Renting laws under review in New South Wales

The long awaited Statutory Review of the Residential Tenancies Act 2010 is upon us!

To kick things off, Fair Trading NSW has released a high level discussion paper, seeking input on a range of issues. The paper includes background and commentary on a number of known areas of concern for both landlords and tenants, and raises 42 specific questions for consideration. It also invites comment and discussion on any issues not raised. Submissions are invited, with a closing date of January 29th 2016.

As you might imagine, the Tenants' Union of NSW will have a couple of things to say. We've previously outlined our key concerns with the Act in a report we circulated in July: 5 years of the Residential Tenancies Act. But we'll be talking with as many people as we can between now and the end of January to make sure our submissions reflect the views of tenants, advocates and all right thinking folk across the community(!)

To that end, we'll pull out a few of our favourite questions for discussion on the Brown Couch over the coming months.

To start with, here's question number 33 (with background commentary):

Commentary: There have been suggestions that 'no grounds' terminations be removed and that the landlord be required to provide a grounds for termination from a prescriptive list of possible reasons. This proposal would need to balanced against the view that landlords are entitled to deal with their property as they see fit. 

Question 33: Should landlords be required to provide a reason for terminating a tenancy? If so, what types of reasons should be considered?

It's interesting that Fair Trading sees the need to balance this proposal against the view that landlords are entitled to deal with their property as they see fit. We see no such need. Quite simply... a landlord can deal with a property as they see fit, subject to the terms and conditions placed upon them by a regulatory scheme such as the Residential Tenancies Act. The Minister for Fair Trading now has an opportunity to consider those terms and conditions, and reform them for the better. We say he should.

There is a distinction to be made here: property owners are entitled to deal with their property as they see fit. If, in dealing with their property, they choose to become a landlord, they opt into a scheme that is regulated in a particular way by law. This law, it is said, intends to balance the "competing interests" of those who buy and sell property as a means to acquire wealth, and those who live in it. But these interests are often more in conflict than competition, so finding the right "balance" has always been tricky...

Let's be clear, property owners are under no obligation to become landlords. They are entitled to deal with their property as they see fit, but... usually they can't afford to hold property without collecting any rent. They need it to put towards their holding costs - most notably the interest on loans they've taken out, so they can become a property owner.

Tenants, on the other hand, are finding it ever more difficult to take that leap. For some, becoming a property owner is not even an option, and they see a future of renting, renting and renting some more. But even where a household rents as a matter of choice, there is no good reason to say their landlord should treat their home as though it were a vacant property.

Once a landlord invites a household to take possession of a property, granting a right to occupy, they've begun trading in more than just bricks and mortar. They've begun trading in other people's security as well. They've started trading in other people's well-being. Other people's aspirations. Other people's hopes and dreams.

... and they're relying on them all to acquire wealth through property.

If we take that as our starting point, we can't see the controversy in asking landlords to take one or two things into consideration before deciding how to deal with property. The best way to do this is to get rid of their ability to end tenancies without grounds, and give them an expanded list of reasons that they can use instead.

Now - we've got some ideas about what those reasons should include, and more importantly what they shouldn't and how they might be tested to ensure they are genuine when relied upon. But we'll leave it at that for now, because we'd like to hear from you.

Drop us a comment if you've ever been hit with a no-grounds notice of termination. We'd love to know the real reason behind it...

Mythbusters: Boarding House Edition

'If the prostitutes and criminals don't get you, the ice addicts, deviants, and bums surely will. Why just look at them now, the usual suspects leering at you from their den of ill repute - or 'boarding house', which I do believe is the technical term:

"We'll get ya!"

I assume they paint the boarding house walls in the style of a police lineup to save time. Save yourself while you can - run to the hills (district)!'

Or so went the dominant view surrounding the application for construction of an eight-room boarding house in Cromer, on Sydney's Northern Beaches. Warringah Council's Development Assessment Panel granted development approval last week despite an overwhelmingly predictable backlash. Approximately 800 individuals made submissions to council regarding the development. According to The Sydney Morning Herald, just 0.12% - that is, one - of the submissions were supportive of the project. The record shows those 799 dissenters included Social Housing Minister The Hon. Brad Hazzard MP, Warringah Mayor Michael Regan, and the Principal of a neighbouring primary school. 

The following comments are not attributable to any of those persons, but do give an idea of the flavour of much of the opposition:

"Most [boarding houses] are filled with ice addicts, heroin junkies, paedophiles and jail birds. Please stop this from happening asap [sic].."

"Not only because there is no control over who will be living there (paedophiles???) but also because the children might be exposed to drug/alcohol related problems."

Clearly, these are serious numbers and very serious allegations. So how could the Cromer boarding house have been granted approval? Does it evince a disregard for community safety and interests? Perhaps a sign of arrogance - hubris even? The undue influence of property developers? Or could the opposition campaign be extraordinarily misguided in multiple respects?

Lock in D for the full million, Eddie. It is difficult to know where to start in debunking the opposition to what should be an entirely uncontroversial development.

But let's start with what exactly has been approved. As Warringah Council's report on the development application provides, the Cromer project may be categorised as a 'new generation boarding house'. Earlier this year, the Australian Housing and Urban Research Institute ('AHURI') released a discussion paper which defines the term. And the truth is less than earth shattering: "blocks of small 'studio apartments' or in some cases one-bedroom apartments with separate bathroom and kitchenette". And those undesirables? According to AHURI, they are largely a mix of professionals, students, and shift workers, often paying in the vicinity of $400 a week in rent.

So don't believe the hype. The Cromer development is a largely ordinary apartment block, set to be inhabited by an 'ordinary' cross section of the community. 

Somebody please think of the children!

But even if the project better resembled a more traditional boarding house, the 'addicts and criminals' claim would not hold water. As the AHURI report states, traditional boarding houses are indeed home to "some of society's most excluded and vulnerable individuals...". But the assumption that vulnerable residents bring danger and degradation is simply not borne out. 

Just look at Cromer itself. According to Fair Trading's Boarding Houses Register, its postcode of 2099 is already home to two such boarding houses. The neighbouring postcodes of 2098 and 2100 also contain one each. And there are likely more still, as the AHURI report notes: "...there are strong grounds for believing that the actual scale of NSW boarding house provision is understated by the Fair Trading register...the numbers registered with Fair Trading as at August 2014 were considerably fewer than those formally approved to operate as boarding houses by the council concerned." 

The reality is that the people the campaign so fears will move in are already living in and around Cromer, possibly in considerable numbers. And yet the sky has resolutely failed to fall. Fear and loathing inspired by the vulnerable of our community is simply wasted. 

Finally, the notion that a development application should be refused on account of objections such as those raised in this matter does not concord with how planning law works. Broadly, a development application is assessed according to its compliance with technical and dispassionate criteria, such as height limitations and permitted use. Subjective contentions such as those raised by the opposition here do not get a look in. This quote from the NSW Land and Environment Court, relied upon by the panel in approving the Cromer project, puts it best: "The consent authority must not blindly accept the subjective fears and concerns expressed in the public submissions...there must be evidence."

So forget the hysteria, loud as it may be, and rest easy. This development will not send Cromer to hell in a hand basket. Indeed, this has all happened before, as the seemingly prophetic words of a boarding house proprietor quoted in the AHURI report make clear:

"When [council] has the notification period...all hell breaks loose. There's a residents' action group that's formed, there's agitation from them, you'll have 40 people come to the Council meeting, all throw their arms up, 'there'll be derelicts here, there'll be drug dependents, etc., not in our back yard, get rid of it. Make sure you refuse Mr Council and Mr Mayor and make sure it goes away'."

Far from devastation, the Northern Beaches are as safe as boarding houses. 

Back to the Future for Renters

Today, the 21st of October, 2015 is Back to the Future Day. Movie-goers are celebrating the day that Marty McFly arrived in the future in the second film of the series. Marty came originally from 1985, and it made us wonder what had changed.
So what did renting look like in 1985? See below- the short story, there are many more renters than there used to be, and we're paying a lot more rent! Wages haven't gone up as much as rents have, and groceries have barely gone up at all (in fact in real terms, the kinds of items we've included here have come down in price).

Also in 1985 then NSW Housing Minister Frank Walker announced the first tenants advice services to be funded by the interest earned on tenants bonds. This was a big step up in capacity from the previous network of entirely voluntary services. At the time, we were the first state to utilise bond interest money in such a truly innovative, sensible way.
Now in 2015 we're asking for those services to continue to be funded at fair and sustainable levels in the More Bang for Your Bond campaign- in just a few weeks time we'll be presenting our petition and postcards at parliament house. Details to come, but there's still plenty of time to show your support!

Great Scott!

Three easy fixes for better strata living

The new strata laws are in parliament, and the debate most likely starts today. The laws comprise of two separate bills, the Strata Schemes Development Bill, and the Strata Schemes Management Bill. There has been a lot of discussion of the issues around the Strata Schemes Development Bill, but today we'd like to look again at the Strata Schemes Management Bill which governs the day-to-day ways in which strata living is managed.

At the moment the bill misses an opportunity to reflect their 21st century context, for more than half of the people who live in strata in NSW. We've previously shared our detailed thoughts on the bill, but there are three easy ways to make sure strata living is fair and balanced for all residents, including tenants.

1. Tenant representation

Tenants who live in schemes where 50% or more lots have tenants living in them will be able to elect a tenant representative to sit on strata committee meetings and participate in committee meeting discussions, but will have no vote, no capacity to move motions, and can be excluded for a number of decision-making processes.
All tenants of all schemes will be informed that a strata committee meeting is taking place and will be able to attend, but not participate in any way.

We think all schemes should allow tenant representatives- arguably, it is the schemes where there are fewer tenants that most need to be reminded of their existence and concerns. Tenant representatives could also be empowered to move motions and vote on non-financial matters, such as new by-laws. There are no schemes where a tenant representative could vote their motion through against the will of the majority of owners, so this change would go a long way to making the community a better place to live, with no harm to owner-occupiers or investors.

The easy fix: Remove s33(1) to allow all schemes to have a tenant representative (if the tenants choose)
The bonus: We also recommend an amendment to allow a tenant representative to move a motion on any matter for which they are not excluded.

2. Unfair by-laws

For tenants, by-laws are perhaps the most significant aspect of a strata management scheme. In the absence of provisions allowing direct participation in a scheme – such as those discussed above – a tenant’s interaction with a strata scheme will usually be in relation to its by-laws. If the by-laws are unlawful, harsh, unconscionable or oppressive, they can be challenged at Tribunal and possibly overturned... but not if you're a tenant being subjected to those by-laws.

Tenants are excluded from challenging by-laws, and the Tribunal not permitted to overturn them, even if the tenant could demonstrate they were unlawful. This could then be used by a strata committee to issue fines and again, the Tribunal may not be able to refuse, simply because they are being applied against a tenant and not an owner. This is clearly an unfair situation.

The easy fix: Allow tenants to challenge unfair by-laws under sections 148-150.
The bonus: Allowing tenant representatives to move motions and vote on non-financial matters will mean better by-laws.

3. Overcrowding

We accept the need to address overcrowding in strata schemes for a range of reasons, but think it's important to remember that overcrowding is very often a symptom of broader dysfunction across the housing system – most notably the lack of affordable housing in the private rental market and ever-increasing restrictions on eligibility for social housing assistance.
The main method of pursuing overcrowding will be through the issuing of fines by the strata committee- $5500 for the first offence after a warning. However, this fine could potentially be directed at any person who is residing in the place, even if they are the exploited sub-tenant. We think that whether it is the owner of the property or the head-tenant, the person profiting from the overcrowding should be held responsible for it, not the people living in cramped and sometimes dangerous situations.

The easy fix: Amend s 147 so that penalties can be applied to 'a person with an identifiable interest in the lot' (whether they are an owner or a tenant), and not simply 'a person.'
The bonus: Introduce a section preventing strata blocks 'locking out' residents by cancelling swipe cards without good reason.

For more on Tenants Union policy platforms including law reform and previous submissions, visit our website!

Six year rule ... yet another reason why private renting is so insecure

(Money, The Sydney Morning Herald, 14 October 2015, pp 4-5)

Private rental housing is both legally and structurally insecure.

It is legally insecure because in NSW (and other Australian jurisdictions) landlords may give termination notices without grounds. The Tenants' Union of NSW calls for greater legal security by reforming the law to provide for termination on reasonable grounds only. Read more here.

It is structurally insecure because the private rental market is enmeshed in the owner-occupier market. Most landlords are individual persons who own a single rental property for speculative purposes. They sometimes are referred to as 'mum and dad' investors, but we call them amateurs. Indeed, there's a myth that most 'mum and dad' investors are on average incomes.  This assertion is debunked here.

Up until 2010, studies found that between 7 to 10 per cent of income units across Australia were investors in the residential rental market, although this figure was closer to 5 per cent in New South Wales.  Research into the motivation of landlords in the private rental market may be found here. There have been no more recent studies.

It is highly likely that the above figure is much greater today, because of a significant increase in funds being lent by financial institutions for investment in residential housing. Indeed, figures published by the Australian Tax Office in April of this year show that just over 15 per cent of individuals who lodged tax returns in the 2012-13 tax year, both across Australia and in New South Wales, reported receiving rental income. You may view these figures at Tables 4 and 13 here for Australia and Table 2 here for New South Wales. Also, results from Australian Bureau of Statistics' 'Survey of Income and Housing', published in October 2015, show that across Australia in 2013-14 there were 1.5 million households that owned residential property other than their usual residence. This property can include properties purchased as holiday homes as well as an investment. Read more about this here and the analysis by The Sydney Morning Herald's Peter Martin here.

We have previously argued why the current structure of the private rental market in Australia does not deliver just outcomes for tenants.  Read more here.

Taxation policies encourage speculative activity. Let's look at three such policies...

Firstly, negative gearing ... an individual who negatively gears is operating at a loss: that is, the rent coming in is less than the repayment of the loan. However, they are relying on capital gain when they sell in order to make their profit. Our tax laws allow landlords to deduct interest payments from all their income, not just their rental income or capital gains, thus reducing the amount of tax they pay. For 'mum and dad' investors to maximise their capital gains, they need to be able to sell their property with vacant possession when it suits them, selling to either owner-occupiers or other landlords. This means that a sitting tenant receives a termination notice. Out they go! You may wish to read some of our previous posts about negative gearing here and  here .

A second policy ... when the owner of a property, acquired before 20 September 1985 dies, then generally that property must be sold within two years, otherwise the beneficiaries of the estate are liable to pay capital gains tax. You can check this out here. Again, the estate will want to sell the property with vacant possession. Again, out goes a tenant in order to maximise the capital gain!

And a third, little publicised policy ... it is not just when the landlord sells a property that the tax laws may entice them to give a termination notice to the tenant. Read the first Question and Answer in  Noel Whittaker's column in Money in The Sydney Morning Herald (14 October 2015, pp 4-5) which you can view here.  Well, there's more about this here.  And, this is what the Australian Tax Office says here.  In order to claim an exemption from payment of capital gains tax, the owner of that property must not rent it out for more than six years at any one time. They need to establish that it was part of their principal place of residence for some of this period. But each time that the owner moves back into the property (it again must be their principal place of residence), they revive the six year rule. So after just under six years, out goes the tenant and the landlord moves back in. But then the landlord moves out again ... and in comes another tenant, but with no capital gains tax when the landlord eventually sells.
 

'Six year rule' goes something like this ...

Only your main place of residence is exempt from capital gains tax.

A dwelling is no longer your main place of residence once you stop living in it. However, in some cases, you can choose to have a dwelling treated as your main place of residence for capital gains tax purposes, even though you no longer live in it.

This happens when you lived in the property straight away after buying it (being a date after 20 August 1996), but subsequently you rented it out for less than six years.

And, each time you live in the property (it must be a genuine main place of residence), you revive the six-year rule ... and here-in lies the lurk!  

If you rented out the property straight away after buying it, the Australian Taxation Office deems it to be purely an investment property.

 
Such strategies are encouraged by our tax laws. Tenants in the private rental market will only achieve greater structural security by policies that discourage speculation in housing and that, instead, foster an increased number of institutional landlords. Institutional landlords would be motivated more by the pursuit of rental income and less likely to trade properties in the owner-occupier market. You can read more about the structural changes that we believe would deliver greater housing justice to tenants in the article called 'New face of poverty: older private renters' (Tenant News, No 110, August 2015, pp 10 -11) which you may view here.

And so 'Six year rule' is yet another reason why private renting in Australia is so insecure ...

Antisocial Behaviour Bill passes Legislative Council

The Government's Residential Tenancies and Housing Legislation Amendment (Public Housing - Antisocial Behaviour) Bill 2015 has now passed through the Legislative Council. A motion to refer the Bill for further inquiry did not succeed.

Further amendments, proposed by the Christian Democratic Party, were agreed to before the Bill was passed. These amendments will ensure the Tribunal retains some of its discretion in matters concerning "one strike evictions".

Essentially, the amendments are a combination of proposals put by Government and the Opposition - the Tribunal's discretion will not be removed in cases where injury or damage is caused by a person other than the tenant; or where termination may cause undue hardship to a child, a person in whose favour an apprehended violence order may be made, or a person with disability.

It's not much, but it's something... Rather than have its hands tied, the Tribunal might find a way to wriggle out of causing injustice, when social housing landlords try to end tenancies without full knowledge or consideration of the facts.

Otherwise, the Bill remains as proposed by Government. For more details, including the Hansard record, see here. It now returns to the Legislative Assembly for concurrence, then to be made into law.

Antisocial Behaviour Bill in the Legislative Council

Yesterday the Government's Residential Tenancies and Housing Legislation Amendment (Public Housing - Antisocial Behaviour) Bill 2015 was introduced in the New South Wales Legislative Council.

We understand the Greens have moved a motion to refer the Bill to a Parliamentary Committee, for further inquiry. The motion calls for the "bill to be referred to Standing Committee No. 2 for inquiry and report and in particular, whether the provisions of the bill are appropriate for effectively addressing antisocial behaviour in social housing; the impact of the bill on social housing tenants' access to fair and just review process; and any alternative legislation, administrative or policy approaches which may provide more appropriate redress for antisocial behaviour in social housing."

Debate on the Bill has been adjourned to allow Members to consider this motion, as well as a number of amendments that have been proposed by the Opposition and the Greens.

The Tenants' Union hopes all the Honourable Members of the New South Wales Legislative Council give the motion to refer the bill for inquiry the consideration it deserves.

Given the lack of consultation during the production of this Bill with tenants, community workers and other interested parties, an inquiry of this kind should be welcomed. It would provide a much needed opportunity to discuss the problems this Bill seeks to address - the specific causes of anti-social behaviour and the impacts upon neighbourhood cohesion; the reasons why it appears to be more prevalent within social housing communities; and the kinds of policy and legislative responses that may actually address such problems in a meaningful way.