Where do the parties stand on housing: part 2 - the Liberals

We observed last week that neither of the major parties has put forward a housing policy in the present federal election campaign.

Or have they? Maybe, just maybe, if you squint hard, read between the lines, and guess a bit, you can make out a housing policy.

First we take a hard squint at the Liberals.

In their 'Plan for Real Action', the Liberals state that:

We will improve housing affordability and encourage high levels of home ownership.

'High levels of home ownership' necessarily means 'low levels of rental property ownership' (there's no value judgement in that: these things are just the two sides of the one coin).

So what would the Liberals do to encourage low levels of rental property ownership, and at the same time improve affordability?

In looking for an answer, we should also note the Liberals' statement on fiscal policy, that 'we must start addressing the unsustainable structural imbalances in our Budget and get the Budget back on track to strong and sustainable surpluses' (p 7 of the Plan).

Having committed to a very expensive paid parental leave scheme, and to revenue-reducing cuts to company tax and the carbon pricing scheme, we must assume that the Liberals propose to encourage low levels of rental property ownership and improved affordability through means that would increase government revenues.

Thus, the answer becomes clear – or at least as clear as possible whilst squinting between lines. They must mean to reform Australia's tax treatment of negative gearing.

We've discussed negative gearing before. Briefly, 'negative gearing' is where a person borrows to buy an asset – for example, a rental property – and the cost of the debt is greater than the revenue generated by the asset. In other words, owning the thing is losing the gearer money.

The gearer gets into this situation because they figure that the asset will eventually pay off in one way or other: in particular, that the revenue will exceed the costs, and thus produce a net income (ie 'positive gearing'); or that someone will buy the thing and pay more than what the gearer paid and lost along the way, thus producing a capital gain (ie 'speculation').

Australia's present tax arrangements are unique in the world for their generosity to negative gearers, by allowing them to deduct their losses from their other sources of income, thereby reducing the amount of income tax they pay.

So, while the gearer waits for their pay-off, their losses are effectively subsidised by other taxpayers. For those gearers waiting for a speculative pay-off, it's even more generous: capital gains are taxed at half the rate of other forms of income (from work, or rent for that matter).

As a result of this policy, over a million Australians own negatively geared rental properties, particularly for speculation. That's a lot of people borrowing and spending up big – which is bad for affordability for would-be homeowners. By pursuing speculative gains, they've also changed the shape of the rental market, by favouring established, high-value, high-rent properties  – which is bad for affordability for tenants. And they keep declaring losses against their income to the tax office: $12 billion in 2010-11, or about $4 billion in income tax forgone – which is bad for the Budget.

So what might the Liberals do? They could do as most other countries do: allow losses from a class of assets to be deducted only from income from that class of assets. Other forms of income would get taxed appropriately, regardless of how much of it was spent on a loss-making property.

Or they could do as the Henry Review recommended: apply a discount to net income from assets, whether positive or negative. This would mean losses could still be set against other taxable income, but the losses would be smaller, and would not reduce taxable income quite so much; it would also remove the preference given to speculative gain-seeking over income generation.

Or they could limit the generous treatment of negative gearing to new-built rental properties only... or limit it to five years of losses... or any number of things to improve what is currently an insane policy for making housing less affordable and homeownership less accessible, at public expense.

But at this point our reading between the lines becomes hazy. We await the Liberals' real housing policy with interest.

The Greens conduct 'rental health check'

The Greens have launched an online survey of tenants, 'Rental Health Check', to inform that party's activities in the present Federal election campaign.

Please have a look and consider completing the survey.

While you're reflecting on your 'rental health', why not also share your experiences of renting with the other parties' candidates in your electorate?

Or, if you see a candidate out on the hustings, ask them: 'what will you do to improve affordability and security for tenants'?

(Disclaimer: as an independent non-government organisation, the Tenants' Union of NSW does not endorse political parties. If Labor or the Coalition parties want to run surveys of tenants' experiences, we'll post links to them too.)

An Over Occupation with Under Occupancy

We wrote recently regarding the Auditor-General's Report "Making the best use of public housing". One of the elements the Audit spent a bit of time considering was the 'efficiency' of allocating tenants with houses that fit their needs. The particular statement that caught our eye was that "only 67.6 per cent of public housing households match the size of the dwelling."

The figure of 16180 properties that have 2 or more spare bedrooms keeps coming up- it came up again in the Family and Community Services budget estimates recently.

What isn't mentioned, and doesn't seem concerning to the auditor or the government is that of the 32.4% of public housing households that do not match the size of the dwelling, more than half, or 16641 dwellings, are actually over-occupied. This includes 2482 properties that are chronically over-occupied (they require at least 2 more bedrooms than they currently have).
HNSW estimates in the Audit that under-occupancy costs the government about $25million in lost revenue a year,  but fails to mention it is currently collecting roughly the same from people who are paying to stay in premises that are less than their requirements, as determined by HNSW. 

Of course, the government might argue, we must move those people who are under-occupying into the smaller places so that those who are over-occupying can move in. This might be sound accounting practice, but the focus on under-occupying misses a key point- these figures show they do not have somewhere for the over-occupying to move to.

If we were to assume a zealously efficient overlord position and move people around in a state-wide game of human Tetris, we might try to make a straight swap between the 6230 people currently living in 1-2 bedrooms who require a 3 bedroom property, and 6230 of those living in 3 bedrooms who only require one or two (and hope that those who actually require two get two and not one), then we are still short 7230 places for those in under-occupied 3 bedroom premises. Those in 3 bedrooms who require 4 outnumber those in 4 bedrooms who require 3 more than four to one.

Let's move everyone around, trying to house those over occupying in the premises that are under-occupied, and vice versa. Using Housing NSW's numbers we end up with 13661 households who don't fit the dwellings. There are lots of 3 bedroom places that people could be moved into. However, 7593 actually only require two bedroom places, and 6068 require four or more bedroom dwellings that don't exist. So we would still both have under-occupation, and over-occupation.

Another way of looking at Exhibition 6 above

This is a best case scenario for our efficient overlord, and it ignores things like ensuring tenants are moved within localities. What we are left with is that all this talk of under-occupation will only deal with anyone on the waiting list if we continue to leave people cramped and squashed into premises that are too small- by Housing NSW's own standards.

We're for the efficient use of public housing, but becoming overly occupied with the amount of under occupation distracts government from its real issue- supplying adequate housing for the people who truly need it.

Save your money. Don't use 'Tenant Check'

If you're looking for a place to rent through rent.com.au (allegedly 'Australia's #1 rental property website), you may have noticed a banner on the homepage for its 'Tenant Check' service. 'Don't risk missing out on a rental', it implores; 'Check yourself now' with Tenant Check, for $35 including GST.

Better yet, don't. Save your money. There are much cheaper and more effective ways of finding out if you're on a tenancy database.

(Young couple reads credit card statement,
can't believe they threw their money away.)

The simplest way is just to put in your rental applications with agents, as usual. If in checking your application an agent finds that you're listed on a tenancy database, they must inform you (in writing) that you're listed. They must also give you the particulars of the landlord or agent who listed you, contact details for the database operator, and information about your legal rights in relation to getting access to a listing, and getting it removed or amended. (See section 211 of the Residential Tenancies Act).

And if you're knocked back and not told why, ask the agent – and ask specifically whether there was a tenancy database listing.

Now, if you're informed that you are listed, write to the landlord or agent who listed you for a copy of the information they listed. They must provide a copy, free of charge (see section 216).

You can also ask the database operator for a copy (see section 216 again). Note, however, that unlike landlords and agents, the database operators can charge a fee, provided it is not excessive. Most database operators give you a choice: pay a fee for quick access, or get it free if you're prepared to wait a couple of weeks. By the way, the database Tenant Check checks, NTD, charges $15 for quick access, and nothing if you can wait 10 days.

It's true that Tenant Check also checks a bunch of other non-tenancy databases; whether this is at all useful or relevant is another question. But it checks only one tenancy database – and there are several of them out there. 

So for $35 you may well get a blank piece of paper from Tenant Check, but no assurance that you're not listed on some other tenancy database.

Save your money and find out what you need to know using your rights under the Residential Tenancies Act.

And for what to do about a listing that's wrong, unfair or out-of-date, see the Tenants NSW factsheet.

Where do the parties stand on housing?

It's federal election time.

Now that you've made sure your enrolment is up-to-date, you might start to wonder what each of the parties have to say about housing. Indeed, if you're anything like us here at the Brown Couch, you'll be ravenous for details about how our next Australian Government will make sure good quality rental housing is available - and affordable - to everyone who needs it.

The sad news is, there's not a lot to report. So far, neither of the major parties has released a policy on housing.

That's not to say there aren't a few clues about what we might expect...

If you look very closely at the Liberal Party's document Our Plan For Real Action you'll see a paragraph (at the bottom of page 42) about improving housing affordability and supporting housing development. It says:

We will improve housing affordability and encourage high levels of home ownership. We will work closely with the States and Territories who have primary responsibility for housing to reduce red tape holding up the supply of housing and construction and to increase land release for new homes.

The Australian Labor Party, for its part, has a few words under the Labor is for Fairness page of the ALP website:

Labor has always had a proud record of helping to deliver affordable housing for Australians and their families. The goal of ensuring all Australians have access to affordable housing has continued with a massive increase in housing supply through both social housing and incentives for the private sector to keep building through the financial crisis.

(It then goes on to talk about all the things Labor is doing, or has done a few years ago, to increase the supply of housing during the crisis, and also makes a couple of points about homelessness)...

Of course, while the likelihood of the Australian Greens forming government is almost as remote as Kevin Rudd and Tony Abbott simultaneously quitting politics, signing on for the NewStart allowance and taking up residence in an inner-Sydney share-house for the next parliamentary term, it's worth noting the Greens' somewhat ambitious policy designed to cut housing waiting lists in half.

We sincerely hope that both Labor and the Liberals announce new housing policies over the course of the election campaign. If and when they do, we'll have a look at how they might affect the significant rental markets in Sydney and New South Wales, and what they could mean for tenants.

Enrol to vote deadline: Monday 12 August

If you haven't enrolled to vote – or updated your address having moved, or just want to check that you're still on the electoral role – you must do it before 8 pm next Monday 12 August.

You've got one week. Better yet – do it now.

Happy tenants

This headline on a media release from domain.com.au yesterday caught our eye:

Landlords do the right thing  

3 out of 4 Aussie tenants are happy with their landlords

Apparently, an online survey by domain has found that more than 73 per cent of tenants say they have a 'good relationship' with their landlord.

It's nice to hear that so many tenants and landlords are getting on. Still, the fact that 27 per cent of tenants surveyed say that things are not good is a problem. And it's a particularly difficult problem because of some facts about renting.

Let's consider what you might do if you're not happy with the service you're getting from your landlord. You might try to use your power as a consumer: that is, threaten to take your business elsewhere unless things improve. For most consumer relationships, this is as easy as going to the next shop down the road – but it is not so easy in relation to tenancy. For a tenant, taking your business elsewhere means moving, and incurring all the financial, logistical and emotional costs that moving house entails.

As consumers, tenants are distinctly disadvantaged, which is why we have laws like the Residential Tenancies Act 2010 that prescribe contractual rights for tenants and afford legal remedies for breach – without them, tenants could get hardly rely on their hampered clout as consumers to get decent service from landlords.

So, if you're not happy, you might use the law. We certainly encourage you to – but we also understand why tenants are often reluctant to do so. In New South Wales, as in almost every other Australian jurisdiction, landlords are still allowed to give termination notices without grounds. This legal trump card undermines all the other positive things that residential tenancies legislation does for tenants. When unhappy tenants ring their local Tenants Advice and Advocacy Service for advice about getting repairs done or otherwise enforcing their contractual rights, so often they also ask about the prospect of a no-grounds notice. And of course, there would more unhappy tenants who do not even make the call for advice, because they're discouraged by the spectre of a no-grounds termination notice.

The Residential Tenancies Act does allow the Tribunal to refuse termination and possession orders to landlords who use termination notices in retaliation against tenants who assert their rights – and if you do assert your rights, and you do get a termination notice, your local TAAS will be very pleased to advise you on how to make that argument to the Tribunal.

But how much better it would be if landlords had to state a good reason for giving a notice of termination, and be prepared to back up the reason. That's not really a very big ask, and would be no skin off the noses of the majority of landlords who conduct themselves reasonably.

Only the relative few bad landlords would be put out by such a reform. And all tenants would be happier.