Social Housing Month

Long-time readers will remember that September is Social Housing Month on the Brown Couch, and this year we start off with an update on a story that was in the news last time: social housing rent increases.

(Senior Client Service Officer, Vladimir Dracula)

Housing NSW is about to do one of its regular reviews of tenants' incomes, and this time round it has got its eyes on that $30 per week increase in the pension that the Federal Government bestowed last year. At that time, after a campaign by pensioners and some indications by the Federal Treasurer of strong annoyance at the prospect of State Governments getting their hands on a slice of the largesse, the $30 was quarantined from inclusion in the assessment of households' incomes for the purposes of calculating rent subsidies.

But not anymore. So, from next month, a quarter of that $30, plus a couple of cost-of-living increases on top of it, will go to Housing NSW in rent – an additional $9 per week or so, for a single pensioner.

Ah well. It is easy to give Housing NSW a hard time about this, but we should spare a thought for pensioners in private rental housing. On my back-of-an-envelope calculation (based on a 'low-income' median rent in the September 09 quarter of $248 per week, and the rents component of the CPI increasing 3.1 per cent in the nine months since then), these renters' landlords have already taken their quarter of the $30 increase.

In 2007-08 there were about 117 000 private renter households across Australia whose income came solely from government payments, and who were paying more than 30 per cent of their incomes in rent. Forty-two thousand of them were paying more than 50 per cent.

UPDATE 22/9/10: Public housing pensioners, hang on to your pocketbooks. The Brown Couch's colleagues at the Older Persons Tenants Service have received advice from Housing NSW that the NSW State Government is reconsidering whether it will include the $30 increase in rent rebate calculations. They'll let us know what the Government decides.

Pensioners and others in private rental, keep shelling out as usual.

... and we're back

Sorry, Brown Couch readers, for the long time between posts – we've been stretched thin between preparations for the new Act (including a new Residential Tenancies Regulation 2010, in which we'll see a new standard form of residential tenancy agreement) and other bits and bobs that went on the backburner while we dealt with the Bill.

Looking on the bright side, at least by now everyone should be familiar with the new Act, and be able to tell a frankfurt from a mettwurst. The TU expects the new regime to commence early November or so – we'll keep you posted and have a look at some of its more important and interesting elements before then.

In other news, we've had a federal election. To the discredit of the major parties and – perhaps even more blameworthy – the Australian media, this was preceded by a campaign of very little brain: awfully short on substantial policies, even shorter on intelligent scrutiny and criticism. (At least one journalist noticed that there was scarcely a word said about housing affordability. For your info, Labor didn't have a single discrete housing policy – you can read some announcements here; the Liberals did have a policy, released the day before the poll – you can download it here; and here's the Greens' policy.)

What a contrast to now, where we find politicians, the media and the wider public engaged in an intelligent, reasonable and even a little inspiring discussion about the possibilities of our system of government.

('If you have a problem, if no one else can help....' From left to right: Rob 'Face' Oakeshott, Tony 'Hannibal' Windsor, Adam 'Murdoch' Bandt, and B A Katter.)

While we've got so many people apparently talking reasonably, here's a few people – all of them in the lower 50 per cent of the population by income – to think about and include in the conversation:

• the 505 000 lower income households who rent privately and pay more than 30 per cent of their income in rent

• the 179 000 lower income households who rent privately and pay more than 50 per cent of their income in rent

• the 397 000 lower income households whose mortgage debt repayments consume more than 30 per cent of their income

• the 193 000 lower income households whose mortgage debt repayments consume more than 50 per cent of their income.
  

(From the National Housing Supply Council)

And here's a few slogans for the next campaign, whenever that might be. Instead of, say, 'stop the boats', how about:

• Stop housing stress

• Stop house price inflation

• Stop housing speculators

• Stop evictions.

New renting laws coming soon

The Residential Tenancies Act 2010 passed through both Houses of NSW Parliament in June 2010, without any amendment to the proposed bill. This new law doesn't apply yet, and we're told by Fair Trading NSW that it won’t come into play until sometime later this year. There's plenty of time to get settled in and have a good look at what's going to change, and this will occupy some of our time on the Brown Couch over the coming months. But for now, here's a quick look at the world of renting in NSW, as we soon will know it...

(Sausages: a little bit like a law. Apparently)

New developments

Tenancy Databases - taming the wild frontier...

Under the current law tenants have little recourse to challenge incorrect or unfair "bad tenant database" listings, but the new law will allow the Tribunal to order their removal. Landlords and real estate agents may be liable to compensate tenants for unlawful listings, and database operators may be fined for not following the rules. The government should be congratulated on this important improvement for tenants in NSW.

Share-housing - the end of uncertainty...?

A person who lives in a shared house, and is not named as a tenant, will need a written sub-tenancy agreement in order to come under the new Act's coverage (unless the head-tenant lives elsewhere). Under the current law, oral agreements between named tenants and their housemates are sometimes recognised as residential tenancy agreements, and sometimes not, depending on the facts in each case and how the Tribunal is constituted. The blanket removal of share house residents from the Act’s protection is alarming. Anyone living in shared accommodation should seek immediate advice to make sure they are prepared for this change.

Share-housing - the end of uncertainty...

The often fluid nature of shared housing arrangements will finally be recognised, with share-house occupants able to add and remove names from a residential tenancy agreement with relative ease. Under the current law, a co-tenant who moves out can never really be sure they wont be held responsible (as in liable) for damage or rent arrears caused by remaining tenants. The new law will also make it easier for tenants to sublet or transfer part of their tenancy. Tenants will still require permission, but landlords wont be able to 'unreasonably' refuse anymore, unless the tenant wants to move out and sub-let the entire tenancy.

Domestic violence - kick abuse to the curb...

When two or more tenants are named on the agreement - something that's not unheard of in domestic relationships - leaving violence can result in substantial debt, because you can't leave your residential tenancy agreement. Changes to co-tenancy laws will benefit those wishing to flee violence, by enabling them to end their liability to the landlord when they leave... Excluding a violent tenant can also be difficult. Under the new law a violent tenant may be excluded from a home, and their tenancy agreement will be automatically terminated, when an AVO is made against them. Remaining occupants may elect to continue or end the tenancy depending on their circumstances, even if they are not named on the original tenancy agreement, and regardless of whether the tenancy is still in its fixed term.

Termination for rent arrears - you pay, you stay, but mind you don't do it again...

Currently, there is nothing in the law to save a tenancy when rent arrears are paid at the last minute - it's entirely at the landlord's discretion. A tenant in arrears, and facing eviction, might choose to put whatever money they have available to other purposes (like moving house). Landlords might take a cynical approach to offers of payment, and decline to negotiate. The new law will see tenancies continue as long as arrears are paid, or payment plans strictly followed, even if the Tribunal has already ordered termination. The catch? If the tenant has "frequently failed to pay” rent, the Tribunal can order termination anyway. To be honest it all looks a little clumsy, and we'll be watching with interest to see how the Tribunal handles this one.

Terminating fixed term agreements – getting a better deal…

Tenants will be able to terminate fixed term agreements, without the need to compensate the landlord, if they are offered a social housing tenancy or a place in an aged care facility. They will also be able to end a fixed term agreement if the landlord puts the place up for sale – now that’s going to make things interesting.

Tinkering with the old bits

Aside from these initiatives, the Residential Tenancies Act 2010 will do little more than meddle with what we already know and love. Much of this is for the better, but it’s not all good news.

Termination without grounds

No grounds notices of termination will still be the bane of tenants’ lives. The required period of notice will be extended from 60 days to 90 days (that’s good) but the Tribunal will lose its discretion to consider the circumstances of the case before terminating a tenancy without grounds (that’s bad). The notion of a “retaliatory eviction” will be strengthened and tenants will be able to make a proactive application to the Tribunal to have a termination notice deemed retaliatory (that’s good) but the Tribunal will lose its discretion to consider the circumstances of the case before terminating a tenancy without grounds (that’s bad). Regardless of all the good things the new law will do for tenants, a landlord’s unfettered right to end a tenancy with no justification has been absolutely affirmed and strengthened by this law. This is disappointing.

Goods left behind

There will be some definite improvements to the law concerning goods left behind at the end of a tenancy, but landlords may be happier about these than their former tenants. Under the current law, landlords’ requirements are so onerous that they are rarely complied with – and they can often get away with it because obtaining compensation for lost goods is next to impossible in the Tribunal. The new law attempts to fix both of these problems by relaxing landlords’ obligations, and allowing tenants to claim compensation when the landlord does the wrong thing. The problem is that the rules have been relaxed so much that doing the wrong thing could be virtually impossible. We’ll be keeping a close eye on this one, too.

Landlord access

There will be several changes to the law insofar as it allows a landlord (or their representative) to come onto the property without the tenant’s permission. The most significant of these changes will be in relation to showing prospective buyers through when the property is for sale. The law will encourage parties to agree to no more than two “periodic inspections” each week – if no agreement is reached then the landlord may access the property without the tenant’s consent, limited to twice a week and requiring 48 hours notice. This is an improvement on the current law, which allows landlords to access the property on a reasonable number of occasions, provided reasonable notice is given.

Water charges

Landlords won’t be able to charge tenants for water usage unless the property is equipped with “water efficiency measures”. It will be left to the regulations to define what this means, but the Minister for Fair Trading has indicated (when introducing the bill to Parliament) that a low-flow shower head and a quick once-over by a plumber to fix any leaking pipes will probably suffice. The real fun to be had here will be in monitoring what, if anything, landlords do to ensure their properties are “water efficient” before passing their water bills on to tenants.

Paying the rent

Landlords and real estate agents will no longer be able to insist on “fee-for-service” rent payment methods, but will have to offer tenants at least one method of payment for which they will incur no unexpected costs. This should stamp out the dubious practice of reducing rent payment methods to a single option, being a direct debiting agent who not only charges the tenant for each transaction, but often requires complete and unsupervised access to their bank account as well.

Alterations

Tenants will be able to make “minor” alterations to rented premises, but only if their landlord gives them permission. Unlike the current law, landlords will not always be able to “unreasonably” refuse – but there will be a long list of things for which unreasonable refusal may still be given. This will include painting and making structural changes, or making changes that will be impossible to undo. Tenants will have to pay for any damage they cause by making alterations to rented premises.

Giving notice

Tenants will no longer have to give their own notice of termination if they want to move out before a termination date given by the landlord. This will save tenants the burden of having to pay double rent for longer than is absolutely necessary, and will allow a great deal more flexibility in timing relocations than the current law provides for.

Rent increases

The Tribunal will no longer distinguish between primary and secondary considerations when looking at excessive rent increases - comparable market rents will be just one of several factors for the Tribunal to look into. The flip side is that affordability is to be expressly ruled out as a consideration.

Break fees

The break fee did not survive the final cut – at least not to the extent that it was initially proposed. In the new law, the break fee will be an optional term, to be agreed to at the beginning of a tenancy. If you opt in, it applies. If not, the current system of breach, loss and mitigation applies. The break fee, or alternatively any compensation calculated according to the landlords actual loss, will only be payable by a tenant who abandons a fixed term tenancy. There will be no option for tenants to give notice during a fixed term, and then pay the break fee as compensation, as was initially proposed.

Residential Tenancies Bill 2010 introduced into Parliament

Last night the Fair Trading Minister, Virginia Judge, introduced into the New South Wales Parliament 'a Bill for an Act with respect to the rights and obligations of landlords and tenants, rents, rental bonds and other matters relating to residential tenancy agreements; and for other purposes'.... better known as the Residential Tenancies Bill 2010.

You can download and read the Bill here, and read the Minister's speech here (scroll down about two-thirds to get to the start of the speech).

(Sausage making (a little like law making))

And here's the Tenants' Union's comment:

The Bill reflects, with some changes, the draft Bill circulated by the Government in late 2009.

The Bill, like the draft Bill, would mostly improve New South Wales’ residential tenancies laws. The improvements it would make are sensible and modest, and are mostly directed at fixing problems and omissions in current laws.

This comment focuses on how the Bill addresses four areas of major concern identified by the TU in the draft Bill, and a fifth area of concern that arises from a new provision in the Bill that was not previously in the draft Bill.

1. Access in the event of sale

The Bill’s provisions in relation to access to premises by prospective purchasers in the event of sale are a significant improvement on those in the draft Bill.

The Bill provides that in the absence of an agreement between a landlord and tenant as to access, the tenant must receive not less than 48 hours notice of access (up from 24 hours in the draft Bill), and that access is limited to not more than twice in a week (the draft Bill provided no limit).

Also, a draconian penalty provision for tenants who refuse access, proposed in the draft Bill, is not in the Bill, which would instead deal with refusal of access as a breach of the tenancy agreement.

The TU supports these changes.

2. Former tenants’ goods left behind after termination

While the Bill’s provisions have been reworded to place greater emphasis on the intention that goods left behind should be disposed of by sale, they are substantially the same as those in the draft Bill. They would allow landlords to dispose of valuable goods belonging to former tenants after only 14 days, and without specific regard to their value. The TU remains of the view that the period should be 21 days, and that goods of value greater than $100 should be disposed of by sale for fair value.

If it is the intention of the Bill that a tenant be entitled to recover the value of goods even if they are not sold for fair value (clause 134(1)(d)), this intention should be made expressly clear. Inserting the words “if a reasonable sale price is not achieved” at the end of the subclause would do this.

A further problem in this regard is the wording of subclause, 134(2). This provides that a person who disposes of goods left behind in accordance with the Division will incur no liability. Adding “aside from a liability provided by this Division” would ensure that the intention will be given effect.

The Bill, like the draft Bill, also fails to provide any penalties for landlords who breach their obligations in relation to former tenants’ goods. Clauses 127 and 132 should be backed by penalties of 20 penalty units, and clause 131 by a penalty of 50 penalty units.

3. Tenancy databases

The Bill closes loopholes in the draft Bill’s provisions relating to tenancy databases. In particular, the Bill would prohibit tenancy database operators from listing persons except at the request of landlords and agents (the draft Bill would have allowed listings ostensibly by database operators themselves) and require the removal of out of date information (the draft Bill would have merely required landlords and agents to advise database operators as to out of date information, and operators would not have been required to do anything in response).

The TU supports these changes.

There is a problem, however, in the absence from the Bill of penalties for breach of the obligations at clauses 212 and 214. Each of these provisions should be backed by penalties of 20 penalty units.

4. Termination without grounds and the discretion of the Consumer, Trader and Tenancy Tribunal

The Bill, like the draft Bill, would remove the discretion of the Tribunal under the current law as to whether to order termination in proceedings by landlords of termination without grounds. The TU remains opposed to this change: it would turn termination notices without grounds into trump cards and encourage their use, where instead the law should discourage or prohibit their use.

Unlike the draft Bill, the Bill does not make any reference to the Tribunal’s discretion in relation to the date for possession of premises to be returned to the landlord after it makes termination orders without grounds. This is a serious defect: it should be clear in the legislation that the Tribunal has such a discretion, and that it is to be exercised considering the circumstances of the case.

5. Termination on the ground of rent arrears

The Bill’s provisions relating to termination on the ground of rent arrears reflect those of the draft Bill, which the TU generally supports, but the Bill makes one significant addition to those provisions. This addition – cl 89(5) – is misconceived and introduces uncertainty into an otherwise sensible regime.

Clause 89(5) provides that ‘the Tribunal may, on application by a landlord, make a termination order despite subsection (2) or (3) if it is satisfied that the tenant has frequently failed to pay rent owing for the residential premises on or before the day set out in the residential tenancy agreement.’ This presents the following problems:

• Clause 89(5) refers to an application by a landlord; it is unclear whether this is a special application of which the tenant should be specifically notified, or whether the provisions of cl 89(5) are available for use whenever a landlord makes an application for termination on the ground of rent arrears. If the latter, it opens the possibility that a tenant may make a payment of arrears based on the assurance given by cl 88(2), then subsequently find that the landlord has gone ahead with the termination application.
• Clause 89(5) refers to the Tribunal making an order ‘despite subsection… (3)’. Subsection (3) refers to events subsequent to the making of a termination order, so ‘despite’ does not make sense. The effect of the connection between these two provisions subsections is uncertain.
• The adverb ‘frequently’ is open to widely varying interpretation and may be the basis of disappointed expectations. We anticipate that some landlords will expect that any plurality of instances of late payment will constitute ‘frequent’ late payment and hence that the principles otherwise enshrined in cl 89 will not apply to their proceedings.

The uncertainty of the new clause is such that it may be ineffective, or it may undermine the rest of the regime.

The TU understands that the intention of the addition of cl 89(5) is to prevent dishonest tenants from deliberately and repeatedly paying rent in arrears at the last hour before their eviction. We submit that this intention will be given effect by the Tribunal when it considers the circumstances prescribed at cl 87(5) – particularly (b) ‘any previous breaches’ – in deciding to terminate a tenancy and setting the date for return of possession. We further note that landlords who experience hardship because of deliberate and repeated arrears could apply for termination under the hardship provisions at cl 93.

Alternatively, the Bill could be amended to provide, in addition to the factors at cl 87(5), that the Tribunal must consider whether the tenant’s failure to pay rent until just prior to enforcement of termination and possession orders is deliberate and repeated.

Tenancy culture studies: Andy Capp

After a long break, welcome back to the Brown Couch's Institute of Tenancy Culture Studies. The subject of today's study is the most famous cartoon tenant in Hartlepool, if not the world – Andy Capp.

(Andy Capp, by Reg Smythe)

Since Reg Smythe launched his comic strip in the Daily Mirror in August 1957, Andy Capp and his wife Flo have been the tenants of the premises at 37 Durham Street, Hartlepool, in the north of England. Andy's tenancy has been mined repeatedly for jokes about crumby housing, noisy neighbours and, especially, about paying the rent – or rather, not paying.

(Daily Mirror, 25 June 1958)

(Daily Mirror, 29 December 1961)

(Daily Mirror, 6 November 1961)

One might think that because of Andy's rent-dodging antics he would be fondly regarded here at the Brown Couch. Unfortunately, no. I say 'unfortunately' because I like the idea of Andy Capp: the twisted logic of that third gag is okay, and the whole idea of millions of newspaper-reading households meeting over their breakfasts each morning a chronically unemployed man and his cleaning-lady wife seems kind of radical... but there's no getting past the domestic violence.

The abuse and violence inflicted by Andy Capp upon Flo is a big part of the comic strip and, horribly, its humour (running 'Andy Capp domestic violence' through the British Cartoon Archive's database turns up no less than 73 strips from the period 1957-1962 alone – half as many again as the tenancy-related strips).

(Daily Mirror, 20 August 1957

(Daily Mirror, 24 September 1962)

One gets a bit of chill to think that fifty years ago these hateful little works were presented by newspapers the world over for the amusement of their readers.

Perhaps this is unfair on Smythe, who is said to have later regretted all the DV gags... but I don't think so, and instead think of how many beaten women would have read the papers and got the message loud and clear that they should expect to be beaten and for no-one to help stop it because sometimes it's the right thing for a man to do and sometimes it's just funny. Perhaps we're being unfair to Andy, who after all got given violence and alcoholism by Smythe along with unemployment, soccer, pigeon-racing and tenancy to make him the complete stereotype of the marginal working class Northern English male. But still too many women suffer from the compounded effects of domestic violence and insecure housing to make dismantling the stereotype the first order of business.

Let's consider Flo. If she and Andy lived in New South Wales, Flo could apply to the Local Court for an Apprehended Domestic Violence Order against Andy, which 'may impose such prohibitions or restrictions on the behaviour of the defendant as appear necessary or desirable to the court' (s 35(1) Crimes (Domestic and Personal Violence) Act 2007) – including prohibiting access by Andy to any premises occupied by Flo, 'whether or not the defendant has a legal or equitable interest in the premises or place' (s 35(2)(b)). In other words, Flo could get Andy excluded from the premises of which he is a tenant, if the court was satisfied that this was necessary to her safety.

As the law presently stands, however, Andy's tenancy would not be terminated, so Andy would still be in a position to make life difficult for Flo. The difficulty depends on Flo's own tenancy status: if she and Andy are co-tenants, the difficulty is that there is no straightforward way for Flo to change the tenancy agreement so that she alone is the tenant; if she is merely an occupant under licence, Andy could terminate her licence and have her evicted.

The draft Residential Tenancies Bill would fix these problems. In particular, a final ADVO that excludes a co-tenant from the premises would terminate that co-tenant's tenancy, while leaving the rights of the remaining co-tenant unaffected (so, Andy would legally be out of the picture, and Flo would have the tenancy in her name only). And in the case of an occupant in premises from which a tenant has been excluded by ADVO, the draft Bill would allow the occupant to apply to the Tribunal for an order vesting a tenancy in the occupant on such terms as the Tribunal thinks appropriate (so, Andy would be out of the picture and Flo could get an order for a tenancy in her name only).

Two good practical ways of helping survivors of domestic violence take the steps they need to get safe and get on with their lives, and two good reasons for passing the Bill.

Service or speculate?

Last week ABC's Radio National breakfast show did a neat report on the cost of housing, giving an overview from a number of different perspectives. Your correspondent offered one of them, but I'll draw your attention particularly to another.

Mr Saul Eslake, previously chief economist of ANZ, stated clearly one aspect of the madness of how we tax housing – but if Eslake wasn't clear enough, see the front page of today's Herald for an illustration. This is the story of a house in the inner Sydney suburb of Annandale, purchased for $1.3 million in December 2008, and 15 months later for $1.8 million. And what did the owner do to get this cool $500 000 profit? Says the agent:

''They just repainted, recarpeted, tidied up the garden and made a slight improvement to the kitchen area. That's pretty much it.''

Alternatively, they might have actually done something useful and rented the place out. Doing so might have generated an income for the owner of, I don't know, $50 000 for the fifteen months (it's a pretty schmick house).

And as Eslake says, this income would be taxed at the owner's top marginal tax rate. But the owner's profit from doing nothing productive and simply on-selling will be taxed at half that rate, thanks to the capital gains discounting provisions introduced by Treasurer Costello in 2000... and now retained by Treasurer Swan in the face of alternatives suggested in the report of the Henry Review.

What to do: provide a valuable service, or speculate? The tax system says, resoundingly: speculate.

The shell-less snails of Taipei: Colebatch

Tim Colebatch follows up his recent excellent article on housing and tax with another on the consequences of a housing bubble – this time looking at lessons from Taipei, where the so-called 'snails without shells' – young persons priced out of the owner-occupied housing market – are protesting unaffordable housing.

(Snail and friends in unaffordable Taipei.)

Colebatch's article also refers to another recent controversy: whether Australian house prices have been pushed up by foreign buyers, which reportedly had been given a filip by the Federal Government when it relaxed the regulation of such purchases by the Foreign Investment Review Board last year.

Here at the Brown Couch we watched with amusement as the TV current affairs shows tried to report this one, not sure whether to appeal to the presumed racism of their audience (ie 'cashed-up Chinese are buying all our houses – boo!'), or their presumed greed as house-price speculators (ie 'cashed-up Chinese are buying all our houses – hooray!').

The Government is now moving to tighten the regulations up again. The Urban Taskforce, the developer lobby group, liked the relaxed approach. Its Chief Executive, Aaron Gadiel explained:

a renter will not be fussed if their landlord lives in Australia or overseas – they just want a home. By allowing foreign investors to purchase new housing, more apartment development is made possible, which in turn means more homes available to renters.

Fair enough – up to a point. This position holds only in relation to investment in newly built housing, not purchases of existing stock. It is not clear that overseas landlords have done any better than their Australian counterparts in building new stock, rather than just buying and bidding up the price of homes already in existence.