NSW State Budget: the good, the bad and the windows of opportunity...

It’s time we had a look at the NSW state government’s recently announced budget for 2009-2010 – what’s in it for tenants?

Aside from a general increase in the maintenance budget of Housing NSW (long overdue), there are three initiatives of interest. We’ll call these the much-touted “saviour” of the housing industry, an attempted medium- to long-term plan to combat homelessness, and a new subsidy to assist victims of domestic violence to move out on their own.

We’ll look at each in turn over the next few days… Starting with the saviour:

The Housing Construction Acceleration Plan.

In the words of the NSW State Treasurer, Eric Roozendaal, “this provides a 50 per cent cut to stamp duty for newly constructed dwellings up to $600,000.00 purchased in New South Wales from 1 July to 31 December 2009”. This applies to everyone except for first home buyers, who already enjoy substantial relief from stamp duty, as well as various first home owner grants. (Notably the State Governments’ contribution to such grants is to continue for another year). So, this initiative might coax landlords as well as owner-occupiers into the market for new housing in the immediate future.

The government suggests in its “Budget Highlights” package that this is an investment to “support growth and construction jobs in the housing sector”. The Urban Taskforce Australia, an organisation representing property developers, has hailed the plan as the “strongest measure taken by any government in Australia to support new home construction”. Clearly, they’re quite happy with it, and why wouldn’t they be? As a targeted economic stimulus measure, it sounds like good news. But what’s it really going to do for the housing market?

The CEO of The Urban Taskforce, Mr Aaron Gadiel, suggests “… far more people will benefit – not just first home owners. Some people who aren’t first home buyers are now likely to bring forward their home purchase to take advantage of this grant”. The Housing Industry Association’s Executive Director, Mr Graham Wolfe, puts it this way: “the saving in stamp duty provides a window of opportunity for anyone looking to buy a new home”.

“A window of opportunity”… Get in quick before the money runs out! You can’t afford to miss it!!! At these prices you’d be a fool to put your money anywhere else…

Now, call me a nay-sayer and a ne’er-do-well, but perhaps there are some very good reasons why people should NOT bring their purchases forward, simply to take advantage of yet another “saving” on stamp duty. Enticing home purchasers to prematurely increase debt in order to qualify for a stamp duty concession does not strike me as a good idea. To illustrate this point, I recommend a cursory glance over numerous comments made earlier on the Brown Couch. Start with the "numbers" tag and work your way back from there.

Correct me if I’m wrong, but isn’t this Global Financial Crisis largely the product of housing related debt? Does it not seem a little odd to try to reinvigorate the market by offering yet another incentive to borrow more money now? Can somebody in government please give me a definition of the word irony?

Still, I do see one positive that may come out of all this. It could give us a few more opportunities to test out the new “Mortgagee Repossessions” amendments to the Residential Tenancies Act, now that they’ve made their way through the legislature.

The Curse of the Wolfman: discrimination in rental housing

The Brown Couch notes with concern reports in today's sports pages that Manly Sea Eagles winger and tenant, David 'Wolfman' Williams, has had applications for tenancies declined by bigoted landlords and real estate agents. According to the Herald:

"I got rejected from like seven places because I was under 25 … and a footballer," the 22-year-old said.

(David 'Wolfman' Williams, tenant.)

Your correspondent at the Brown Couch does not follow Williams' game, being instead a devotee of Australia's national football code (go Hawks!), but I do feel a strong sympathy for the man, born of a common experience. As an employee of the Tenants' Union, I too have had more than my share of applications for tenancies refused where I have disclosed my occupation.

Discrimination in the provision of rental housing in New South Wales is subject to State and Federal anti-discrimination legislation. Under each of these regimes, discrimination on grounds of race, sex and a number of other factors is illegal; unfortunately, neither of these regimes prohibits discrimination on the ground of occupational status. The Australian Capital Territory's Discrimination Act 1999, however, does prohibit discrimination on grounds of a person's 'profession, trade, occupation or calling' (s 7(1)(m)). This measure should be extended to citizens of New South Wales and Australians generally. The Wolfman and his similarly affected colleagues should not have to move to the Canberra Raiders in order to get housed.

Williams' comments indicate that another factor may be involved in the discrimination he has experienced: his age. Discrimination on this ground is generally prohibited by both State and Federal legislation. Williams and anyone else who is knocked back for rental housing because they are too young, or because 'the landlord really wants a family to move in' or some similar excuse, should consider contacting the NSW Anti-Discrimination Board or the Australian Human Rights Commission to find out more about making a complaint.

Williams says that despite the prejudice he encountered he is 'in a good place now', and the Brown Couch wishes him well as he settles into his home.

Better protection for tenants when landlords default on mortgages

Some much-welcome news: the NSW State Government has announced that it will introduce legislation this week to better protect tenants when landlords default on their mortgages and the mortgagee (usually a bank) takes possession of the premises – and evicts the tenant.

(Well done!)

We don't yet have the detail of the legislation, but the Minister for Fair Trading, Virginia Judge, says that it will provide:

• Immediate introduction of a 30 day notice to vacate once a mortgagee is entitled to possession of rented premises

• Permit a mortgagee who becomes entitled to possession of a premises to authorise the release of the tenant’s rental bond

• Relief for relocation expenses, with tenants who receive an eviction notice to withhold all future rent and / or recoup advance payments – i.e. a rent holiday, or compensation from the mortgagee.

• 
  

All of which represents a massive improvement on the current law, under which tenants have been evicted by mortgagees with little or no notice, and no real prospect of compensation. (Click here to download a briefing paper by the Tenants' Union on the problems with the current law.)

The TU has previously asked the Government to deal with the mortgagee eviction problem as a matter of urgency, so we are very pleased that action is being taken now.

The TU and the Tenants Advice and Advocacy Services saw a wave of these cases a couple of years ago, when interest rates were rising. We expect to see another wave in the coming months, as unemployment rises. This time, it looks like the law will better protect tenants.

Well done, Minister Judge.

Your ad here!

With heavily mixed feelings, your correspondent from the Brown Couch participated the other day in a story for one of the commercial TV current affairs shows. It goes to air sometime next week. I'll not name the show – not out of any ill-feeling for the show (it's done some good stories on renting, and this one may also turn out to be more or less balanced), but because it doesn't need the free advertising. Which brings me to cause of my mixed feelings.

One of the other participants in the show is a real estate agent, who has become well-known to TV audiences through his appearances on current affairs shows over the years. I'll not name him either – he gets more than enough free advertising from the current affairs shows. His schtick is to confront a tenant in arrears, with cameras rolling, and do his bully-boy, alpha-ape routine; this appeals to a certain type of embittered landlord, and these types then take their business to the agent. It's good business for the agent; I doubt that the bully-boy routine is actually so good for the landlords. You lose good tenants that way, and I've seen enough Tribunal proceedings to know that in most (sure, not all) cases, a landlord's best chance of getting arrears repaid is for the tenancy to continue with a sensible repayment schedule negotiated. The better and cleverer agents know this too.

Anyway, my own participation in the story was to point out that it was in fact a free ad for the agent, and to try to make the point that the larger problems facing tenants were not individual agents like the one depicted/advertised, but were instead problems in our renting laws (in particular, no-grounds terminations) and problems in the economics of housing (in particular, the house-price speculators who have screwed up house prices). We'll see how much of that comes through in the story.

Finally, to any tenants whose lives have been touched by this agent: I'm sorry if your correspondent did not reflect the sort of indignation you might feel – that's because indignation from the Tenants' Union is best advertisement for this agent of all.

Rent and Sales Report no 87, part 2: tenancies and turn-over

The big news from the latest Rent and Sales Report, as discussed in the previous post, was the sudden drop-off in rents for new tenancies in the March quarter, after several years of increases.

There's another aspect of the Rent and Sales Report that hardly ever gets reported in the media, but here at the Brown Couch we find it pretty interesting. It's the number of new bonds lodged with the Rental Bond Board, and the number of total bonds held by the Board. Because just about all tenants in the private rental market pay a bond, the number of new bonds lodged is a pretty good proxy for the number of new tenancies starting in a given period, and total bonds held is a pretty good proxy for the total number of private tenancies.

The graph below gives both these numbers, going back to March 2003. The number of new bonds lodged jumps around a bit, but there's a rhythm to it (it's in time with the academic year) and if you look at the trend, the number of new bonds lodged – and hence new tenancies starting – is declining.

On the other hand, though, the total number of private tenancies in New South Wales has grown continuously over the period.

(Rent and Sales Reports, March 2003-March 2009. Click on image for a better view.)

What this tells us is that the turn-over of tenancies has declined; in other words, tenants are not moving around as much as they used to.

There's a number of possible explanations for this. Perhaps tenants generally are getting older and more settled in their homes. Without ruling out other explanations, I suspect the strongest is the lack of affordable housing, both for purchase and, especially, for rent. In the face of rising rents, many tenants have battened down the hatches and tried to weather the storm in their current residences - which led to fewer vacancies and, in turn, yet higher rents for new tenancies.

So, back to rents: if they are indeed starting to level off, or even come down, will tenants start moving again? Maybe – if you feel that your income is secure you might think about venturing out into the market again, and you might even find a few reasonably-priced high-quality premises to let from credit-crunched investors who need the cash. But for those tenants who are not so secure in their employment, the storm has not passed yet.

Rent and Sales Report no 87: rent increases stall as recession hits

Housing NSW's excellent Rent and Sales Report is out today, with figures for median rents for new tenancies starting in the quarter to March 2009. Over the year to March, median rents increased painfully – between eight and 11 per cent (eight per cent in inner Sydney and for New South Wales, over all, higher in middle and outer Sydney) – but what's really interesting is what happened in the most recent quarter:

Sydney, inner ring: down 1.3 per cent

Sydney, middle ring: no change

Sydney, outer ring: no change

New South Wales over all: down 1.5 per cent.

That's the recession starting to bite: more and more tenants don't have the incomes – or even the jobs – to keep paying higher rents.

The Brown Couch's Budget Reply Speech

It is with regret that the Brown Couch, having applauded the Federal Government's second stimulus package in February, must now issue a strong boo in reply to its Budget.

(Boo!)

The booing is deserved for two reasons.

The first, of course, is the decision to extend the Boost to the First Home Owners Grant until the end of the year (albeit at a reduced amount for the last three of the six months). So first home buyers can continue to pay too much for their housing for the next six months (and, because almost all of them also borrow heavily, they will also be paying too much for the next three decades or so).

I understand the argument that the Boost, as it applies to newly-built dwellings, stimulates employment in the building industry. But that argument doesn't hold in relation to existing dwellings, which is where most of the Boost money goes. (And I think the housing industry lobby agrees. In the pre-Budget speculation about the fate of the Boost, they were implicitly saying: keep the newly-built-dwelling-Boost and, if you must, ditch the existing-dwelling-Boost.)

The Boost, as it applies to existing dwellings, doesn't keep builders and tradies employed. Let's call it for what it is: it's part of Australia's own housing-bubble bailout. This is a bailout of house-price speculators, partly financed by the taxpayer through the FHOG Boost, and partly debt-financed by first home buyers. And for many of the latter, as the recession hits harder and they lose their jobs, their participation in the bailout will end in tears.

The second reason for booing: what the Budget does in relation to pensions and other social security payments – or more accurately, what it does not do. One feels a bit curmudgeonly for begrudging Age Pensioners their increase, but not all of them need it so much as the social security recipients who rent privately do. These folks include Age Pensioners, but also Single Parent Payment recipients, Newstart recipients and others, and their housing costs have recently much more than the housing costs of Age Pensioners who own their homes or who rent in social housing.

The better way to go would have been to increase these citizens' incomes through the Rent Assistance payment. In particular, the Government should have lifted the maximum amount of Rent Assistance a person can be paid, because currently it is capped at amounts that leave some recipients in severe housing stress. This would entail no across-the-board increases, nor any expansion of eligibility, so shouldn't inflate rents generally – instead it would be targeted assistance to people who desperately need it. But no, they'll not be getting it from this Budget.