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?

Australia can't decide - or can we?

In years to come, we might think back on the 2016 federal election with the fondest of memories. How we all rolled up to our local meeting points, grabbed a sausage or haloumi roll and a pastry, posted a quick selfie and took a cheeky punt on whether Malcolm or Bill would win the day. Waved a few pleasant hellos to neighbours and friends as we made our way back home again. Then quietly went on with our business, on a glorious winters' day.

Has the 2016 federal election offered up a treat?

Then came the surreal finish - no clear result, and nothing for the politicians or journalists to talk about for the rest of the weekend, other than themselves. Of course, they diligently set about doing that, with much early commentary focusing on the major parties' low primary count amid the seemingly relentless rise of minors, micros and independents. What does this mean for the future of Australia's democracy? Who could have seen it coming? Who's to blame? What will happen next?

It makes sense for the media to spend all its time looking at the parties and the politicians, because that's where the personalities are. That's the drama. That's what makes federal election coverage such wonderful entertainment. But we grow a little tired of it here on the Brown Couch, so we've decided to look at some of the policy implications of the election instead. And we think there are two take-home messages that, if read correctly, could mark the 2016 federal election as an extremely important moment in whatever's currently left of Australia's housing policy landscape.

The first is that Australians were asked to run screaming from changes to negative gearing and the capital gains tax discount, and we did not. The time, effort and expense put in by several real estate agents and other interested groups, who sought to paint a picture of certain disaster if tax breaks for landlords are wound back, has gone unrewarded. This is a good sign. Politicians and policy-makers of all persuasions should take note - Australians have swung towards housing affordability instead.

The second key message is that Australians were expected to turn their backs on higher budget deficits to pay for health and education over the next few years, and we did not. Perhaps there is recognition across Australia, after all, that economic growth can come from putting money into services that matter, rather than another tax cut. Of course tax cuts would result in growth for some, but there's no guarantee it would flow on to much of what the country desperately needs.

This brings us back to affordable housing. Australia needs that as much as everything else right now. And it's been shown, even within the last decade, that government investment in housing creates jobs and growth. When the Rudd Government responded to the Global Financial Crisis with the Nation Building Economic Stimulus plan in 2009, it included the Social Housing Initiative. Under the program, the nation poured more than $5billion into the construction and repair of its social housing portfolios. The program was evaluated by KPMG in 2013, and was found to have a strong economic impact as well as a social one. It resulted in the creation of 9,000 full-time and 14,000 part-time jobs in construction and trades. KPMG estimated that for every one dollar spent in the program, an extra thirty cents in turnover was generated in the economy, amounting to around $1.5billion per year over the course of the program.

While addressing housing advocates about the Social Housing Initiative at its outset, then Minister for Housing Tanya Plibersek hailed it as a "once in a lifetime opportunity" to grow the portfolio. While that may be true of a $5billion+ injection of funds, it needn't be true of the policy in principle.

This election, Australians have demonstrated a tolerance for government spending on key social services and projects. We've also shown the importance of housing affordability as a national goal. Whoever finally wins the day should take note of this, and implement a national housing strategy that includes both tax reform to fix the private rental market, and a plan to invest in new affordable rental housing across Australia.

If the politicians and journalists stop talking about themselves for long enough to notice this, the 2016 federal election might just become the stuff of legend.

NSW renting laws - change is recommended

Wedged between a state budget and a federal election, the NSW Minister for Innovation and Better Regulation's report on the Residential Tenancies Act 2010 could not have come at a worse time for those of us who love a good old chat about tenancy law reform.

We've all been busy discussing other things - like what will become of the social housing system as more and more government assistance is designed to keep people in the private rental market, or indeed how the market might respond if we change the way negative gearing and capital gains taxes work... Anyway, last Thursday the report was tabled in Parliament, and it's time we gave it another look.

We might have to wait until next week before any of the usual media services pick it up - or indeed before Fair Trading puts the report up on their website. You can find it in the Hansard records until then. In the meantime here's what's going on:

The good
There are a couple of very good recommendations in the report. For instance, it recommends a suite of changes that would improve renting laws for victims of domestic violence, and bring NSW into line with a number of other Australian jurisdictions. These include:

• allowing victims of domestic violence to end their tenancy immediately by giving notice to the landlord and any co-tenant, along with evidence of domestic violence (such as a provisional, interim or final AVO)
• allowing a tenant to change locks and security devices where necessary to protect themselves from domestic violence
• ensuring liability for damage is not attributed to a victim of domestic violence, resting instead with the perpetrator, where the damage is the result of domestic violence
• ensuring that victims of domestic violence cannot be unjustly listed on a residential tenancy database

Other recommended improvements to the law include preventing tenancy database operators from charging tenants to find out if they have been listed, shifting the "reasonable diligence" defence in repairs and maintenance matters from the question of breach to whether a remedy will be available, ensuring that tenants have some recourse if material facts are not properly disclosed by a landlord prior to entering into a tenancy agreement, coming up with a single method for calculating a lease-break fee, and making it clear what seperately metered premises means when landlords pass water and utility charges on to tenants.

The bad
There are some recommendations in the report that we're less fussed with, such as proposed changes to the way a tenancy that is established as part of an employment contract can be brought to an end, allowing landlords to photograph a tenant's home for use in a sales campaign, and persevering with the "frequently failed to pay" complication to the otherwise useful "pay and stay" rent arrears provisions.

Some much needed changes to the law are missing from the report's recommendations, too. In particular, there's no proposal to fix the way rent increases work, no prohibition on landlords inserting "no pets" clauses into tenancy agreements, no requirement for landlords to occasionally inspect their investment properties and report on prospective maintenance needs, and no mention of increased funding for Tenants' Advice and Advocacy Services.

Most importantly, the report has declined to recommend putting an end to landlords' use of "no grounds" notices of termination, focusing instead on oft-promised, never-delivered "longer fixed-term tenancies". We'll come back to that in a moment.

The curious
The report makes several recommendations that warrant further investigation, and we're doing our best to find out more. These include working out what to do about share-housing tenancy agreements and marginal renters not covered by the Boarding Houses Act, and making minor amendments to the Act that "have merit".

Also in this category are recommendations to use the interest on tenants' bond money to fund "consumer protection more generally" - will this be at the expense of tenants getting More Bang for Your Bond? ; and make Rental Bond Board data available through an "open data project" - but this shouldn't impede the continuation of our new Rent Tracker series.

Unfinished business
Seems it wouldn't be a complete review of the Residential Tenancies Act without putting security of tenure into the "too hard basket". This is very easily done by making recommendations like "the Act's provisions in relation to no grounds terminations should remain unchanged. The Government should consider other ways of improving security of tenure in the rental market, including through facilitating the use of longer fixed term leases".

The thing about this is that landlords don't want to offer long fixed term leases, and tenants don't want to accept them. Not in the current climate, with a rental market driven by gains-motivated investors who'd sooner have vacant possession for a quick sale than a long-term, steady tenancy. The report even notes this, characterising it as the "tax settings in Australia and the tendency to purchase a property to make a capital gain rather than to collect rental income contributing to landlords' reluctance to enter long term leases".

This is interesting in the context of the Federal parties' stated views on those very tax settings. If the NSW Government wants to encourage more long fixed-term tenancies in the private rental market - and this is a long-stated aim that we can trace back to the 2005 review of the Residential Tenancies Act 1987 - they need look no further than the way negative gearing and capital gains tax concessions encourage the wrong kind of investment. They should insist whoever next takes Federal office take the appropriate action and reform these tax concessions. After all, as the saying goes - if you want less of something, you tax it.

The process from here
We expect further consultation to occur on some of these recommendations before any legislation to amend the Residential Tenancies Act is put to Parliament. The report gives no indication of expected timeframes, but even if Government moves quickly it could be several months before we see further details of the proposed changes. Of course, this means Government has plenty of time to consider the report's recommendations, or indeed revisit those important changes that did not make the list.

We'll keep you posted.

Will rents rise if Australia votes for tax reform?

We've heard that some people - let's call them real estate agents and a couple of prominent politicians - have been saying rents will rise if Australia votes for tax reform. We thought we'd better check this out.

We've already looked at how negative gearing and capital gains tax discounts distort the rental market at a macro level - you can read about that here - so it's hard to know exactly what these soothsaying ne'er-do-wells are getting at. Affordable rental housing couldn't really disappear from the market any faster than it already does. And if the current reform proposal does get up, existing arrangements will not be affected, so current landlords would not be able to use the old "suddenly I am paying more tax, and I must pass this unexpected cost on to my tenant" excuse.

Still, we can't shake this feeling that, should it come to pass, landlords could try to use a new tax regime as a screen for putting up the rent. Real estate agents' bottom lines would benefit from higher rents, and because they favour the status quo they have nothing to lose from cultivating an expectation that change means rents will increase...

One of the first claims you'll hear a real estate agent fall back on is that rents took off after Paul Keating made some adjustments to negative gearing back in 1985. If it happened then, they say, it will happen again. Never mind that the claim has been contested and discredited time and time again - see, for example, this 2003 article from Ross Gittins, which discusses rents rising in Sydney and Perth in the late 1980's, but not in other parts of the country; or this more recent piece from the ABC's Fact Checker, which reaches a similar conclusion before quoting a 1987 Cabinet Submission:

With the notable exception of Sydney, conditions in the residential rental property market are not unusually tight. The evidence suggests that local influences, rather than tax measures, dominate in metropolitan rental markets.

The Fact Checker article goes on to examine some of the "other influences" that could have been contributing factors. It cites high interest rates as well as high prospective capital gains in other investment classes, making residential property a less attractive option. But one of the influences that hasn't been mentioned is the impact on rents of residential tenancies legislation at the time.

Keen followers of renting law reform will know that tenancy agreements in New South Wales were not regulated by the Residential Tenancies Act 1987 until it commenced in 1989. This means that back in 1985, putting the rent up in Sydney was much easier than it is today. Landlords would simply offer a rent increase, and if the tenant didn't accept it they'd usually get a notice to quit and have to move out. But some other states - notably Queensland, Victoria and South Australia - had brought in new renting laws somewhat earlier. Which means that rent increases were better regulated in other parts of the country while Keating was tinkering with tax, and Sydney rents were doing their thing...

Of course, renting laws still vary from state to state, and tenants in some states may again be better equipped to handle wholesale rent increases than in others. Even so, to the extent that rents are now regulated, they are still very much tied to "the market". Landlords set the rent based on what tenants are prepared to pay, and if a tenant challenges an excessive rent increase it is generally decided by a tribunal with market comparisons in mind. But the important thing is that such a challenge is possible, and tenants should not hesitate to exercise this right if the need arises. This right was not available in Sydney in the mid-1980's.

Landlords who claim they will set rents according to tax policy, rather than market factors, should have cause for caution. Rents continue to reflect a fine balance between vacancy rates and tenants' incomes, and landlords cannot move the market by sheer force of will. Thankfully, those bad old days are over.

Nevertheless, we expect there will still be some landlords, real estate agents and politicians who continue to insist that tax reform will result in rent increases. Here are a couple of useful points to keep handy, just in case you ever find yourself in conversation with one:

Rents are not tied to other costs
Rents increase faster than the general cost of living. We'd have thought this was common knowledge, but SQM Research's recent report suggests perhaps it is not - they've suggested Labor's tax reform proposal could lead to "an acceleration in rents above and beyond the CPI rate". But here's what rents already look like against CPI, over the last quarter of a century:

Rents v CPI, from the TU's Rent Tracker (coming soon!)

There's been plenty of "above CPI acceleration" in there, even without tax reform.

We also know from tax data that rents increase faster than landlords' costs. We explored this in our report 5 years of the Residential Tenancies Act:

... landlords collect significant amounts of income from their tenants each year. In the 2009-10 financial year landlords declared $9.7billion in rental income for properties in New South Wales. This increased to $12.1billion in 2012-13. An increase is to be expected given the growth of the sector, but even so this represents approximately $2,175.00 more rent to landlords in 2012-13, per property, than in 2009-10. The average costs declared by landlords over the same period rose by $880.00 per property.

So we can conclude - rents go up because they can, not because they need to, and certainly not in response to any particular cost factors for landlords.

There's no room in the market for higher rents
Rents go up because they can, unless for some reason they can't. At some point, rents become unaffordable, and tenants cannot continue to pay them. When this happens, tenants are forced to find homes in a more affordable area, or they're forced to share a home with others. In their 2013 report Long term private rental in a changing Australian private rental sector, Stone, Burke, Hulse and Ralston found that families with children now make up the largest group across Australian private rental markets. These households may not be inclined to share, which means landlords need to keep rents within their reach so as not to price them out.

None the less, the report also shows that the fastest growing group is shared households. Tenants are increasingly responding to high rents by pooling their resources and living together. Further research suggests that share housing is not the domain of young people alone, with a marked increase in the number of people over 40 recently using the share house finding website flatmates.com.au...

Meanwhile, the Rental Affordability Index continues to reflect the grim reality of high rents across the country. The RAI reveals that under current conditions, low-income households typically need to pay 50 to 85 per cent of their income on rent. And as we showed in another recent post about rents, even a modest - and much needed - increase to Commonwealth Rent Assistance couldn't open the gate for higher rents.

If tax reform happens and the rent goes up, who's going to pay it?

Landlords really, really need the rent, and so do their banks
Even though rents are no reflection of costs, it's really quite expensive to be a landlord. As we discussed in our Tenants' Guide to Tax Reform, their biggest expense comes from the purchase of a property in the first place. According to tax data, the interest payable on loans amounts to more than all other expenses combined, even with record low interest rates:

Landlords' expenses ($billions) Source: ATO

That's not surprising when you consider that banks have been lending, on average, more than $550million to Australian landlords each month for the last year.

If landlords were to increase the rent beyond what the market could bear, or even beyond what the market can anticipate, many would start to experience periods of vacancy. Even a short-term loss of rental income could have serious consequences for landlords - at best it would affect cash-flow arrangements and compromise their ability to meet a mortgage commitment without making other sacrifices; at worst it would lead to mortgagees calling in bad debts.

So, all things considered, if you come across a landlord, real estate agent or politician who insists tax reform would lead to higher rents, we reckon you should call their bluff.

Tenants’ guide to tax reform

Housing affordability is a key issue during the 2016 federal election. The presumed impact of reducing tax concessions for landlords has been a strong feature in media discussions, and in commentary from political parties and candidates. Most of these focus on the cost of housing to buy.

But how do negative gearing and capital gains tax discounts affect the private rental market?

What is negative gearing?
An investor is negatively geared if the cost of holding an asset is greater than the income it generates. This occurs where an investor borrows money to purchase an asset, such as a rental property, and the income it produces doesn’t cover the cost of paying back the loan. Investments like this are made in the hope that the asset’s value will rise, and lost income will be rewarded with higher overall wealth.

For tax purposes, the losses that arise through a negatively geared investment are deductable against the income it generates. In Australia, losses on rental property investments are deductable against other income as well. This includes salaries and wages.

What is the Capital Gains Tax discount?
When an investor takes advantage of a rise in their asset’s value, by selling it at a profit, they pay Capital Gains Tax (CGT). This is paid on the difference between the amount they sell it for and the initial price they paid for it, minus some expenses.

CGT is payable on property investments. Exemptions apply to the “family home” and to property that has been used as an investor’s “main residence” within the six years prior to sale.

CGT is halved for any investment that has been held by an individual or small business for longer than 12 months – this is known as the CGT Discount. The CGT Discount applies to residential property, and most landlords pay CGT on only half their capital gains when they sell.

How do these tax concessions affect the housing market?
By allowing investment losses to be deducted against all income, and reducing liabilities for CGT, our tax system encourages Australians to enter into negatively geared investments. The housing market is seen as a safe investment for negative gearers, because of an expectation of continuing capital gains.

The largest part of the market – owner-occupiers – incurs no CGT liabilities upon sale at all. Their housing gains are not taxed like other forms of wealth, so they are prompted to divert spare financial capacity towards capital improvements. They do this by adding value to property through renovation, and/or spending more when upgrading. This increases the likelihood of capital gains across the market, and the expectation of perpetual gains encourages new entrants to pay more when buying in.

Landlords trade in the same market. The tax treatment of negatively geared investments enables them to manage larger debts than owner-occupiers, especially first homebuyers who have not already built up wealth through capital gains. Landlords who negatively gear can afford to pay more than other buyers for the properties they want, and are prepared to pay a premium for well-appointed and well-located properties that have high prospects for rapid capital gains.

How do these tax concessions affect the private rental market?
Proponents of Australia’s current tax settings suggest they increase the supply of housing and put downward pressure on rents by encouraging more investment in the housing market. They also suggest that without this investment, Australian governments would be left to make up the shortfall of affordable rental housing through their public housing systems.

 It is true that the number of Australian landlords continues to grow:

Australia's landlords (millions) Source: ATO

As does the amount of money they borrow in order to make their purchases. But the vast majority of this debt is used to trade already existing dwellings rather than build new homes, so it does not make a meaningful contribution to new housing supply:

Landlords' debt ($billions) Source: ABS

And the cost of servicing this debt is greater than all other costs to landlords combined – even as record low interest rates have reduced the interest payable on loans during recent years:

Landlords' expenses ($billions) Source: ATO

All of this means that our current tax settings are well suited to anyone with residential property to sell, and/or money to lend. But they are doing a poor job of increasing housing supply, so arguments about their impact on rental affordability are completely undermined.

On the contrary, we know they’re not really keeping rents low at all. Negatively geared landlords favour more expensive properties with greater prospects for high capital gains. Properties at the affordable end of the rental market have been in steady decline over the last decade or so, while the number of properties for rent at higher prices continues to grow, because of the type of investments landlords are encouraged to make.

Volume and price ($/2011) of Australian rental properties over time Source: AHURI

How do these tax concessions affect tenants?

Australia’s current tax settings affect high and moderate earning tenants by making it difficult for them to achieve home-ownership, keeping them in the rental market for longer. Landlords can take on higher levels of debt so they can afford to offer more for the properties they want than most first home buyers can. This has a general inflationary impact on prices too, and it has increased the difficulty for those who aspire to buy but are not yet able to. Would-be homeowners have to set themselves increasingly large savings targets in order to raise a deposit for a home loan.

Australia’s current tax settings affect tenants on lower incomes by reducing the number of affordable homes in the rental market, and increasing the number of people hoping to rent the ones that are available. Landlords tend to favour properties that have high prospects for quick capital gains, rather than low-end housing that could be let at affordable rents under long-term tenancy agreements. But where low-end housing is available there is no guarantee that low-income tenants will secure it, as they must compete for tenancies with higher earners who are hoping to minimise their housing costs.

Australia’s current tax settings affect all tenants by making the private rental market chronically insecure, because they encourage landlords to chase rapid gains rather than steady tenancies. They want to realise these capital gains when it suits them, and prefer not to limit their pool of prospective purchasers by selling with a sitting tenant. Tenancies are often brought to an end, and tenants forced to move, when landlords decide to offload their residential property investments.

What are the proposed reforms?
Both the Australian Labor Party and the Australian Greens have adopted policies to reform negative gearing and Capital Gains Tax discounts, raising housing affordability as a key issue for the 2016 federal election.

The Greens propose to end the current tax treatment of any negatively geared investment that is not a “business asset”, which means affected investors would only be able to claim losses against their relevant investment income. This reform would be grand-parented so that existing arrangements are not affected. The Greens would also phase out the CGT Discount over 5 years, by reducing the discount at a rate of 10% each year. These proposals focus on the budgetary impact – costed at $7.028billion in new tax revenue over four years – and The Greens would put this increased revenue towards the construction of new Social Housing.

Labor propose to limit the current tax treatment of negatively geared investments, to apply it only to newly built housing. Landlords who buy established dwellings would no longer be able to claim losses against their salaries and wages as well as their rental income. This reform would be grand-parented so that existing arrangements are not affected. Labor would also reduce the CGT Discount from 50% to 25% for “non-business assets” purchased after July 1 2017. These proposals focus on economic transition and budget reform. Costed at $32.1billion in savings over ten years, Labor says they would use the revenue raised through these reforms to “fund priorities”.

The Coalition does not propose to reform the tax treatment of negatively geared investments, or alter CGT discounts.

We have not conducted any analysis of minor- or micro-parties’ housing and tax related policies.

What would be the impact of the proposed reforms?
There have been many suggestions that reforms to negative gearing and CGT discounts would lead to an increase in rents, because it would reduce the level of investment in the housing market. This is unlikely. Proposed tax reform may have some impact on investors’ strategies, which would be a desirable outcome, but it would be unlikely to change the common preference for investment in residential property.

Significant demand for rental housing would continue, as home-ownership would remain out of reach for many households. Residential property would continue to attract capital gains, as owner-occupiers would remain exempt from CGT liabilities and would continue to make capital improvements to their homes.

But without preferential tax treatment of their negatively geared investments, landlords may be less inclined to take on the large amounts of debt that currently enables them to bid up the cost of housing. They may be less inclined to invest in housing based on the prospect of quick capital gains, and consider more closely the demand factors coming from the rental market itself. They may be more amenable to entering into stable, liveable and affordable agreements with tenants, rather than chasing quick capital gains.

Where can I get more information?
For more detailed information and commentary about the impact of Australia’s tax settings on tenants and rental housing, please visit: http://tunswblog.blogspot.com.au/search/label/Negative%20Gearing

A version of this post is available for download, so you can print it off and share it with your friends.

Can I hang electoral material in my rented property?

It's election time in Australia, and political signs on front lawns and windows are cropping up across the country. We've been contacted by a number of tenants in recent days asking about their rights to have a sign up in their property - some have been approached by landlords asking them to take the advertising down again.

Our legal eagles got interested in the question so here's the skinny on your rights to hang political signage.

The TU does not endorse political parties or candidates. The TU does endorse Pedro.

The High Court

First things first, Australians do have a right to political expression. In 1992 in Nationwide News Pty Ltd v Wills and Australian Capital Television Pty Ltd v Commonwealth (ACTV) 177 CLR 1 the High Court made a decision confirming that right despite there not being a specific constitutional protection as in other countries like the USA. Read more here.

Council Requirements

Councils have rules around signage on properties and on the street. While it might be unlikely a little sign in your front yard or window needs approval, it could be worth checking with your local council about the size and type of signage you propose to hang, particularly if it's on the bigger end.

Strata by-laws

Most strata blocks have by-laws that restrict you from changing the external appearance of the lot without first gaining consent of the owner's corporation. Arguably election material may fall afoul of this by-law - if your strata brings it up with you, check out our factsheet on living in strata and get advice!

Tenancy Rights

When you rent premises, you become entitled to the ‘reasonable peace, comfort and privacy’ in your use of the premises. The landlord/agent must not interfere with, or cause or permit anyone to interfere with, your peace, comfort and privacy.

In relation to electoral signage, we consider it a breach of a tenant's reasonable peace, comfort and privacy for a landlord to demand the removal of political signage so long as the signs are legal, and not causing damage to the property.

However, all these rights can't stop New South Wales landlords from giving you a "No Grounds" termination notice, and it's unlikely that the retaliatory provisions will help. This alone may prevent many tenants from participating fully in the election process. One more reason to support stronger tenancy rights, for democracy!

If you are getting hassled by your landlord about political signage, get advice from your local Tenants' Advice and Advocacy Service.

Battlefield: rent

A number of large and powerful real estate agencies look set to recommend landlords increase your rent if Australia votes for changes to negative gearing and capital gains tax discounts on July 2nd. We're not sure how else to read the "Negative Gearing Affects Everyone" campaign that's recently attracted media attention.

The agents will smite you if you vote for tax reform

The campaign suggests that "should current taxation arrangements for property be changed, as many are suggesting, rents could be expected to rise substantially". It provides nothing to support this theory, other than a couple of lines about supply and demand:

Because the incentive to buy property to rent out will be severely curtailed, fewer people will buy residential investments, meaning the supply of rental stock will contract: fewer houses means higher rents charged to those who don't own their own homes.

Nobody can argue with these fundamentals, right? Well...

When you're thinking about taxes, housing supply and rents, it's important to remember these two things:
1. Where rents and real estate are concerned, supply and demand dynamics get complicated by the tax system.
2. No matter what federal tax settings look like, the only way your rent can go up is if your landlord serves you with a valid notice of increase.

Let's explore this.

This "incentive to buy property to rent out" that the real estate agents' campaign refers to is, of course, capital gains. According to the campaign authors, the way to keep our rents down is to ensure that property values continue to go up. The idea is obvious enough - increasing property values draws more people into the housing market to buy investment properties, so more properties become available to rent. That's supply taken care of, right?

Well, no, because around 90% of money lent to landlords each year goes to purchase established dwellings. The majority of "new" supply into the rental market is actually existing housing that's just being recycled - moving in from the owner-occupier market or just transferring from one landlord to another. Even if it is new to the rental market, it probably isn't a new home, in which case it can't really be considered new supply. It's just borrowing from Peter to pay back Paul.

But even if we pretend not to notice this glaring hole in the real estate agents' logic, they still have a problem with their argument. The idea that rising prices can put downward pressure on rents is not just counter-intuitive - it's also demonstrably wrong. And it's not merely a question of ever increasing prices (landlords' expenses) dragging up rents (landlords' income), it's about which properties find their way into the rental market, who ends up paying to live in them, and how much they are willing to spend.

In short, it's the the type of supply and demand you're getting in the market that matters. Negative gearing and capital gains tax discounts actively distort the market by affecting supply and demand.

This happens in a couple of different ways.

First, these tax settings affect the supply of rental housing, by manipulating investor demand. The "incentive" to buy properties to rent causes landlord's to pick and choose their purchases based on the prospect of gains. Or, as the real estate agents' campaign authors have put it in another part of their website, to make "strategic investments":

If negative gearing is abolished on all but newly-built dwellings, investors will no longer be able to buy strategic investments, looking to acquire high value properties in prime locations that will realise the best gains over time.

We've talked about what this kind of "strategic investment" does to the shape of the rental market before, but here's a quick reprise: landlords don't buy the cheap stuff because the prospects for gains just aren't the same. 15% of 100 is better than 15% of 10, even at the same rate of growth. Rents at the lower end of the market are increasing faster than rents at the top, because affordable rental housing is actually disappearing from the market.

The shape-shifting private rental market: driven by gains

For six long years Anglicare's Rental Affordability Snapshot has told us what this means for low income households. In the latest snapshot there were only 902 properties advertised across Sydney at what could be considered affordable for a family whose income is made up of a minimum wage and some Family Tax Benefits. 902 properties, or 6.4% of what was advertised for rent during the snapshot period. For a single person on Newstart allowance, there was not a single property advertised during the snapshot that could have been considered affordable. Nada. Zip. Nothing.

National Shelter's Rental Affordability Index provides a somewhat more rigorous analysis. In it's inaugural release in November 2015 it noted that New South Wales faces "rental unaffordability across the board, and a dire situation for low income households".

Second, these tax settings affect the demand for rental housing, by reducing the supply of affordable housing to buy. Negative gearing encourages landlords to carry month-to-month losses by reducing their pay-as-you-go tax liabilities, while capital gains tax discounts increase the chances of these losses being fully recovered in the long-run. Thus landlords can afford to take on greater amounts of debt than their competition, the owner-occupier. They outbid would-be owner-occupiers for properties they do not intend to live in, using them instead to build wealth. This pushes prices higher, faster (and encourages more people to follow this investment strategy if they can).

This is generally understood to be a problem for first-home-buyers, and it is this concern that seems to be driving the current political discussions around tax reform. What these discussions fail to address is that most of these frustrated home-buyers are making homes in the private rental market in the meantime, as tenants. They're earning a decent enough income and can manage the high rents, even if they can't keep up with landlords bidding against them at auction. Then there are those who have simply given up on home-ownership: as house prices scale new heights, they simply wonder how they could ever come up with a deposit in the first place. They're still earning decent money, though, and they're contributing to demand for rental housing while dragging up rents because of what they can afford to pay.

Our housing market dynamics have been working to these conditions for many, many years. They are entrenched. Giving our federal tax settings a few necessary tweaks will not result in immediate or drastic change. Fundamentally, tax reform will not reset the incentive for buying and renting out property. Instead, it should alter the way capital gains are achieved, providing for more tenant friendly "strategic investment" by landlords. The system would adjust. New, more functional dynamics would emerge. But this would take time.

Nobody should expect wholesale rent increases in the short term, unless landlords strategically decided to put them up. We'll come back to that soon, for further discussion.

Curb negative gearing, increase rents - or not

In awkward news for the Coalition Government, currently seeking re-election on a platform of sensible tax-reform-avoidance, it's been revealed that the Reserve Bank of Australia once suggested curbing negative gearing could be good for financial stability. In awkward news for us, the RBA also wondered whether curbing negative gearing might lead to an increase in rents. Find the RBA's memo on negative gearing here.

It's a common assumption that reforming negative gearing on residential property investments would result in a surge in rents. Indeed, property lobbyists have been dining out on the suggestion for years, hoping to keep the policy in their back pockets. But we've never been captive to such a notion, as we explained back in 2011 with one of our most read blog posts: Negative gearing is not your friend.

Negative gearing does not cause individual landlords to charge less rent, nor does it create additional supply of housing. It has contributed to more higher-income households renting for longer, as they are priced out of buying a home by investors who can afford to borrow just that little bit more. In a competitive market, this pushes lower-income households out of affordable properties, as higher earners tend to be more attractive to landlords regardless of the asking rent. And it has contributed to property investors passing over lower-rent housing stock in favour of properties with potential for higher capital gains, meaning that lower-rent stock has vanished from the rental market.

In short, negative gearing increases demand while reducing supply of rental housing, especially at the affordable end of the market.

Even so, the myth prevails. To be fair, we can easily envisage countless overstretched landlords crying poor if their tax-break rugs were suddenly pulled out from under them. Indeed they might try to put the rent up to compensate. Spend some time talking about tax reform on social media and you'll come across many landlords suggesting they'll do just that.

The problem for these landlords is that their tenants are already maxed out.

For some, putting the rent up might backfire, as tenants leave over-priced properties for more affordable arrangements. Overstretched landlords might then find themselves lacking the cash-flow needed to cover their no longer tax-subsidised debts, while still enjoying all the fine things life has to offer. They might even have to consider selling an investment property or two in order to make ends meet.

We understand such a thing would be completely unAustralian, so we've come up with a few alternative cost-saving measures for your landlord to consider in the event that negative gearing gets a trim.

Here are our top three tips for cash-strapped landlords:

3. Stop using real estate agents. According to the Australian Tax Office, Australian landlords spent more than $2.4billion on property agents fees and commissions in the 2013/14 financial year. Giving agents up might seem hard at first, but as you begin to gain an understanding of what it means to take care of another person's home, you'll find it's not rocket science. Tenants do it all the time.

2. Get your investment properties in good order. Spend up big on repairs and maintenance now, make capital improvements and invest in attractive additions that your tenants will love. The Tax Office says Australian landlords spent over $2.4billion on repairs and maintenance in 2013/14, and claimed over $5billion in deductions for capital works and plant depreciation. Bringing your repairs and maintenance spend forward makes good financial sense - not only could it save you money in future non-subsidised financial years (to a point), it would improve the quality of housing for someone who has been locked out of home-ownership. Just make sure you do everything properly the first time so you won't have to come back and spend the money again...

1. Pay down your debt. The single most useful thing landlords can do to reduce their expenses is to pay down their debt. Tax data shows Australian landlords paid an astonishing $21.1billion to cover interest on loans in 2013/14. This is far and away the most significant cost of being a landlord, so it makes sense to pay down the principal to reduce the interest payments over time. Eventually, you might end up owning the place, so you wont even need to worry so much about capital gains. That would make the housing market more affordable for all, making it an absolute win/win option!

Keep these in mind and remember them the next time you're assured negative gearing is keeping your rent down. The simple fact is that changes to negative gearing won't put your rent up - only your landlord can do that...!

2016 Budget to deliver income management for Social Housing tenants?

A few weeks ago we noted the NSW Government's continued interest in a Compulsory Rent Deduction Scheme for social housing tenants, as they took the idea to the recent Council of Australian Governments meeting.

Such a scheme would make it compulsory for tenants in social housing to have their rent taken from a social security payment and paid directly to the landlord. As we have noted many times before, such a scheme already exists, but it works on a voluntary basis. Direct rent deductions work for some people some of the time, but they won't work for all people all of the time. Making the use of such a scheme compulsory will produce awkward results.

Now the idea has resurfaced as an expense measure in the 2016 Federal Budget. Here's what the budget papers say:

The Government will establish a Compulsory Rent Deduction (CRD) Scheme. 

Under the Scheme, occupants of public and some community housing who receive income support payments or Family Tax Benefit will have their rent and related tenancy costs deducted from their payments and automatically transferred to the relevant public and state approved community housing providers. 

The CRD Scheme will reduce the likelihood of individuals accumulating rental debt, leading to an expected reduction in evictions and improved social outcomes. It will also improve rental income streams for housing providers and so encourage investment in public housing stock. 

The expenditure for this measure is not for publication as the arrangement is subject to negotiation with the States and Territories.

We're not sure either claim - reducing evictions and increasing revenue collection - will hold true in New South Wales. Whenever we've raised concerns about the over-zealous management of rental arrears and recovery of related amounts by FACS Housing we've been politely informed that only a very small number of their tenants are ever in rental arrears, and that in monetary terms the outstanding amounts do not dramatically affect their bottom line.

On the other hand, current arrears management practice is to issue a notice of termination and apply to the Tribunal, rather than enter into sensible discussions with a tenant about getting arrears under control. We're told this is because tenants who are in rental arrears do not read their mail or answer their phones, but we're not convinced. We've heard of many Social Housing tenants who have started diligently paying off a rent arrears debt only to find themselves in the Tribunal to fend off a notice of termination anyway.

We're all for FACS Housing and other Social Housing landlords taking steps to reduce their use of the Tribunal for managing rental arrears, but allowing them to compulsorily redirect tenants' Centrelink benefits into their own accounts is nothing short of overreach.

Further information about the proposed CRD is available on the Department of Human Services website. Notably it provides that the Scheme is subject to the "passage of legislation", which suggests a change to Social Security laws is on the cards.

Of course, there's an election to be had in the meantime, which begs the question - will Labor support this Scheme? They tried to introduce something similar when in Government back in 2013. They even got as far as introducing an amendment bill into Parliament, before dropping it cold. Here's hoping they leave it there, where it belongs.

Who wants an affordable rent?

Private market rents and low-incomes don't mix. We'd like to say this is a recent phenomenon but Anglicare's annual Rental Affordability Snapshot - which has consistently shown affordable rental properties for low-income workers and those receiving income support are practically non-existent across Sydney and other major Australian cities - is now in its sixth year. But the latest report, released today, shows rental affordability continues its decline across regional New South Wales as well.

We're sad to say the problem is entrenched. But is it intractable?

We're often told that the way to improve housing affordability is to increase the supply of housing. Take this comment from NSW Treasurer, Gladys Berejiklian, in the AFR earlier this month:

While we are open to further tax reform, including looking at stamp duty, we believe that the most effective way of tackling housing affordability is to increase supply.

If we apply this logic to the private rental market, what might be required is an increase in the supply of residential property investors who are willing to buy newly constructed dwellings. Now, as we know from our most recent exploration of tax data, an increase in investment does not necessarily mean an increase in the number of landlords, as the rate of second, third, fourth, fifth and sixth-time investors is growing faster than the rate of first-timers. But we also know, and it is well established, that around 90% of new lending and finance to landlords goes towards the purchase of established dwellings rather than new builds. Even so, there are blocks of new units going up all over Sydney and surrounds right now, but as Anglicare's Rental Affordability Snapshot reminds us, rents aren't coming down. Other research confirms the supply of housing does not put downward pressure on prices.

Source - Prof. Peter Phibbs, Shelter NSW seminar New Directions for Housing Fairness"December 2015.

This calls for an exploration into what drives landlords to buy - and the early verdict is that it ain't cheaper homes. It's more expensive ones. Property investors want house prices to rise because they're buying into a kind of superannuation scheme, hoping to replace wages and salaries with rents and access to "financial products" as their portfolios grow in value. Our whole housing system is geared towards the provision of wealth, rather than the provision of homes. Homes for people with a little less money in their pockets? No, that's not what housing is for.

Our federal tax settings are a case in point. Much has been discussed throughout this election year about negative gearing and capital gains tax discounts, and their impact on house prices and rents. What's not been talked about is the impact these tax settings have on our housing system more generally, and the assumptions upon which they feed. Negative gearing and capital gains tax concessions are just the type of policy settings that encourage an increase in the supply of residential property investment. But whether it is for the first, second or sixteenth time, or in new or established homes, the reasons for investment are the same. It ain't cheaper prices and affordable rents.

Of course, the banks deserve a mention for their part in this housing system, because it's where most of their lending business comes from. As landlords lodge their tax returns each year, we can see their most significant holding cost - and the reason why landlords make consistent losses on their property investments, despite charging unaffordable rents - is the payment of interest on loans. That means our tax system, which subsidises these landlords' losses, is also a boon for the banks.

Throughout all this discussion, tenants have rarely gotten a word in. We'd like to see this oversight addressed, because we make up a significant proportion of the population. Reports such as Anglicare's Rental Affordability Snapshot provide a good opportunity to talk about rents, and what it really takes to find your way in an unaffordable housing system. We can use these moments to remind landlords, journalists, economists and policy-makers that the private rental market is not just the nation's cash cow. It's where we live.

Paying landlords to borrow more money

Imagine for a moment that a new political party has formed - let's call it the Property & Real Estate Party, or PREP for short. As the name suggests, this is a party for landlords and the people who work for them.

Leader of the fictitious Property & Real Estate Party, Ms Nora Morse

Now let's also imagine that PREP will be fielding candidates in the next federal election, and the Brown Couch has interviewed their leader, Ms Nora Morse, about their headline policy - paying landlords to borrow money so that property prices continue to go up.

BROWN COUCH: So, Ms Morse, thank you for joining us today...

NORA MORSE: Thanks for having me, it's a pleasure.

BC: Can you tell us a little about your plans for the residential property sector?

NM: Well, Couch, it's not just for the property and real estate sectors - our plan is for everybody. What we're proposing to do is to take money out of consolidated revenue and pay it directly to anyone who is well off enough to own houses, to encourage them to keep borrowing and buying more houses. This will be good for property owners because it will make sure there's always new demand for their houses - in terms of both renters and buyers - and it will be good for the banks, because it will keep money cycling through their systems...

BC: Will it be good for tenants?

NM: Well, no... but then things so rarely are. Tell you what, they could buy a house instead... then they could get hold of some of the money we'll be handing out, take it to the bank and buy more houses.

BC: Okay let's talk about that for a minute. How will tenants buy a house if property prices continue to go up?

NM: Well, perhaps the first thing they need to do is stop buying so much coffee. Did you know that if every poor person in the country stopped spending money on coffee they'd be able to save about $15 a week? That's a lot when you think about it over the life of a mortgage...

BC: Hmmmm, yes I suppose it is. But what will become of our barista friend over the road there if he loses all his customers...?

NM: Well, he might have to buy a house so he can get hold of some of your money instead. That's part of the beauty of our plan - we'll be giving away your money so that you don't have to...

BC: Okay, but if he doesn't have a house in the meantime, he'll have to pay rent to someone, right?

NM: Oh, yes, of course. You don't think we're going to let people live in our houses for nothing, do you? I mean, these things don't come cheap. Not even with all the free money we'll be handing out...

BC: The money you'll be handing out to make sure property continues to become more and more expensive?

NM: Exactly! We can't have houses declining in value. Too many people with too many houses have far too much to lose...! No, what we need is house prices to continue to go up, so that people will always want to buy more houses because that's how you can be comfortable in your retirement. By giving away some of your money to landlords we'll simply be encouraging what is already the natural way of all things...

BC: But... as property prices go up, won't that make it harder for people to buy more houses? Even the ones who already own a few?

NM: Oh, yes, I suppose you could say that. It certainly would be a problem if prices stopped going up, though. People would actually have to start paying off their mortgages instead of just pointing to the balance sheet and saying "I'm rich!" But we'll let the banks sort all that out.

BC: Let's get back to prices always going up... Doesn't that mean that people have to keep borrowing higher and higher amounts to buy houses?

NM: Well, yes... but that's very good for the banks... and that's why we'd like to give more of your money to landlords...

BC: But wouldn't that mean that it will be harder for owner occupiers to compete with them?

NM: Yes, I suppose it would. But you don't actually need to buy a house to live in one - you can live in someone else's. As long as you're prepared to pay the rent, of course. And it's better not to buy houses to live in because they're much more profitable that way... When we're elected we can start paying landlords too, as we're proposing, so it will become even more attractive to own houses not to live in.

BC: But what about the people who can't afford to buy a house to begin with?

NM: Well, like I said, they could make some sacrifices and save up...

BC: Do you think you could put the rent down a little? That might help...

NM: Oh, goodness me, NO! We couldn't afford that! Don't you know how much it costs to keep house prices on a constantly upward trajectory?

BC: What do you mean?

NM: We have to pay the interest, Couch! You don't think the banks are just giving their money away, do you? No, no, no, no, no... giving money away to people who own houses is a role for government, not the private sector!

BC: Can you elaborate a little?

NM: Well, every time a house price goes up, so does the amount someone has to borrow in order to buy it. Interest rates are already at record lows, so there's really no room for the banks to move on this. We're already paying billions of dollars a year to the banks in interest, so you see we can't put the rent down. We wouldn't be able to afford to buy more houses if we did that, and that would be devastating for house prices which of course would not be good for anybody...

BC: Okay. So how would giving money to landlords help here?

NM: Well I'm glad you asked, Couch. Seems we might be finally getting somewhere here. It's very expensive to buy houses, and it's not just the one-off expense of coughing up the deposit for a loan. As I've explained, keeping a house is almost as hard buying one, when it comes to the cost. The interest, Couch! The interest! It's crippling! No clear-minded person would enter into such servitude with a bank unless you paid them to! Which is why we think the government needs to give them more of your money, and that's why we'll be running in the federal election later this year...

BC: Okay, one final question. If house prices keep going up, wouldn't that mean the amount of money government would have to pay landlords would also continue to go up, just like rents?

NM: Yes, well, we all need to make sacrifices for people who own houses, Couch...

BC: Ms Nora Morse, thank you very much for your time today. Best of luck with your campaign.

NM: No Couch, thank you. Now, can I interest you in a tidy three-bedder only a hop, skip and a jump away from local tips and open cut coal mines...? Think of the employment opportunities for your tenants' children!

313,000 people MPs should listen to instead of the Property Council of Australia

This week we saw a not-at-all veiled threat from the Property Council of Australia to Members of Parliament in marginal seats. That threat was very simple: don’t touch negative gearing, or we will do you in the next election.

Pearl from the Property Council wants to get paid.

“That’s enough voters to swing all of these seats eight and half times over, a big political risk to take with people with a lot at stake.”

“Australians already pay $72 billion a year in property taxes – and property owners don’t want government’s hands reaching even deeper into their pockets.”

-Property Council Chief Executive Ken Morrison

We’d like to provide those MPs with some other people who might easily sway an election, though they’ll win their vote with kindness and good public policy. We've some suggestions on our policy platform for social housing, and affordable housing across NSW and the nation.

(Note - we give no guarantee as to the accuracy of the Property Council's data on votes needed, but the bits we've added have come from the 2011 Census records...)

Social housing tenants- easily more than enough to change these results.

Private Renters- unsurpisingly, many more private renters than negatively geared investors!

In just these 20 seats there are 312,978 people the government could listen to instead of the Property Council of Australia when deciding housing policy. We'd also point to our own affordable housing recommendations and those of National Shelter.

In the media release and subsequent articles we also saw a couple of tired tropes trotted out – first:

"There are 840,000 Australians with taxable incomes below $80,000 a year who are negatively geared."

That may well be true, but it's meaningless. We’ll refer the Council back to this excellent piece from Michael Janda, who examines the claim that it is Australians with taxable incomes below $80,000 a year who mostly benefit from negatively gearing - essentially, they're able to reduce their taxable incomes by claiming a whole bunch of tax deductions, through schemes like negative gearing!

The AFR article also suggests the Property Council will argue negative gearing “keeps a lid on rental costs and house prices” - which is interesting, given that in our 5 year report on the Residential Tenancies Act 2010 we found that rents have risen much faster than landlords' costs (where negative gearing is most likely to have an impact). Perhaps the Council could pass the message along to its constituents that they are supposed to be holding back on rent increases? It appears to have been lost in the mail.

Where's the value in the Australian housing system?

The TU sends N.C. away to the Australian National Housing Conference, figuring that he'll be inspired by Australia's pre-eminent housing policy thinkers, and he comes back more cynical than when he started out! Curse you, Australian housing system!

 

Well, it has been a tough year for housing policy. Scarcely a word on housing from the two major parties at the election, and no dedicated Minister for Housing in the new Federal Government. A series of interest rate cuts that might have helped finance productive investment have instead stimulated speculators to just throw money at houses (Sydney prices are up by more than 11 per cent for the year, with half of all finance approvals going to landlords). Meanwhile, Prime Minister and de facto Housing Minister Tony Abbott observes:

if there’s a strong market for flats and for houses, that’s a good thing, not a bad thing. Don’t forget... that if housing prices go up, sure that makes it harder to get into the market, but it also means that everyone who is in the market has a more valuable asset.

Let's get back to basics. This 'more valuable asset': where's the added value? It's the same house, producing the same amount of housing services – shelter – as it did before. 

What are most people going to do with their more valuable asset? Live in it. Some might sell it, but then only go and buy another more valuable asset to live in. Some of those who have more valuable assets than they can live in might sell and spend the proceeds on consumption. Some might double-down their bet and buy another more expensive valuable asset. And those who own a more valuable asset suitable for development – and thereby actually produce more housing – might hang onto their valuable asset and see where these increases in value take them without actually doing anything productive.  

'More value' would be the building of a better mouse trap, or a bionic eye, or a new dwelling, or producing a new or better service – something new or better that adds to the utility and comfort of human beings. 

What we've got now is little more than the swapping about of title certificates, lubricated by debt; meanwhile, there's a bit less of the productive investment that might have produced things capable of paying down our debts, and rather more inequality of access to the product of housing assets, shelter.

If inspiration was needed, perhaps we should have sent N.C. to the Tenants Advice and Advocacy Program meeting after all. 

As well as the usual practical stuff (seminars on the rules of evidence, file management best practice, the Aboriginal Housing Office's 'Build and Grow' Strategy, etc), TAAS advocates heard a cracking speech given by Aboriginal and Torres Strait Islander Social Justice Commissioner, Mick Gooda, on housing as a human right. TAAS advocates are human rights workers, said Commissioner Gooda, and he urged them to keep using the law, education and community engagement to advance housing justice. 

We also farewelled sadly the Older Persons Tenancy Service and the Park and Village Service, which were cut by NSW Fair Trading in the present funding round of the Tenants Advice and Advocacy Program. There was, however, some consolation in reflecting on the contributions that each of these services have made to justice for individual tenants, law reform for tenants generally, and the immense store of skill and knowledge in the TAAS network.

TAASs solve housing problems and keep people housed – and, by extension, help their participation in work and education, and in family and community life. They provide a truly valuable service.