Tuesday, October 20, 2009

Child safety in rental housing

Brown Couch readers will probably be aware of the terrible story of the three-year old Sydney boy who died on the weekend after falling through the window of his family's third-storey flat. The family rent the flat, and it is reported that they had previously complained to the landlord that the windows were unsafe.

I make no comment here about the fault or liability of any party in this very sad case – just some general comments on how the safety of children is addressed in New South Wales renting laws.

There's a few provisions of the Residential Tenancies Act 1987 (NSW) that are relevant to child safety, but with a single notable exception, the Act makes no provision for particular safety devices to be installed or for particular safety standards to be met.

Those provisions are:

  • the habitability term. Under the Act, it is a term of every tenancy agreement that the landlord will provide the premises in a state fit for habitation.
  • the repairs and maintenance term: it is also a term of every agreement that the landlord will provide and maintain the premises in a state of reasonable repair (and just what 'reasonable' means depends on the amount of rent payable and the age and prospective life of the premises).
  • the locks and security term. It is also a term of every agreement that the landlord will provide locks and security devices sufficient to make the premises reasonably secure. (What's 'reasonably secure' depends on the circumstances, especially location. It also means that the landlord does not need to make the premises Fort Knox.)
(There's another term that's relevant too: the alterations and fixtures term, which provides that a tenant must not make an alteration or install a fixture – say, a window lock – without the consent of the landlord.)

These obligations are all generally stated - that is, they don't specify particular devices that need to be installed for the premises to be regarded as habitable, in a reasonable state of repair, or secure. That's all very well – it's good that our laws provide this general obligation – but it also means that if you want the landlord to install a specific safety device, you might have difficulty: for example, if you want a child-proof lock on the window, the landlord might reply 'no, the lock already on the window is sufficient to make the premises reasonably secure', or even 'no, the window is sufficiently high up that it does not need a lock to make the premises reasonably secure.'

This problem also arises in relation to residual current detectors (sometimes known as electrical safety switches), which switch off the electricity if they detect it zapping a person. RCDs were not required on electrical circuits before 1991, so many houses built before then don't have them. And if your house doesn't have them and you ask for them, be prepared for the landlord to reply 'no, the premises are habitable/in a reasonable state of repair without them.'

I mentioned a single exception to the no-specific-requirements approach of our renting laws. Smoke detectors are specifically required in all residential dwellings, and there's a term to that effect in every tenancy agreement. This requirement was inserted by the NSW State Government in 2005 and, to the TU's knowledge, has improved the safety of rental housing without any dramas.

It would be a good idea if our renting laws built on the general obligations they already provide with some new, specific obligations for landlords to improve their properties. Devices to promote child safety – in particular, child-proof window locks and electrical safety switches – would be an excellent place to start. (Western Australia and Queensland have each already moved to make RCDs specifically required in rental housing.) After that, some other types of specific improvements might be required – say, insulation and water efficient devices – in a rolling program to lift the standard of rental housing.

In the meantime, readers might be interested in the advice of Danny Cass from Westmead Children's Hospital, reported at the second link above.

Rather than wait for the government to pass legislation for better building design, Professor Cass urged parents to ensure windows accessible to children could not be opened by more than 10 centimetres.

A visit to a hardware store, he said, could enable parents to alter windows themselves at a cost of $10.

"So for the vertical ones, that's a Black and Decker and two drills and coach screws, and for the aluminium ones, a rod that just sits in the gutter or two little aluminium screws that screw down," he said.

Some home truths about property reviews...

Readers of the Brown Couch may be aware of an innovative new website where tenants can share news and views of their rental properties throughout Australia.

Home Truth: The online voice for the rental community looks great at first glance. Indeed an opportunity for disgruntled tenants to publicly vent some spleen is long overdue. But there are several things to consider if you're going to regard it as anything more than light entertainment:

  • The website will be of more use to those who are able to "pick and choose" where to live, than those who need to find a new home pronto. With this in mind, it represents good value for the socio-economically blessed, but it offers very little for the rest of us (especially when vacancy rates are low).
  • The website invites reviews of properties and real estate agents. It does not review landlords. It is therefore not on the same footing as a residential tenancy database which collects tenants' names, and holds them to ransom.
  • There is an inherent problem with reviewing properties and real estate agents, and that is the transient nature of both. With property, ownership can change, and so can its level of repair. With agents, a person's employment can change. The review of a property or agent may become inaccurate or irrelevant by virtue of such change. It follows that such reviews could be apt to mislead.
  • Reviews are likely to be made in response to a particular set of circumstances. While one person's experience may be defined in a certain way, it is unlikely that their story will resonate with others to the extent that a property or real estate agency will be boycotted.
  • There is no way to verify whether reviews are genuine. Anyone who makes a decision to rent a property based on a website review must have rocks in their head.
  • The website has potential as a pool of information to draw from while pushing the law reform agenda. But given the problems outlined above, tenants are better advised to take their grievances direct to the Office of Fair Trading. This can be done on a website too!

Thursday, October 8, 2009

Tenancy Culture Studies: Jimmy Olsen and 'The Secret Slumlord of Metropolis'

Today's subject of study comes from issue number 127 of that fine periodical, Superman's Pal Jimmy Olsen, in which our hero does battle with a foe more sinister than Lex Luthor, or Mr Mxyzptlk, or Gorilla Grodd... housing-related poverty.

(Superman's Pal Jimmy Olsen no 127)

It's March 1970. Superman's Pal and cub reporter for the Daily Planet, Jimmy Olsen, has moved into a derelict tenement to get the inside story on the slums of Metropolis. His neighbours endure leaking ceilings, rotting stairways and vermin infestations. When Jimmy asks old Mr Collins, who sleeps under old newspapers because there's no heating in the building, 'why do you people stand for such neglect? Why don't you move?', Mr Collins answers:

'Cough-cough! Because the Bond Company, which owns most of these houses, makes us put up three months rent in advance... and we lose the money if we break the lease!'

Jimmy hits trouble too. His article for the Daily Planet is kiboshed by corrupt editor Perry White when advertisers threaten to withdraw their business. Undaunted, Jimmy writes the story up as a book, but loses the manuscript out his broken window (it gets caught in Superman's slipstream, who had popped in for a visit.) His landlord, the mysterious 'Mr Squeeze', kidnaps Jimmy, imprisons him in a basement, shaves his head and threatens to kill him if he continues his expose.

But Jimmy has his day. Discovering Mr Squeeze's true identity, Jimmy and his fellow slum-dwellers march on Squeeze Manor and unleash hundreds of rats and cockroaches on the society-types there assembled. Superman hauls Mr Squeeze off to prison for the kidnapping caper. And, finally, the slum is redeveloped, by Superman at super-speed, into a public housing estate, 'Olsen Gardens'.

This comic would be secure in its place in the annals of tenancy culture studies for nothing other than that final image of Superman soaring into the sky carrying aloft a prefabricated public housing unit, but there is more to it than that.

The publication date – March 1970 – is important. This places Jimmy Olsen no 127 at the head of the new Realism movement in comics, a month before the publication of the conventional front-runner, Green Lantern no 76 (in which Green Lantern and Green Arrow team up against another slum landlord). It also places Jimmy Olsen amongst the wave of writers, researchers and, later, government inquiries investigating the persistence of poverty and poor housing at the height of that postwar 'golden age' of economic development and prosperity.

This wave began with Harrington's The Other America (1960) and included, in Britain, Abel-Smith & Townsend's The Poor and Poorest (1965) and, in Australia, Ronald Henderson's survey of poverty in Melbourne (1970), then Henderson's national survey, conducted as Commissioner of the Federal Government's Inquiry into Poverty (1975).

That inquiry included a special report by Adrian Bradbrook on Poverty and the Residential Landlord-Tenant Relationship (1975), which analysed tenancy laws in three Australian States and concluded:

'Unfortunately, a study of the existing legal principles shows that the law is sadly deficient in most of the areas of tenant needs. No advice or assistance is provided for a prospective tenant by any governmental agency in any State, there is no legislation to ensure that the tenant is not bound by onerous or oppressive terms in a lease, and the means of solving any dispute between a landlord and a tenant are far from fair and sensible...'

Bradbrook then recommended law reform to regulate security deposits, prohibit other non-rent charges, oblige landlords to do repairs, create a fair standard form of lease, and provide dispute resolution by specialist tribunals, amongst other things. It took a couple of decades, but eventually all Australian States and Territories implemented residential tenancies legislation that more or less reflect the Bradbrook principles. These pieces of legislation represent pretty mild consumer protection – and the speed with which they allow tenancies to be terminated suits landlords very well – but without them rental housing would be governed by the principle of caveat emptor, and many of the abuses inflicted on Jimmy Olsen would be allowed to be perpetrated by our own local Mr Squeezes.

Friday, October 2, 2009

Work disincentives in public housing

September turned out to be Social Housing Month here at the Brown Couch, but there was nary a chart nor graph to be seen. This cannot be allowed to stand, so here are a few about the rent rebate system in public housing, and how Housing NSW's policy for charging rent at a higher rate for so-called 'moderate income' tenants contributes to massive work disincentives.

A couple of explanations first. Work disincentives are costs or conditions that discourage persons from increasing their incomes through work – in other words, where you would keep so little of your increased income for yourself that it is not really worth the effort of increasing it. There's rather a lot of talk about work disincentives generated by the tax and social security systems, but they are generated by housing assistance too, particularly public housing, because public housing's income-related rents mean that if you were to increase your income, a bit of that increase would go to Housing NSW in rent.

One way of measuring work disincentives is to think of them in terms of effective marginal tax rates (EMTRs). EMTRs express, for a person on any given income, how much of an additional dollar of income would go to tax, social security withdrawal and, in public housing, rent and water charges. EMTRs of more than 60 per cent are considered high. It's worth remembering too that the top marginal income tax rate in Australia is 45 per cent.

As for the moderate income rents policy: as Brown Couch readers know, most public housing tenants pay rents that are rebated to 25 per cent of their household incomes. In 2005, Housing NSW introduced higher rates for tenants whose household income fell between two threshold amounts - Housing NSW set the amounts, and called the band between them 'moderate incomes'. These higher rates ranged, on a sliding scale, from a titch over 25 per cent at the bottom of the band, to 30 per cent at the top of the band (so, if your income was in the middle of the band, your rent rate would be 27.5 per cent).

That might not sound like a big deal, but those moderate income rent rates are not marginal rates, like the ATO's income tax rates: they apply not just to that portion of your income in the moderate income band, but to the whole of your income. If you expressed the moderate income rent rates as a marginal rate – ie how much of the portion of your income that falls in the moderate income band goes in rent – it is about 50 per cent. In other words, 50 cents in every additional dollar of income in the moderate income band goes to Housing NSW in rent.

Now the graphs, which show the combined effect of income tax, social security payment withdrawal, the Medicare levy and public housing rents and water charges in terms of EMTRs for three typical public housing households. (But, before we do, a qualification: these graphs are based on numbers crunched by the TU this time last year, and since then the tax and social security elements will have changed a bit. The general picture provided, though, is still about right.)

First, let's consider a single person in public housing (let's call him Andy) who has a disability and who works part-time (ie Andy's income is the Disability Support Pension plus wages). Here are the EMTRs Andy faces if he should increases his income through additional work. We're really interested in what happens in the moderate income band: here EMTRs range between 85 and 109 per cent. If it were not for the moderate income rents policy, he'd face lower EMTRs of 56 to 76 per cent.

(Click on the image for a better view)

We can make this clearer by embellishing Andy's story a little. Say Andy works 3 days per week as a caseworker in a community centre. At award rates these wages, plus his (reduced) DSP, will put him just below the moderate income band. The community centre offers Andy more hours and hence more wages, but this will put him in the moderate income band. If he does an additional 14 hours, he'd be paid an additional $320, but the additional tax, social security withdrawal and rent add up to an EMTR of 85-86 per cent on each of his additional dollars. (If he did even more hours, he'd hit an EMTR of 91 per cent, rising up to 109 per cent near the top of the moderate income range.) So Andy would get to keep about $48.50 for two days work. Thanks, but no thanks.

Next, the EMTRs for a single parent (Beth) with two kids. She faces EMTRs ranging from 81 to 103 per cent over the moderate income range. But for the moderate income rents policy, she would face EMTRs of 57 to 74 per cent.

(Click on the image for a better view)

To embellish again: say Beth receives Parenting Payment (Single), plus Family Tax Benefit A and B, plus wages from working casually three days per week in the local library. This income would place her in the middle of the moderate income band. Now say she's asked to work another day a week. At casual award rates, the additional wages are subject to EMTRs of 92-103 per cent. If she works the additional day, she'd end up being about one dollar worse off - and that's before you consider the cost of child care. Beth politely declines.

Finally, let's consider a young worker (Cass) in a household of multiple adults (mum, dad and brother). She faces EMTRs that bounce around between 43 per cent and 78 per cent – generally lower rates than our other two cases, but note that they cut in at much lower incomes than in the other cases. But for the moderate income rents policy, her EMTRs would be between 16 and 60 per cent.

(Click on the image for a better view)

To embellish: Cass has just left school, and works Thursday nights and Saturdays in a shop, while mum and dad care for her disabled brother. Cass's fortnightly wage is just $277 but, with her (reduced) Youth Allowance, and two lots of Carer Payment and Carer Allowance and the DSP, the family's household income is just under the moderate income band. Cass's boss wants someone to do another shift each week. If she picks them up, Cass proposes to pay the increased rent (strictly speaking, under the moderate income rents policy a young person's share of the rent continues to be calculated according to a concessional rate, and it is the other adults in the household who cop the higher rates, even though their own incomes have not changed. Cass is doing the decent thing here). This means she'll face EMTRs of 71-78 per cent on her additional earnings. This works out to an hourly rate of pay between $2.44 and $3.21. Cass decides not to ask for the additional shifts.

Two conclusions from all this. One is straightforward: the moderate income rents policy should be scrapped because of the way it contributes to some extraordinarily high work disincentives.

The second is more tentative: what are the implications of a work disincentive analysis for income-related rents generally? The usual 25 per cent rent rebate rate contributes to EMTRs too, but on the other hand, there is something fair about the proposition that those who earn more should pay more. Dr Henry has flagged that this is something he's thinking about in his review into the future of Australia's tax and transfers system - and those of us who are interested in the future of social housing should be thinking about it too.