I scream, you scream: reflections on an inequitable Budget

In today's guest appearance, legendary tenants advocate and now Older Tenants Project Officer at the TU, Dr Robert Mowbray, reflects on the Federal Budget.

My favourite gelato is scoops of panna cotta and hazelnut from Bar Italia in Norton Street, Leichhardt. But I always wondered what was planned for the long-time empty Harold Hawkins Court, a former aged care facility. It's smack-bang in the centre of the cafe strip along Norton Street and I look across at it everytime I indulge in my favourite gelato.

Just over a year ago, Leichhardt Council announced it was forming a partnership with UnitingCare Ageing to develop affordable housing in Leichhardt. The initial focus was providing accommodation for older people with intellectual disabilities and mental health issues. Old aged care facilities, such as Harold Hawkins Court and Annesley House (just around the corner), were to be given new leases of life through the National Rental Affordability Scheme (NRAS). That's really great!

But when I opened the Sunday paper after the Federal Budget, I found that the new round of NRAS funding has been scrapped. That means no NRAS funding for the proposed UnitingCare affordable housing in Leichhardt and elsewhere.

Although no one will feel the blow torch of this Budget more than the young unemployed with no family support who are being fast-tracked to homelessness, there are hidden in the Budget are other surprises for older persons, often struggling to meet housing costs. The Commonwealth-State agreement for concessions and discounts on travel, electricity and rates will be terminated. Financial planner Louise Biti says:

"It will hurt pensioners the most. This will cost $1000 to $2000 a year. No one was expecting that ... ''

Also cut: a voice in government for people with disability. The Coalition Government has announced that it will not fund a separate Disability Discrimination Commissioner at the Human Rights Commission when the term of the current Commissioner, Graeme Innes (ex-Residential Tenancies Tribunal Member), ends in July. This is despite the fact that 37 percent of discrimination complaints relate to disability, and those is so much more for a Disability Discrimination Commissioner to do.

Welcome to 'The Age of Inequality' – the paradigm for a future Australian society. We will see the wedge between the 'haves' and the 'have-nots' widen dramatically. High-income earners are barely affected: 'someone earning three times the average wage will lose just 0.9 per cent of their take-home income. And further up the income scale, 'the latest tax statistics show 75 ultra-high-earning Australians paid no tax at all in 2011-12':

It isn’t only millionaires. Tax Office figures show there are 1095 Australians earning in excess of $150,000 who pay no tax. Half of them sought tax advice and shelled out an impressive total of $98 million, which works out to $223,000 each. Their biggest lurk is negative gearing. Most lose large sums on properties they rent out in order to destroy their taxable incomes, hoping to make it up later when they sell the properties for a lightly taxed profit.

I wonder what high income earners will think should they sit down for a gelato at Bar Italia and just happen to look across the road at the empty Harold Hawkins Court?

Roomshare sector not complying with boarding house reforms

When the NSW State Government introduced the Boarding Houses Act 2012, it set out to address not only traditional boarding house establishments, but also houses and flats rented out in shared accommodation arrangements. This is the 'roomshare' sector, and it is often targeted to students and low-income workers, especially from overseas.

A few months ago the TU did some research into the roomshare sector, to get an idea of the extent to which the Boarding Houses Act applies to it (as 'general boarding houses', as defined by the Act), and the extent to which general boarding houses in the roomshare sector are complying with the requirement in the Act to be registered with NSW Fair Trading.

To do this we looked at roomshare ads on the online classifieds site, Gumtree.  

(A space on the branch rents for $150 per week)

Over five weeks we looked at Gumtree and found, on average, about 1 400 roomshare premises advertised each week (by contrast, there were 598 general boarding houses registered on Fair Trading's Register of Boarding Houses).

We analysed 224 ads to see whether the premises advertised fit the definition of 'general boarding house' at section 5 of the Act, and found:

• 26 per cent very likely to be general boarding houses; and another
• 18 per cent may be general boarding houses.

Of these, just two (0.5 per cent) were actually registered as general boarding houses.

On the basis of our analysis, we conclude that:

• the roomshare sector is a large – if not the largest – part of the general boarding house sector;
• it is hugely – almost completely – non-compliant with the requirement to register; and
• its compliance with other aspects of the Boarding Houses Act, and other laws, is doubtful, to say the least.

The job of enforcing the registration requirement lies with local councils; we recommend that they more actively investigate the roomshare market and exercise their role.

We also recommend that the NSW State Government, local councils and representatives of boarding house residents and proprietors work together to

• clarify what really can and should be expected of the roomshare sector, particularly in relation to planning law and local government legislation;
• establish protocols to minimise hardship to residents where action is taken to stop roomshare premises operating; and
• inform the development of policies for affordable housing to appropriate standards.  

Read the report here.

What is a sustainable surplus?

Chair of the National Commission of Audit, Tony Shepherd, laments the widespread criticism of the Federal Budget. He says:

I wish people could... stand back, look at the overall picture of the Commonwealth budget and rather than say 'don't touch me', say 'what can be our contribution to a sustainable surplus'.

The terms of reference for Shepherd's Commission of Audit included that it 'make recommendations to achieve savings sufficient to deliver a surplus of 1 per cent of GDP prior to 2023-24.'

So what is a sustainable surplus?

There's probably no such thing, at least for the Australian economy. Government deficits are more sustainable than surpluses.

First, let's get clear on what a surplus is, and what a deficit is. Each refers to the government's net income over a period (a year). If the Australian Government's income (primarily taxes) is more than its spending, the Government is in surplus; and if its spending is more than its income, it is in deficit.

Of course, one person's spending is another person's income, so if the Australian Government is in surplus, everything that's not the Australian Government (households, firms, other governments) must, by identity, be in deficit.

(This means, incidentally, that rather than saying a government 'delivers' a surplus, it is better to say that it 'takes' or 'extracts' a surplus.)

We can narrow down that broad non-government sector by distinguishing an external sector (ie foreign households, firms and governments) from the Australian private sector.

For any given period, one (or two) of the three sectors can be in surplus – and two (or one) in deficit. Not all of them can be in surplus, or in deficit, at once. Their total surpluses and deficits for the period must net to zero.

In the case of Australia, what we pay to the external sector is nearly always more the income we receive from it (we have a current account deficit). With that in mind, when the Australian Government takes a surplus, the Australian private sector must be in deficit – paying out more than it receives in income.

The Australian private sector can do this by running down stocks of money accumulated in previous periods of Australian private sector surplus (that is to say, periods of Australian Government deficits).

This cannot be sustained for long. Theoretically, if the Government persisted bloodymindedly in taking surpluses year after year, the private sector would end depleting all its net financial assets, then start offering up real assets (houses, cars, the shirt off your back) to the voracious Government. More realistically, financially constrained households and firms would try to shore themselves up individually by spending less and saving more, thus reducing overall income and economic activity.

By contrast, when the Australian Government is in deficit, its spending is not financially constrained, because it issues the currency. With an Australian private sector that is inclined to save Australian dollars and other net financial assets, and an external sector of trading partners pleased to accumulate Australian net financial assets, an Australian Government deficit is the sustainable and appropriate way to promote economic activity.

Your rights in action: Peace, comfort and privacy

In todays guest contribution, the Brown Couch welcomes contributor Anne Coates. Anne is a Distance Education Student with a story to tell! This article first appeared in the April edition of Tenant News - the TU's regular newsletter.

As a distance education student, my rented apartment is not only my home, but also my main place of study. So I particularly value the right to ‘reasonable peace, comfort and privacy’. One way this right is maintained is through the landlord or agent giving proper notice, prior to access – at least in theory! Recently I discovered in practice, things may be rather different.

Our landlord, it turns out, has decided to sell the property. In preparation, a tradesperson was arranged by the landlord to paint all the windows. Our notice of this work was a knock on the door by the painter, one Thursday morning just after 7am, requesting for all the windows to be opened, and left open ‘for the next few days’.

The failure to give adequate notice (not less than 2 days notice for maintenance), and the painter’s noisy scissor lift starting each morning from 7am, upset the 20 odd tenants in the apartment block. The tenants exchanged ideas for action. Some put up notices in response to the painter’s sign for ground floor tenants, while others sent emails to the Managing Agent. Eventually, the message made its way to the painter, so towards the end of the job the noise was not starting until 8am (the legislated time).

The following Tuesday a letter under our door advised that a Selling Agent (not the Managing Agent!) wanted to inspect the premises on Friday at 9.30am, another failure to provide adequate notice for access. Again, the protests of the tenants in the building resulted in the inspection not taking place. Our efforts in objecting to our rights being breached eventually resulted in the legislated 14 days written notice prior to showing the premises to prospective buyers. So, as one of my neighbours’ signs appropriately summed up, “Check your lease and be empowered!”

For more info, check out Factsheet 8, Access and Privacy at tenants.org.au

Choose your parents wisely...

Choose your parents wisely, for they may be all that stands between you and poverty.

"A little high, a little low" ...

the Little household discusses rents and incomes.

Now that we've had a week to digest some of the proposed changes to the Australian budget, we can begin to wonder what life might be like if the brave new world it has set before us makes it through the Senate.

It will be particularly tricky for young people who rent. Reductions and limitations to income support will mean more rental stress and evictions in a market that is already failing to deliver housing for people on low incomes. We expect landlords will simply decline to rent to young people on low or insecure incomes, putting additional pressure on an already stretched social housing system.

But as we mentioned last week this budget is bad news for social housing landlords as well. Absent a well-funded saviour (State Government, anyone? Don't hold your breath...) the social housing sector will contract even further. The result: more people living with mum and dad for longer. Or, if that's not an option, homelessness...

Changes to income support are not just a concern for low-income or unemployed tenants who can't find a home. The prospect of a six month wait for Commonwealth income support will place all young people in the 'inherently risky' basket - even if you do have a job. If you can talk a landlord into renting you a place, expect it to be on a six month agreement at best. If you can't, you'll be living with mum and dad for longer. Or, if that's not an option, you'll be homeless.

Now, if you've been following our posts about the real housing supply problem, you might start to wonder at the sense of this. The Australian Government could have made some adjustments to the way housing is taxed, to encourage landlords away from speculative investment. As things stand landlords take a punt on high-cost housing because they think it will produce the juiciest capital gains. They'll need an increasing supply of mid- to high-income tenants to rent their houses to, because you just can't go renting high-cost housing out at affordable rents. Landlords need high rents to keep their losses manageable while meeting the interest payments on their loans.

At the 2011 census, 54 per cent of tenants in New South Wales earned less than $600 per week, and 29 per cent earned less than $300 per week. While the Government wants young people to avoid certain disaster by stepping up to the next income bracket, we're afraid it is just as likely to have the opposite effect. The ranks of low-income renters will swell. This could just as easily knock off a few underpaid landlords in the meantime; particularly those who have had to take the kids back in, without any income to contribute.

But thankfully for your landlord it doesn't stop there. Changes to tertiary education funding will result in lower disposable incomes and higher debts for students, but it will also mean reduced savings for graduates. Sure, this means your landlord will have to keep a spare room free while their kids are off earning or learning - just in case they come up short on the rent for six months or so... But it might also ensure mid- to high-income earners are priced out of home-ownership for longer. And that means they'll be renting. Look out while your landlord puts the rent up, because competition just got a little bit more stiff.

And if that means you can't afford it, don't worry. You can always just move back in with your parents.

Is government debt a burden on future generations?

The Treasurer, Joe Hockey, concluded his Budget speech and its agenda of cuts with an appeal to think of the next generation of Australians:

But unless we fix the Budget together, we will leave the next generation a legacy of debt, not opportunity.

As Australians, we must not leave our children worse off.

The Treasurer is talking about government debt. But is it really a burden on future generations?

Actually, no. In this admirably brief and clear article, Robert Skidelsky explains that while fears about one's own debts and legacies run deep, it really is wrong to apply them to government debt.

Says Skidelsky:

the national debt is not a net burden on future generations. Even if it gives rise to future tax liabilities (and some of it will), these will be transfers from taxpayers to bond holders. This may have disagreeable distributional consequences. But trying to reduce it now will be a net burden on future generations: income will be lowered immediately, profits will fall, pension funds will be diminished, investment projects will be canceled or postponed, and houses, hospitals, and schools will not be built. Future generations will be worse off, having been deprived of assets that they might otherwise have had
Read more at http://www.project-syndicate.org/commentary/does-debt-matter#1PgjEUp3Mb2hH1w5.99

the national debt is not a net burden on future generations. Even if it gives rise to future tax liabilities (and some of it will), these will be transfers from taxpayers to bond holders. This may have disagreeable distributional consequences. But trying to reduce it now will be a net burden on future generations: income will be lowered immediately, profits will fall, pension funds will be diminished, investment projects will be canceled or postponed, and houses, hospitals, and schools will not be built. Future generations will be worse off, having been deprived of assets that they might otherwise have had
Read more at http://www.project-syndicate.org/commentary/does-debt-matter#1PgjEUp3Mb2hH1w5.99

The national debt is not a net burden on future generations. Even if it gives rise to future tax liabilities (and some of it will), these will be transfers from taxpayers to bond holders. This may have disagreeable distributional consequences. But trying to reduce it now will be a net burden on future generations: income will be lowered immediately, profits will fall, pension funds will be diminished, investment projects will be canceled or postponed, and houses, hospitals, and schools will not be built. Future generations will be worse off, having been deprived of assets that they might otherwise have had.

There are two sides to a debt. On one hand, it's a financial liability to the debtor. On the other, it's a financial asset to the creditor. That's the same for government debt (issued in the national money, as government bonds), which is a financial liability for the government, and a financial asset for bond-holders (and if you don't own a government bond yourself, you're probably in a super fund that does).

The practice of governments is to issue bonds that pay interest and, as Skidelsky says, this stream of interest income to the next generation of bond-holders, particularly if the Government feels the need to balance it with tax revenues, may be 'disagreeable' as a matter of the equitable distribution of income throughout society.

But the Government, as the issuer of a sovereign currency, is always able to pay this interest: as we discussed recently, it cannot run out of money. And for that reason, the Government could, as an alternative to issuing interest-bearing bonds, simply spend by issuing currency (that is, crediting the bank accounts of payees, via banks' reserve accounts at the Reserve Bank).

Spending, of course, has two sides too. Money spent by the Government is money received as income by the private sector. In the name of 'saving' money (that it cannot run out of), the Budget will reduce income to the private sector by the equivalent of 1.3 per cent of GDP relative to last year; that's $20 billion taken out of an economy that is growing below trend and in which labour is underemployed, and in which there are useful and productive things to be done and investments to be made. But with less money, as Skidelsky observes, less of that will happen, to the disadvantage of future generations.

*

It should be said: the Budget papers do not envisage such a reduction in activity in the wider economy. But if government spending is reducing, the Government's forecast levels of production can only be met by... a huge expansion of private debt. But can households – real households, not fallacious ones – incur much more debt, on top of their already massive burden of past promises to repay?

(Source: RBA Chart Pack – Household Sector.)

the national debt is not a net burden on future generations. Even if it gives rise to future tax liabilities (and some of it will), these will be transfers from taxpayers to bond holders. This may have disagreeable distributional consequences. But trying to reduce it now will be a net burden on future generations: income will be lowered immediately, profits will fall, pension funds will be diminished, investment projects will be canceled or postponed, and houses, hospitals, and schools will not be built. Future generations will be worse off, having been deprived of assets that they might otherwise have had.
Read more at http://www.project-syndicate.org/commentary/does-debt-matter#1PgjEUp3Mb2hH1w5.99

 

Apartment residents fined, locked out of their homes: reform needed.

In the first of a series of guest contributions, the Brown Couch welcomes guest contributor Tom McDonald. Tom is a Tenants’ Advocate at the Inner Sydney Tenants Advice & Advocacy Service at the Redfern Legal Centre.

If you live in NSW, it is becoming more and more likely that you will live in an apartment, flat or unit rather than a traditional freestanding house. It is also becoming more likely, therefore, that you will live in a place where strata laws apply.

The most noteworthy thing to say about strata laws is that they allow for each apartment building to have an owners corporation: a body run by a small number of elected individuals tasked with the job of setting and enforcing the building rules. Owners corporations have been called the ‘fourth-tier of government’. Its an apt label.

Owners corporations and their rules are generally a good thing for residents. Sensible rules help to promote harmonious (or at least functional) buildings. But not all rules are sensible. In their haste placate a particular group of residents or tackle a problem they believe is occurring in the building, owners corporations will occasionally introduce rules that are unreasonably harsh or oppressive on one or more (or all) building residents.

One problem currently giving headaches to a number of owners corporations and building managers is overcrowding in their apartment buildings. For the media attention that overcrowding attracts, we don’t know much about the extent of the problem, much less the best way to tackle it.

The owners corporation of the sprawling Regis Towers complex in Sydney’s CBD (reportedly the largest strata plan in the country) is now taking to locking its own residents out under the banner of tackling overcrowding and illegal activity that it says is rife in the building.

Tenants are having their electronic swipe cards (ie. their house keys) cancelled without warning over matters as trivial as lending the card to a visitor so they can go out to buy a carton of milk. For tenants to get back into the building they have to pay a swipe card ‘reactivation fee’ of at least $150. Some tenants have been locked out for days on end and it is understood that others have had to pay accumulated penalties in the thousands of dollars just to get back in to their homes. Many, if not most, of these tenants have nothing to do with overcrowding or ‘illegal activity’.

These kinds of blunt measures, while being potentially lucrative for an owners corporation’s coffers, are probably unlawful in much the same way as it is unlawful for a debt collector to stand at your front door and block you from entering your home until you pay them the money they say you owe.

You can bet that other owners corporations with similar problems are looking at what is happening at Regis Towers with great interest. Many buildings, after all, now have electronic key systems that allow for the locking out of residents at the stroke of a keyboard. Locking people out has never been easier.

Perhaps the most unfortunate thing for Regis Towers residents is that, so far, the law has been of little assistance. NSW Fair Trading has said, for example, that current legislation does not empower it to take action in these types of cases. Residents have the option of either pay the fee or pay to kick-off a potentially expensive and lengthy legal process. When you’re locked out of your home, it’s not much of a choice.

Compare this to a situation where a landlord unlawfully locks out a tenant. In these cases, there are very clear legal provisions that allow tenants to seek reasonably quick, affordable and effective redress in the NSW Civil & Administrative Tribunal, with offending landlords facing fines of up to $22,000. The law correctly identifies unlawful lockouts by landlords as a cardinal ‘no-no’ and there is no reason why it shouldn’t do the same regarding lockouts by owners corporations and building managers.

With the government currently reviewing the State’s strata laws and a draft bill expected sometime this year, now is an opportune time to make this reform. 

It is time for a provision that protects all apartment residents (both tenants and owners) against unreasonable interference with access to their homes by the owners’ corporations and building managers. This is not about creating new rights, but improving accessibility to a basic right that has long been recognised in the law.

This is not to say that owners corporations shouldn’t be able to take measures to address overcrowding in their buildings, just that those measures should not extend to preventing innocent tenants from accessing their homes.

This article first appeared in the April edition of Tenant News - the TU's regular newsletter.