct provision of public housing proper, and focus entirely on the setting of policy instead. They do this on the grounds that "community housing landlords are well placed and can do it better", although this is far from an established truth. While we can have no objection to the growth of this community housing sector, the fact that it only ever seems to happen at the expense of our established public housing provider is a simple reflection of the State's entrenched reluctance to pay for and provide social housing. Given the sector has spent the better part of a decade trying to attract private finance to its cause, it reflects a certain level of disinterest in housing-as-shelter from the profit-driven private sector as well - as an aside, it will be interesting to watch how the emerging "build-to-rent" discussion proceeds from here.

Right - so while all of that is going on at the higher level, there is a somewhat consistent legal framework setting the scene in the meantime for social housing landlords and tenants across New South Wales. Although with the right political will the statutes under which social housing policies are determined can be changed - as we have seen throughout the last couple of years with mandatory evictions for social housing tenants and the introduction of concurrent leasing by the Land & Housing Corporation to enable the current Management Transfer Program - keeping tabs on the legislative framework can be a useful way to maintain one's bearings while trying to make sense of social housing.

The Residential Tenancies Act 2010 devotes an entire Part to social housing tenancy agreements, a discrete form of residential tenancy agreement to which a number of additional provisions apply. This Act defines a social housing tenancy agreement as "a residential tenancy agreement where the landlord is a social housing provider", and then defines a social housing provider as:

• the New South Wales Land & Housing Corporation
• the Aboriginal Housing Office
• a registered community housing provider within the meaning of the Community Housing Providers National Law (NSW)
• an organisation for the time being registered under Part 5 of the Aboriginal Housing Act 1998
• an organisation or a member of a class of organisation prescribed by the regulations

This immediately brings a number of other statutes into play. There's the Housing Act 2001, under which the Land & Housing Corporation is established as the legal entity that enters into residential tenancy agreements and other related dealings in residential property on behalf of the government; and under which the income based rental subsidy scheme is established. This is the legislation that gives us public housing, and it is amendments to this legislation that has enabled the emergence and establishment of community housing over many years.

There's the Community Housing Providers (Adoption of National Law) Act 2012, under which regulation of the community housing sector is provided by adoption of the Community Housing Providers National Law. This Act brings New South Wales into the National Regulatory System for Community Housing and, in some circumstances, allows the government to conditionally transfer title from the Land & Housing Corporation to a registered community housing provider. Note this has fallen out of fashion as concurrent leasing has come into play, having been made available by amendment to the Housing Act in 2016. For the time being property is being transferred to the community housing sector using this form of head-lease, but transfer of title under the Community Housing Providers (Adoption of National Law) Act remains an option.

Finally there's the Aboriginal Housing Act 1998, under which the Aboriginal Housing Office is established along similar lines to the Land & Housing Corporation, but with a specific remit to develop policy and deliver subsidised housing for Aboriginal households who rent. This Act also allows regulation of a broader Aboriginal Community Housing sector, for whom the National Regulatory Scheme for Community Housing is also being brought into play. By association, we must mention the Aboriginal Land Rights Act 1983, under which Local Aboriginal Land Councils who provide rental housing to their members may register with the Aboriginal Housing Office or the National Regulatory Scheme for Community Housing in order to have the requirements for approval to run a community benefits scheme that includes the provision of residential accommodation to their members waived by the NSW Aboriginal Lands Council.

The policy framework in which social housing operates is likely to keep changing, and where required legislative changes will sometimes follow. But for now, the above provides an overview of social housing in New South Wales. We'll keep an eye on the development of the National Housing and Homelessness Agreement, and take further note of any impact it might make.

In the meantime we'll do our best to answer any questions left in the comments, or sent through to us via the usual channels.

NSW Opposition's affordability pledge

NSW Labor announced a housing affordability package over the weekend. It's worth a look.

As reported in the SMH, the Oz, and ABC Online, the headline is that under a NSW Labor Government 25% of government owned land that is earmarked for residential development would be set aside for Affordable Housing. Additionally, 15% of new dwellings or floor space on "privately developed" land would be designated as Affordable Housing, "available for rental or sale to low- to moderate-income households."

As reported in the SMH and ABC Online, with comments attributed to NSW Planning Minister Anthony Roberts, the plan lacks detail. It is unclear just what is meant by "Affordable Housing", although the term does have a meaning in modern housing policy parlance. It generally refers to rental housing that is let at around 80% of the going market rate, and it is usually managed by a registered Community Housing landlord. It is not clear how Affordable Housing "for sale" would be determined, though we note the policy states Labor would "work closely with industry experts, including Community Housing Providers, to formulate the rules around this policy". That's good, but they could include tenants and prospective home buyers in that list of experts as well.

For his part, Minister Roberts says the plan is "totally flawed", and that the NSW Government has already created affordable housing. In comments to the ABC, he is reported to have said:

We are doing it incredibly successfully without destroying the value of peoples' properties, without actually going into the marketplace and providing a level of Government intervention that is no good for anyone.

Presumably he was referring to the Social and Affordable Housing Fund, under which the construction of 2,200 new properties was announced in early March. He might also be referring to the Communities Plus initiative, under which land owned by the Land and Housing Corporation - that's the public housing landlord in New South Wales - is to be "recycled". For the uninitiated, that means knocking down established communities in places like Redfern, Waterloo, Macquarie Park, Telopea and Riverwood, and replacing them with new, higher density neighbourhoods that will include both Social and Affordable Housing. But they'll include more dwellings for sale into the private market than anything else, because that's how this "recycling" model gets funded.

Ignoring the significant upheaval this causes tenants and residents within those communities, Minister Roberts might be right - that is one way to deliver Affordable Housing in parts of Sydney without destroying the city's property values. In fact, it seems designed to encourage further growth in the value of property, while carving out small tracts of affordability for a lucky few. To be clear, that is affordability relative to our extremely unaffordable housing market, as opposed to affordability by any real objective measure. That's good for property owners, but on its own it's not so good for tenants and would be home-buyers struggling to find something they can afford in the places they'd like to live. And it's really not good for the public housing tenants who value their properties in an entirely different way - by making homes and neighourhoods in the communities that are about to be destroyed.

In any event, the scale of Sydney's affordable housing crisis is such that a few thousand extra dwellings here and there won't really put much of a dent in it, even if we do rent some of them out a little more cheaply than the rest. What is needed is a clear and meaningful target for affordable housing to be included in new residential developments right across the city, if not across the state. We need a sustained effort to get more and more of it built with every new development that gets off the ground. On this note we'll give the NSW Labor policy a big thumbs up.

We'll be surprised and disappointed if the NSW Government comes out with a substantially different policy when it announces its own housing affordability package, as it has promised to do in the coming State Budget. Given the recent Federal Budget's focus on delivering Affordable Housing through the proposed National Housing Finance and Investment Scheme, and the reference to aggregate supply targets (including targets for social and affordable housing), residential land planning and zoning reforms, and inclusionary zoning arrangements in the proposed National Housing and Homelessness Agreement, the only real difference we're hoping to see in the Government's plan is a little more attention to detail.

Time will tell.

The Landlords' Budget

It's been dubbed the Budget that forgot the renters, but chances are your landlord is pretty happy with he 2017 Federal Budget's housing affordability measures. With first home buyer incentives that will push prices higher, and new rewards for speculative investment, this should be the stuff of landlords' dreams.

Let's take a quick look. We'll see what Lenny the Landlord - pictured below - thinks of the Budget's headline measures.

ABC TV's The Checkout presents: the landlord. Let's call him Lenny.

First up - unlocking supply. The Turnbull Government says it will ease restrictions that are holding back housing supply by sorting out some of the planning and zoning issues that make it hard for developers to build enough properties for landlords to invest in. They'll throw some money towards infrastructure upgrades to make sure developers don't have to worry too much about installing water supply pipes and sewerage systems, and so that future residents of new developments don't get too bogged down in traffic jams on their way to work every morning. They'll even tip in a bit of surplus land to help kick things off.

Lenny the Landlord says he quite likes these ideas. "Anything that gets me off the hook on housing affordability, I'm all for it," he grins. "As long as my high mortgage costs can continue to keep my tax bills down, I'm one happy chappie". A brief shadow of doubt creeps over him as he wonders whether all this fast-tracked supply could affect his longer term capital gains. His delight is palpable when he realises the measures would almost certainly result in higher land values where applied. "Forget the accountant," he chortles, "I'm heading straight to see my mortgage broker. Gotta get in on the ground floor, right?"

Next - creating the right incentives. The Turnbull Government says it is taking "prudent steps" to provide the right incentives for home-owners by allowing first home-buyers to make voluntary contributions to their super fund in the hope of saving for a deposit, and allowing older home-owners to top-up their super funds with the proceeds of sale. They'll also try to limit foreign investment by requiring half of all new supply to be sold to domestic buyers, and they'll prevent foreign investors from sneaking off without paying capital gains tax. What's more, they'll sting foreign investors with a levy unless they rent their places out for at least six months of every year.

Lenny the Landlord says he's a little worried about the impact of reducing foreign investment, but on balance he's still a fan of these measures. "Look, I'll be honest with you, this first home-buyer thing is a bit of a worry," he says. "There's not enough of them around, which makes it harder for investors to get the very best price when it does come time to sell. Thankfully we've got a steady stream of internationals coming in to stem the flow - capping the number of properties we make available to them could hurt. And who else can afford Australian property? I guess we might just have to settle for selling to other landlords in the long-run, so it's a good thing we've still got our tax perks."

When asked about a possible return of first home-buyer activity on the back of this Budget, Lenny laughs. "Yeah, please, that'd be great. Obviously this super fund thing is only going to help those who are already pretty much ready to buy - making sure they've got a bit of extra cash on hand to bid up prices is no skin off my nose." He thinks for a moment, and his eyes light up. "Actually, they might be able to bid up my property when it's time to cash out. That'd be, well... super!"

What does he think of the incentives for empty nesters? "Well, assuming some of them actually do it, I reckon it'd be good for those of us looking to pick up an extra investment property. More good homes on the market means more gains coming through hefty mortgages, makes it easier to ensure steady losses see, so you can get all the tax breaks and make it worth your while." He pulls out his mobile phone, but quickly puts it back in his pocket. "I must remember to make that call to my broker..."

The levy on empty houses? "Well, that's an interesting one," says Lenny. "I like the thought of foreigners having to rent their places out for six months at a time - that takes the pressure off me a bit. I can take my time between tenancies if I need to, keep the place vacant for a couple of months and still get my tax breaks. Bonus for me - with foreign investors evicting tenants every six months or so, there'll be plenty of competition for my place when I do put it back into the rental market. There'll be no trouble getting a little bit more rent here and there, so keeping my property empty every now and then could totally be worth it in the end!"

Lastly - improving outcomes for those most in need. The Turnbull Government says it will improve outcomes in social housing and homelessness by continuing to fund social housing landlords and homelessness services, encouraging "social impact investment", giving more tax breaks to landlords and creating a bond aggregator that will encourage private and institutional investment in new affordable housing products.

Lenny the Landlord says he's not really fussed with all this government housing business. "That's really not my concern," he mumbles. "I'm not running a charity here. I think the government should do that, so it's good they're doing that I guess".

When asked if the bond aggregator might prompt him to diversify his investment portfolio, he appears a little confused. "Diversify?" he asks. "What do you mean?" We briefly explain the proposed Affordable Housing Finance and Investment Corporation and how it could allow him to invest in other companies that would put money into the affordable housing sector. Perhaps he could even make a direct investment himself? He remains unsure. "Look, that all sounds interesting but I think I'll stick with what I know. I'm not sure investing in something other than the place I've got is a good idea. I mean what if some of this affordable whatchamacallit is built nearby, and my property ends up going down in value?"

"No, no," he says, reassuring himself. "We invest in property because we know prices always go up. Let me have another look at these new tax breaks you mentioned, they sound promising..." His mood picks up again. "You mean I can get an extra 10% off my capital gains tax if I give my place to one of these community housing dooverlackies for a few years to rent out at a smidge or two below the market? Sign me up! Heck, that means I could even sell the place a year or two earlier than I was thinking! I can start the ball rolling on buying the next one... and the next one... and the one after that..."

With that, Lenny the Landlord pulls out his mobile phone and walks off with a spring in his step.

Federal Budget Watch - priming the pumps

There have been a few developments since we last looked in on expectations for housing affordability measures in the coming Federal Budget. For instance there's the establishment of an affordable housing taskforce to come up with a UK style affordable housing bond aggregator that will suit local conditions, as well as intensifying speculation that first home buyers could be allowed to raid their superannuation funds in order to come up with a deposit before applying for a loan. In his address to the Australian Housing and Urban Research Institute yesterday, Treasurer Scott Morrison all but confirmed he will pursue these policies, which he believes will deliver housing affordability while ensuring house prices continue to soar.

It was an interesting speech, full of all the usual stuff about supply not keeping up with demand. It made a point of noting the majority of investors in the private rental market are small time speculators, holding only a single rental property with a low yield while hoping it will rise in value and deliver a solid capital gain. It suggested that any change to negative gearing would come at a cost to renters (although it didn't go into any detail about what that might be). And it had yet another go at the National Affordable Housing Agreement, suggesting its $1.3billion-ish annual spend is not producing the right outcomes because the effects of unaffordable housing are still being felt by low-income households.

What it didn't do was seriously consider the key drivers of unaffordability in our housing system. It steered clear of the capital gains tax exemptions that encourage home-owners to shovel excess income into their housing rather than other, higher taxed investments. It made no reference to the impact that small-time investors who trade in the same housing market - buying and selling mostly established dwellings - are having on the shape of the private rental market. It didn't even come close to considering what's recently been described as the financialisation of housing - the notion that a dwelling is is not a basic necessity but a means of accumulating wealth - is what's driving up the cost.

Or rather, it didn't consider these things to be a problem. In fact, in focusing on new ways to entice private investment into residential property - through the development of an affordable housing bond aggregator on the one hand, and providing incentives to stimulate home-ownership on the other - it goes so far as to suggest that further financialisation of housing will be the solution.

It's easy enough to see how allowing first home-buyers to dip into their superannuation will put upward pressure on prices. The more people have to spend, and the more competition there is in the market, the higher they'll be able to go. Without curbing existing tax breaks investors will continue to ride on the coat-tails of owner-occupiers, trading in the same market and pushing prices even higher. No doubt this will be to every buyer's satisfaction, once they become an owner, but for those who remain unable to buy despite their (potentially) increased access to debt it will simply exacerbate all the existing problems of relying on rental housing as the only long-term option.

Presumably this is where the bond aggregator and the development of new affordable housing portfolios comes in. According to the Treasurer in his speech yesterday, "the bond aggregator would issue bonds to the market, and on-lend these funds to community housing providers - allowing them to access cheaper and longer term finance". He also said "the goal is for affordable housing to be conceived not so much as a real estate investment, but a longer term fixed interest investment that can comfortably sit within institutional investment portfolios".

Perhaps the Treasurer has missed a point here. While financiers may be able to distinguish between affordable housing and real estate investment, community housing providers will not. They'll be buying, selling and renting into the same rising markets as everybody else. And while ever land values and housing costs continue to rise, so too will the need for "cheaper and longer term finance" for those who would deliver affordable housing to those markets. Community housing landlords may be accustomed to pushing against strong headwinds, but to date they've not had the full weight of Australia's affordable rental housing policies foisted upon them as they do. If we are to expect them to succeed, we may have to offer them more than just cheap debt. Taking some of the heat out of Australia's housing markets might also have to be on the table, and this means reforming negative gearing and capital gains tax concessions.

There's a final point to be made following the Treasurer's remarks yesterday. He concluded, correctly, that "there are no single solutions and the payback is achieved in some cases over a generation - not an electoral or budget cycle". With this in mind, let's acknowledge that whatever measures are proposed on budget night next month will be small consolation to many of the growing number of Australians who currently rent their home. Affordability is one thing, but knowing you can be evicted without a good reason is something else entirely. It's well beyond time to bring our renting laws up to scratch.

News from down the Hume...

The Victorian Government has shown plenty of good form of late, kicking goals by announcing a suite of new housing policies: funds for social housing, new supply, first home buyer grant boosts, stamp duty exemptions, shared-equity schemes, a vacant property tax and long fixed term tenancies! Ticking all the boxes, right? Could this be the game changer Victorians have been waiting for, and should New South Wales promptly follow suit? Or is it yet another case of a government dropping the ball on housing?

Let's take a look.

Reform, growth and better outcomes for social housing
Announced late in February, this includes the establishment of a $1billion Social Housing Growth Fund as part of a collaboration amongst "government, the private and philanthropic sectors", an additional loan scheme to give community housing landlords access to cheaper finance, the transfer of some 4000 properties from public housing to community housing management, and a commitment to push the federal government not to abandon the National Affordable Housing Agreement.

What does this mean?
There has been a long and steady push across Australia, over many years, to move away from Government owned and managed social housing - or what many of us might once have called "public housing" - and place it in the hands of the non-government sector. This is reflected in the National Affordable Housing Agreement and the relatively recent establishment of a National Regulatory Scheme for Community Housing. It explains the continued rise of the Community Housing sector.

Governments are spending less and less on the construction of new public housing, and hoping more and more that the non-government sector will partner with private interests to build and manage it for them. As these partnerships develop, large swathes of our governments' existing public housing stock is being transferred over to Community Housing landlords to manage, and in some cases title has also been transferred. In other places, public housing is being demolished and rebuilt, with Community Housing landlords and private developers dividing up the new stock between them.

Should NSW do this?
Growing the social housing sector by supporting and funding Community Housing landlords makes sense, but it shouldn't come at the expense of our existing public housing system. In New South Wales the horse has already started to bolt. We've got a long history of transferring properties from the Land and Housing Corporation to a range of registered Community Housing landlords, and we have plans to transfer about another 18,000 towards the end of this year. We've established our own Social and Affordable Housing Fund, which looks remarkably similar to the Victorian model, that is intended to give Community Housing landlords access to a guaranteed revenue stream if they build and manage new social housing dwellings without the help of government.

We don't as yet have a guaranteed low-interest lending facility for Community Housing landlords, and our Government has made no public commitment to the National Affordable Housing Agreement. Given the direction our social housing policies are taking, these would both be good things for New South Wales to do.

Unlocking new communities and affordable housing
Also a late February announcement, this is essentially a rezoning package that will allow new residential housing to be built across the outer suburbs of Melbourne. It comes with a commitment to build 100 new social housing dwellings, and makes reference to experimentation with "inclusionary housing".

What does this mean?
New supply means more affordable housing, right? Well, taken on its own that's not always the case. This was explained quite well in a recent article by Peter Phibbs and Nicole Gurran in The Conversation - well worth a look if you haven't already seen it. Essentially, housing markets are not like other markets, where supply and demand are said to impact upon one another in predictable ways. With housing, bringing new supply online tends to coincide with rising prices, because it is rising prices that stimulates demand.

The Victorian Government's mention of inclusionary housing here is interesting. We expect this would require developers to set aside a proportion of any newly constructed housing for Community Housing landlords to manage as affordable rental housing. This usually means setting rents at around 80% of market value, and renting to low income workers. It's not clear what the impact of rezoning and redevelopment would be on rents in affected locations, though, but we can expect them to go up because affordability will be set against the value of newly developed, higher value homes. Thus "affordable housing" rents might actually not be as as affordable as we'd have hoped.

Should NSW do this?
Any discussion about housing affordability should place a strong focus on increasing supply - this is especially especially true for policies at state and local government levels. This is reflected in a number of rezoning and urban renewal discussions around Sydney, such as for Arncliffe and surrounds, the Central to Eveliegh corridor, Sydenham to Bankstown, the Bays Precinct, Riverwood and Telopea, to name a few. As these discussions progress, it is clear that urban renewal and redevelopment must be approached with sensitivity to established communities who stand to lose as much as others might gain. It is also clear that good urban renewal requires well developed transport and infrastructure policies as well as a focus on the design and delivery of good housing options.

The Greater Sydney Commission is toying with small targets for inclusionary zoning as part of its grand new plan. This is great, but it needs to go further. Indeed, our Government could implement an inclusionary zoning scheme that covers even greater parts of the state, so that more affordable housing becomes a feature of every new residential development where it's needed. But, as we've cautioned above, this shouldn't be seen as a solution in isolation because affordability will be set against the value of newly developed homes. Renewal and redevelopment implies bringing higher-value stock into the neighbourhood, and this puts upward pressure on final costs to the householder. It is also not in renters' best interests if new developments are driven by investors' appetite for capital gains, rather than stable housing for families and others who need it.

First home buyer grant doubled for regional Victoria
Announced in early March, the Victorian first home owner grant - or first home builder grant as it might better be known - will double from $10,000 to $20,000 for regional properties from July 1st.

What does this mean?
The grant is only available for first home buyers who purchase or build new homes valued at $750,000 or less. In theory it encourages first time buyers to increase supply by commissioning new construction or buying off the plan - but homes at below $750,000 are getting harder and harder to find. Doubling the grant for "regional" buyer/builders is likely to stimulate construction and development outside of Victoria's metropolitan centres, and give first timers an even shot against investors who are happy to borrow up big and negatively gear. But it's not likely to have much impact in areas where highly paid jobs are hard to come by. It might just end up pushing up prices in parts of the state where housing is still nominally affordable, as the availability of grants are factored into land values and developer costs.

Should NSW do this?
NSW already limits first home owner grants to newly built dwellings, but it doesn't double the grant for regional buyers. The newly announced Victorian scheme does bear some resemblance to the old Regional Relocation Home Buyers Grant, which could be applied to any home 100 kilometres or more from any metropolitan centre in NSW purchased for less than $600,000 (or land under $450,000). It was later amended to apply to homes 50 kilometres or more from a metropolitan centre, to give it a bit of a kick-along. The scheme ended late in 2014 amidst claims that demand for it was weak. Reports at the time confirm this, citing then Deputy Premier Andrew Stonor:

The Regional Relocation Homebuyers Grant - which has no direct tie to employment - has not been as successful as the Skilled Regional Relocation Incentive in stimulating growth and employment in regional NSW and therefore it will not be continued.

So, any inflationary concerns of a first home builders grants aside, it appears attracting first home builders to regional areas is not the best way to develop regional economies. You've got to put jobs there first. Even so, if first home buyer/builders aren't so easily lured from the city to take up an option in the regions, the impact on rental markets in the city will be negligible. On the other hand, rental markets in the regions could start to falter, as local renters move to owner-occupation while increasing supply and creating new vacancies, and this could prompt regional investors to look to city markets instead. Given the majority of investors buy established dwellings rather than newly built homes, and those who do buy off-the-plan buy properties that are not well suited to the needs of renters, this would compound the affordability problems that are already at play for renters in New South Wales' metropolitan centres.

Stamp duty abolished for first home buyers
Also announced in early March, stamp duties will be abolished for Victorian first home buyers on properties valued at under $600,000. Concessions will apply for properties valued between $600,000 and $750,000. Significantly, this will apply to both newly built and established dwellings, while exemptions for investors purchasing newly built homes will be wound back.

What does this mean?
Stamp duties are levied as a percentage of a property's purchase price, on a sliding scale. In Victoria, properties purchased at between $130,000 and $960,000 attract duties of $2870 plus 6 per cent of the value that exceeds $130,000. Thus, a first home buyer purchasing a property worth $600,000 will save around $15,000. Or, as is more likely, first home buyers looking to buy at around the $600,000 mark will feel like they have an extra $15,000 to spend. Set against an investor who is prepared to borrow up big because they can negatively gear, this could help to level the playing field. But it won't make houses more affordable. It will instead bring first home buyers back into the bidding war, with more money in their pockets. As it wont do anything to stimulate new supply, it is unlikely to create new rental vacancies by removing frustrated home buyers from the rental market. They'll most likely be displacing a household and creating new demand for another property anyway.

Should NSW do this?
First home buyers in New South Wales are already exempt from paying stamp duties on the purchase of newly built homes valued at up to $550,000, and concessions apply for newly built homes valued at between $550,000 and $650,000. Exemptions also apply to land valued at up to $350,000, and concessions for land valued at between $350,00 and $450,000. Stamp duties are payable where a first home buyer purchases an established dwelling.

Theoretically the New South Wales exemptions are preferable to those announced for Victoria, because they act as a direct stimulus for new supply. However, property in New South Wales is no more affordable today than it was when these exemptions were introduced in 2012. Stamp duty exemptions and concessions can not rightly be regarded as a housing affordability measure.

Shared-equity schemes
The Victorian Government will set up a new scheme to purchase up to 400 homes and on-sell a 75% stake in them to first home buyers. The scheme will retain the remaining 25% interest in each property.

What does this mean?
There are a number of variables that need to be considered before this can be properly answered - what, aside from equity, does a 75% stake in property get you? Who covers the costs of ongoing repairs and maintenance? Who receives the gain from any capital improvements? Can the property be placed into the private rental market some time down the track?

There's no doubt these questions and more can be answered. There's also no doubt they'll need to be before the scheme can be properly rolled out, and we look forward to seeing the detail. But questions aside, there's still the matter of whether or not it's a good idea. Some have suggested it will encourage home buyers to take on a more expensive home than they might otherwise have considered - or even have been able to afford! - which could have an inflationary impact. We're inclined to agree, but in a policy environment in which house price reductions are never, ever contemplated a well designed shared equity scheme might be about the best a frustrated home buyer could ask for.

Should NSW do this?
There is no comparable program in New South Wales. As we've suggested, we're not entirely convinced it's the best idea ever, but we'll be keeping an eye on it. Again, if it is to have any beneficial effect on the rental market it would need to be directly linked to the construction of new homes.

Vacant residential property tax
The proposed introduction of a Vancouver style vacant property tax has also been announced. This will be a 1% levy on the "capital improved" value of property in Melbourne's inner and middle rings that sits vacant for more than six months in any year. Of course, exemptions will apply, and it will be up to property owners to self-nominate their liability to pay the tax. Exemptions include properties used as a holiday home, those needed for city-based workers who principally reside elsewhere, deceased estates and homes whose owners are temporarily overseas.

What does this mean?
Put simply, habitable properties in Melbourne's inner suburbs, that are left vacant, will attract a new tax. This will encourage property owners to put their dwellings to more effective use, either by selling them or renting them out. But the exemptions may be too broad, and too easily applied, for the tax to have any real impact. Property owners - especially those who do not live in Australia - might be prepared to try their luck and avoid notifying the authorities that their property qualifies for this new tax. Nevertheless, the introduction of a vacant property tax sends an important message.

Should NSW do this?
There is no similar tax for Sydney, and there ought to be. The ideal solution of a broad based land tax that would apply regardless of whether a property is vacant remains our hope, but a vacant property tax is a good step along the way.

Long fixed term tenancies
... and now for our favourite announcement: long term security for tenants and landlords. The Victorian Residential Tenancies Act will be amended so that fixed term tenancy agreements of five years or more are no longer excluded from its coverage, and a new standard long term tenancy agreement will be developed. A website will be developed to help landlords and tenants who want a long term tenancy agreement to find each other.

What does this mean?
Long fixed term tenancies of five years or more are rare throughout Australia, and Victorian tenancies are no exception. The Victorian law reform process seems to have concluded that bringing five year agreements under their renting laws will encourage their use - but actually the opposite is more likely to be true. Not being bound by the provisions of a Residential Tenancies Act means that parties are free to contract with one another as they see fit, and can enter into agreements that are suited to their specific needs. When forming a long term legal relationship as a landlord and tenant, being able to determine who takes responsibility for what, and how proprietary interests are to be shared between the parties without regard to a particular regulatory scheme, should encourage people to negotiate and take on such agreements in much higher numbers. But it has not, which tells us that it is not the prevailing regulatory environment that is hindering the establishment of long fixed term tenancies.

None-the-less, the idea that long fixed term tenancies need to be encouraged by producing "standard long term agreements" that alter the established, legislated rights of tenants and landlords - such as we have recently been discussing in New South Wales - persists. The Victorian announcement suggests a new standard form long term tenancy agreement will be developed in consultation with stakeholders - much as we have been discussing in New South Wales. From what we are hearing, one of the first suggestions to find its way into these discussions is to shift the repairs and maintenance obligations from landlords to tenants - much as we have been discussing here in New South Wales.

Should NSW do this?
Encouraging the use of longer fixed term tenancies is certainly a worthy discussion, but as we've seen it is not really the regulatory environment that will drive them. Our Residential Tenancies Act already covers long fixed term tenancy agreements, and it already allows certain mandatory terms of a tenancy agreement to be waived for fixed term agreements of 20 years or more. But, just like in Victoria, long fixed term tenancies are very hard to come by in New South Wales. Trying to encourage their use by legislating reduced rights and increased costs for tenants who would like one is not something we're comfortable with.

On the other hand, we know that stability and security are critical issues for tenants, so we can understand the appeal of an announcement like this. When people hear "long term tenancies" they probably think "protection against unfair eviction". That's something we'd like to see built into our renting laws, too, and it is possible that long fixed term tenancy agreements could deliver this. But to do that in any kind of meaningful way long fixed terms would need to become the standard, rather than something that could be offered by landlords on a take-it-or-leave it basis. This does not appear to be what's getting traction in Victoria, and it is not what's being considered in New South Wales.

The website is an interesting idea though, and it could be worth setting something up along similar lines and using it to inform any decision about introducing a new standard long fixed term agreement in New South Wales. It would give a clear indication of the demand for long fixed term tenancies, and could also give us some insight into the kinds of terms on which landlords would be willing to offer them. Moreover, it could tell us whether tenants would genuinely accept those terms. For this to be useful, landlords would need to share information and data relevant to the terms they are prepared to offer. For instance, if a long term tenancy is to be offered on the condition that a tenant takes on repairs and maintenance obligations, details of the condition of the property would need to be disclosed. This would include, for instance, an independent assessment of projected repairs and maintenance costs over the course of the agreement.

Who is the social housing landlord in this brave new world?

There has been some understandable confusion about the role of community housing providers after FACS Housing transfers large sections of its public housing stock over to them.

So, what will be the various roles of these parties in this brave new world:

• NSW Land and Housing Corporation (LAHC)
• FACS Housing NSW
• community housing landlord
• community housing tenant

Here’s what the webpages of LAHC and FACS NSW say:

• LAHC and FACS work together to achieve a unified administration of the Act
• LAHC owns and manages land, buildings and other assets within the social housing portfolio'
• Housing NSW, an agency of the NSW Department of Family and Community Services (FACS) is one of the largest providers of social housing in the world
• Housing NSW directly manages approximately 122,000 properties Housing NSW provides more than 19,000 properties through community housing providers.

The Social Housing Minister's media release talks of:

Delivering better outcomes for tenants and the community is the focus of reform which will see social housing in four areas of NSW managed by Community Housing Providers (CHPs). 

Minister for Social Housing Brad Hazzard said Family and Community Services (FACS) would transfer, on a long leasehold basis, management of approximately 18,000 properties to the community sector to ensure a better experience for tenants in social housing.

On 11 October 2016 the NSW Government introduced the Housing Legislation Amendment Bill 2016 and this was assented to on 25 October 2016. This Act amends the Housing Act 2001 with respect to the entry of concurrent leases. There is a new Section 13A:

13A (Entering into concurrent leases)  ...
(2) On entering into a concurrent lease under this section:  ... (b) the tenant is no longer renting public housing.

Discussion of 'concurrent leases' on The Brown Couch here provides some clarification:

A concurrent lease allows those property rights and interests that have not been passed on to, say, a residential tenant, to be transferred to a third party. Lawyers would think of it as a division of the "bundle of rights" that are attached to property, in a way that retains a clear hierarchy of interests and concerns - property owner > concurrent lessee/landlord > residential tenant/occupier. Rights that are tied to a residential tenancy agreement are not affected by a concurrent lease, and this is what the Minister is getting at when he suggests "tenants' lease length and lease conditions will remain the same". 

Strictly speaking, the Land & Housing Corporation (the Public Housing landlord) has been setting up concurrent leases all over the place, as it has already transferred the management of around 28,000 Public Housing properties to Community Housing landlords since about 2008. But it's not been done in such a clear-cut way before. In the past, tenants have been asked to rip up their residential tenancy agreements with the Land & Housing Corporation, and enter into a new one - perhaps with new, less favourable terms - with the Community Housing landlord. 

Concurrent leases may take some of the sting out of the coming property transfer scheme...

One view is that concurrent leases may be the most sensible way of doing tenanted transfers, given Australian social housing transfer practice has never given tenants a role in determining whether a transfer happens, nor a genuine choice as to who the new landlord will be. They avoid unnecessary confusion (about so-called ‘choice’) and give assurance (that is, that the current tenancy agreement remains on foot). South Australia used concurrent leases in its recent transfers and it appears to have made the process easier for those reasons.

However, it appears LAHC wishes to be no longer be responsible for repairs and maintenance. An 'Industry Sounding' document that was circulated and discussed amongst FACS officials and community housing landlords in early October states that the community housing provider will be responsible for maintenance, while LAHC will retain responsibility for 'structural repairs and strategic portfolio management decisions'.

But if this is a 'leasehold' arrangement, then isn't there still a landlord and tenant relationship between LAHC and the community housing provider? And, because of the broad nature of the definition of a ‘residential tenancy agreement’, wouldn't the LAHC still be responsible for repairs and maintenance under the Residential Tenancies Act 2010? We expect the answer is 'No’, because a ‘concurrent lease’ between LAHC and a community housing landlord may be exempted from the Act’s coverage. See section 156 (1) of the Residential Tenancies Act 2010:

156 Head leases involving social housing providers
(1) A residential tenancy agreement is exempted from the operation of this Act if:
(a) under the agreement, the landlord is a social housing provider (the head landlord) who lets the premises to a tenant who is a social housing provider, and
(b) the agreement is in writing and the agreement states that this section applies to the agreement.

Accordingly, the landlord and tenant relationship between LAHC and the social housing provider can be exempt from the Residential Tenancies Act 2010 by the simple insertion of a clause in their concurrent lease documents. This means that such a landlord and tenant relationship will be covered under the provisions of the Landlord and Tenant Act 1899 until such time as this last Act is repealed (slated for June 2010 (s 1D)), or common law. The specific terms of any concurrent lease will determine who takes responsibility for what. But such details may be considered 'commercial in confidence'. This prompts us to ask, will there be a level of transparency around all of this? We will have to wait and see.

So, coming back to our earlier question about the various roles of the parties ... there will be two landlord and tenant relationships:

Landlord (head-landlord):    NSW Land and Housing Corporation (LAHC)
Tenant:                                  community housing provider

Landlord (head-tenant):       community housing provider
Tenant (sub-tenant):             community housing tenant

For all practical purposes, the landlord will be the community housing provider and the tenant will be the social housing tenant who has signed a social housing tenancy agreement over the premises. The community housing provider is not like a real estate agent who just manages the premises. They will have all the responsibilities of a landlord under the Residential Tenancies Act 2010.