The NSW Companion Animals Taskforce was established by the State Government to advise on ways of reducing the appalling numbers of cats and dogs that are surrendered or abandoned by their owners, and subsequently destroyed.
Last year, almost 50 000 cats, and 70 000 dogs, ended up in pounds; over 30 000 cats and 21 000 dogs were destroyed.
The Taskforce has released a discussion paper (at the link above) which includes, amongst many other things, a reference to the particular problem of companion animal ownership in rental housing. Private rental especially is not very friendly to pets, or their owners, because most landlords and agents prohibit tenants from keeping animals as a term of their agreements. The concern is that this results in tenants having to surrender animals when they move house, and in their not being able to adopt animals and save them from death row.
The TU's view is that companion animal ownership is fundamentally a matter of personal responsibility. By that we mean:
(1) that an individual should be free to decide that they will keep a companion animal, subject to the law; and
(2) that the individual owner of a companion animal should be liable for its upkeep and any damage or loss it causes.
As things currently stand, tenants have the liability, but not the freedom to decide.
We reproduce below the section of the discussion paper that relates to rental housing. If you've had any experiences of owning a companion animal while renting, or any suggestions as to how to make rental housing more pet-friendly, that you'd like us to consider as we make our submission to the Taskforce, please let us know in the comments or by email: chris[underscore]martin[at]clc[dot]net[dot]au.
*
Option 18 Review barriers to cat and dog ownership in relation to residential tenancy laws
Key finding
Pet-unfriendly rental accommodation and strata-titled housing (whether owned or
rented) contribute to the surrender of owned pets, and appear to be a significant
factor inhibiting the adoption of companion animals from pounds and shelters.
The Residential Tenancies Act 2010 and Strata Schemes Management Act 1996
could be reviewed to identify existing barriers to cat and dog ownership in rental and
strata accommodation, including the existence of by-laws which currently allow pet
bans.
Particular consideration could be given to the introduction of a pet bond system,
similar to that operating in Western Australia, to provide a financial incentive to
counter landlord concerns about pet-owning tenants.
Relevant industry bodies could also be engaged to develop and implement
education, as part of a whole of community socially responsible pet ownership
education campaign (see option 12), which address issues such as:
assisting cat and dog owners living in units and rental accommodation to become better neighbours/tenants by ensuring they provide appropriate environmental enrichment and care for their cats and dogs,
the advantages of preparing a pet resume that shows their cat or dog will be a good tenant, and
emphasising to landlords and real estate agents that by excluding cat and dog owners they are limiting the potential pool of good tenants.
Benefits
Removing cat and dog ownership barriers for renters could increase overall demand for animals and reduce the number of animals surrendered to pounds where they were previously unable to be kept by their owners.
A pet bond scheme may allay some landlord concerns about cat and dog owning tenants.
Potential issues
Ongoing resistance from strata/owner bodies.
The cost of pet bonds may be a barrier for some cat and dog owners.
The cost and/or administrative burden of pursuing damages from tenants where they are over and above the bond amount may be prohibitive, and thus some landlords may support the continuation of a ‘no pets’ policy.
[Extracted from the Taskforce's discussion paper, for readers' info – the options do not reflect the views of the TU.]
The centenary of public housing in New South Wales also means the centenary of Daceyville, our first public housing estate. Work commenced on the estate in June 1912 (just two months after the establishment of the Housing Board - they didn't muck around).
The City of Botany Bay is marking the centenary with a birthday party on the public holiday Monday 11 June, at the estate (corner of Gardeners and Bunnerong Roads, Daceyville).
(Click to view the centenary day program at the City of Botany Bay website.)
The NSW Coroner has made findings in the inquest into the deaths of six residents of the licensed boarding house that, until recently, operated at 300 Livingstone Road, Marrickville. (We've mentioned the inquest previously, here and here.) The Coroner's conclusion:
If a society is judged by its treatment of its most vulnerable members, then ours is failing miserably.... There can be no question that the six who died who died at 300 Hostel between June 2009 and August 2010 were uncared for, poorly treated medically, and neglected.
We won't go into much detail about the medical aspects of the findings, about which, not surprisingly, the Coroner has a lot to say. It is enough for our purposes to note the Coroner's finding that the medical treatment of the residents was 'less than adequate':
There was little evidence of a co-ordinated approach between doctors and outside services or doctors and management. Reviews of medication, if they took place at all, were not properly recorded, and medical note-taking was negligible to the point of negligence.... Medication compliance amongst the patients was poor, and dangerously ill-supervised.... The need for the use of multiple anti-psychotic medication in the treatment of all the deceased was highly questionable.... I could not avoid seeing emerging a Dickensian picture of over-sedated people reduced to a state of inertia or lethargy in order to keep them quiet.
The Coroner also makes strong criticisms of the deceased residents' housing, their landlord, and the regulation of licensed boarding houses by NSW Ageing, Disability and Home Care (ADHC) – and these aspects of the findings we'll present in some detail.
The housing
First, in relation to the residents' housing, the Coroner finds:
The standards of hygiene and nutrition at the hostel were poor, facilities run down or not usable, and overall care sadly lacking. The weekend staff member had no training in first aid, and [landlord] Mr Young's explanation for this was not credible. Further, there were reports made of fire fighting safety equipment being outdated on one inspection and parts of the building posed high risks. In the last two years before closure, there was over 20 complaints recorded against 300 Hostel.
The complaints came from local support workers, one of whom described the boarding house to the Coroner as 'Third World':
There were blocked toilets, often only one working shower, no fans and unclean rooms. She [the support worker] also gave evidence that up to 25 people shared one bathroom including a toilet.... Ultimately, but only after many complaints, was a second toilet downstairs made available to clients as well as two extractor fans that were installed to assist with ventilation.
Another support worker gave evidence as to the state of the boarding house:
... It was dirty, had peeling paint, was ill-smelling, that some beds were without bedsheets, it contained dangerous stairs as well as no outside protection from the sun for residents. Care workers told her that some residents shared clothes, including underwear.
This worker also stated that residents, lacking tenancy rights, were 'too frightened to complain'. Police officers who attended after the death of one of the residents also noted 'the lack of staff, the low morale of residents ('they were all outside and didn't speak to us'), and the run down state of the premises'.
For all this, residents each paid $290 per week. (That's about 85 per cent of the Disability Support Pension.)
The landlord
The licensee and landlord of the premises at the time was Mr Chris Young, formerly a psychiatric nurse and now, as we noted in our previous post, President of the NSW Property Owners Association. The Coroner summarises Mr Young's evidence to the inquest:
He disagreed with most criticisms of the Hostel and his management and was extremely defensive thorughout his examination. He claimed that most of the six deceased had constantly expressed how contented or happy they were at 300 Hostel.
If any criticism of the state of the premises was justified, then lack of funding was the reason.
Mr Young comes in for strong criticism by the Coroner, both for his evidence and his conduct. As noted above, the Coroner heard evidence that the weekend staff member had no first aid training (though she'd been employed for 11 years): Mr Young's explanation for this was, in the Coroner's words, 'absurd'. The Coroner also heard evidence that during the investigation of a resident's death, Mr Young attempted to dispose of a document relating to the resident's medical treatment, and had pressured his staff member and a resident to change their versions of events as stated to police. Mr Young's own evidence on these matters was, again in the Coroner's words, 'less than credible'. The Coroner says:
At the end of his testimony, it could not be said that he had given an impression of a compassionate, caring owner or boss whose only problem was lack of Departmental support of funding....
Despite Mr Young's assertions of compassion and sacrifice, the fact is that he and his wife were making a living from the boarding house and while undoubtedly hampered by lack of resources, appear to have been reducing services to residents to perhaps cut costs, and to have provided, at least in the last years, very little supervision or basic care to those most in need of it....
Mr Young and those providing medical services to the residents failed in their duty to address [residents' heath] problems.
The government department
Finally there's the part played by ADHC. The Coroner heard evidence from the officer responsible for the boarding house that he considered it 'top of those places dangerous to residents.' However:
He told the court that legal action had been considered when each inspection found serious problems although the legal advice given at that particular time to [ADHC] was that the laws governing compliance with the Licence obligations may not have been enforceable, and as a consequence prosecutions were not an option of first response.
We note here that the problem of unenforceable licences was first brought to the attention of the State Government in 1999 – and not resolved until amendments were made to the Youth and Community Services Regulation... 11 years later. This was too late for the residents of 300 Hostel. Observes the Coroner:
I do note that in the final months of operation at 300 Hostel, consideration was being given to withdrawing the licence. Unfortunately, that consideration was not acted upon so as to benefit the six residents who died in that time. It is significant that after 300 Hostel closed, the evidence shows that the remaining residents who were moved to alternative boarding houses all showed improvements in their health and demeanour.
The Coroner handed down her findings two days after the announcement by the NSW State Government that it would reform the boarding house sector, including through legislation for occupancy rights, a system of registration and standards for boarding houses, increased powers of inspections and increased penalties for non-compliance. The Coroner, without any further details of the Government's proposed reforms, could only 'endorse its intentions and concur with every proposal which improves the lives of our most vulnerable'.
As do we, and as do all those other advocates who have worked with boarding house residents and been dismayed by the neglect they've suffered, both from landlords and from past governments.
Over the last few months we've been reviewing the Residential Tenancies Act 2010, since it has now been in operation for a little over a year.*
In part 1 of our discussion, we talked about the need for strong renting laws. We noted that our new law hasn't radically altered the nature of a tenancy, or substantially changed the relationship between landlords and tenants. It was really just a much-needed tidy up of the old law (the Residential Tenancies Act 1987 - now repealed).
In part 2, we spent a few moments talking about some of the good things to come out of the new law. We observed that our two favourite changes are only useful when tenancies are coming to an end.
Now it's time for part 3, wherein we let fly at some of the more frustrating parts of the new law...
What's not to like?
There are three things in the new Residential Tenancies Act that are posing major problems for tenants.
1. Tenants in rent arrears can 'pay and stay' - or can they?
A fantastic new initiative could have ensured that tenants who fall into arrears - for whatever reason - could be assured of saving their tenancy by paying up, or entering into a payment plan to pay up over time. Under the new law, payment of arrears can put a stop to a landlord's Tribunal application for termination orders, and can render a vacant possession order (or even a warrant for possession) ineffective. Unfortunately, there's a catch...
There's a catch because landlords and the Real Estate Institute of NSW made a big fuss about this initiative while the laws were being drafted. According to its critics, the provision would have tempted too many tenants to hold out on paying rent until the eleventh hour - or encouraged a 'payment on the courthouse steps' mentality. The provisions were amended before the law was passed.
As it now stands, tenants who pay their arrears can put a stop to their landlords attempts to evict them - but only if they have not "frequently failed to pay rent owing". Now, this might seem reasonable at first glance, given that it is intended to stop an anticipated flood of tenants taking advantage of the law by refusing to pay their rent on time... but on closer inspection, it's a real mess.
The problem is that there's no easy way to decide what "frequently failed to pay" means. Tenants want it to mean one thing, and landlords want it to mean another. Given that it's landlords taking tenants to the Tribunal over rent arrears, what landlords want it to mean is kind of important, even if they turn out to be wrong...
In order to explain this, we need to go back to the value that this initiative provides - the certainty of outcomes, for all concerned, in rent arrears disputes. Tenants don't want to pay arrears when they are faced with eviction - they'd rather hang onto whatever money they have available, because moving house is expensive. Of course, arrears do have to be paid at some point, but handing over a lump sum while you're on your way to start up a new tenancy is usually not the preferred option. Landlords, on the other hand, are reticent to cease hostilities and allow tenancies to continue without some show of liquidity from the tenant. Indeed, even then, many landlords would rather take the money and end the tenancy anyway, because they might think a tenant who falls into arrears every once in awhile is a little too 'risky'.
The 'pay and stay' provisions should have cut through all of this, by taking the decision out of everybody's hands. Payment of rent means continuation of tenancy. Simple.
But instead, we're right back to where we started. Tenants who are in arrears can't be sure that they haven't "frequently failed to pay rent owing", so they're not always inclined to pay once eviction proceedings are underway. Landlords, for their part, are pursuing evictions even after arrears have been paid.
But it gets worse - under the old law, arrears that had long since been settled were off limits for landlords, because you can't get a fix for a breach that has already been remedied. Under the new law, landlords are arguing that the words "frequently failed to pay rent owing" enables them to bring up old instances of arrears as a means to terminate a tenancy for minor arrears in the present. This is hardly in keeping with the principle of 'pay and stay'.
2. Tenants can end a tenancy early and pay a fixed 'break-fee' - or can they?
Similarly, the landlord and real estate lobby ran interference on a provision that would have given tenants some certainty as to their costs when ending a fixed-term tenancy early.
When tenants broke a tenancy agreement under the old law, landlords were entitled to compensation for their loss of guaranteed rental income (up until the end of the lease, or a new tenant was found, whichever was the earlier), as well as any unavoidable cost associated with reletting the property. This presented two problems for tenants.
The first was a commonly held misconception, particular to landlords and real estate agents, that covering temporary rental losses meant a tenant must continue to pay the rent until a new tenant was found, even after they'd vacated the property. The reality is that landlords (or anyone, for that matter) can only recover a loss once it has crystallised - that is, once they had relet the property and could firmly establish how much they were out of pocket.
The second problem was that, in order to avoid paying for losses that a landlord was not entitled to recover, tenants would have to play amateur detective – scrutinising the landlord’s every move to ensure they were reletting the property as quickly and cost-effectively as they could. Such situations rarely end without a dispute over the tenant's liabilities.
The proposed solution – a fixed ‘break-fee’ on abandonment – was a sensible trade-off. It would afford tenants certainty of their costs when breaking a lease. At four- or six- weeks rent, the fee would no doubt result in a windfall for landlords, who could easily rent their properties out again within that time. The Tenants’ Union has expressed reservations about the level at which the break fee has been set, but, in principle, the idea of a fixed break-fee on abandonment has some merit.
The break-fee solution did not make it into the new law in place of the old scheme, because it was seen to undermine the sanctity of contract. Landlords just could not fathom how a tenant should be "allowed" to break a legally binding residential tenancy agreement. It didn't seem to matter that this provision was intended to deal with the consequences of a broken agreement, not to enable or encourage tenancy agreements to be disregarded.
Instead, both schemes were included. The apparent intention of allowing landlords to choose between one scheme and the other does not appear to have been realised – at least not without complications. This means even less certainty, and more complex litigation for tenants who need to end a tenancy before their fixed-term is up.
3. Landlords can end tenancies without a reason, and without regard to the circumstances of the case.
Under the old law, a tenant who had received a “without grounds” notice of termination could make a case in the Tribunal that their tenancy should not be terminated. In such matters, the Tribunal was bound to consider the circumstance of the case – weighing up things like the age and health of the tenant, with the needs of the landlord to recover the property.
In practice, the Tribunal rarely declined to terminate a tenancy on the basis of a “circumstances of the case” argument. But the mere fact that such arguments could be raised had two positive effects for tenants:
• It probably discouraged some landlords from commencing termination proceedings that were motivated for bad reasons (for example, retaliation or discrimination), because of the prospect of these motives being uncovered by the Tribunal in its examination of the circumstances of the case.
• Where landlords did use “no-grounds” notices of termination, and tenants facing genuine hardship or circumstances that would make it difficult to relocate, the ability to raise those circumstances in the Tribunal would often lead to sensible agreements – sometimes by way of resolving issues and allowing the tenancy to continue, and other times negotiating extra time or obtaining assistance for the tenant to relocate.
Under the new law, a notice of termination without grounds is impossible to challenge. The Tribunal's discretion to consider the circumstances of the case has been removed, and landlords are using no-grounds notices with impunity. They are using them in different ways than under the old law, too... often combining them with some other notice, as they do offer a solid back-stop in case the tenant is able to defeat the alternative.
This is the single most disappointing change from the old law to the new. We say that the rights of landlords and tenants have not been significantly altered by the introduction of the Residential Tenancies Act 2010, but the relative strength of each party within the relationship has changed. By giving landlords the ultimate last word on everything (which is what a termination-without-grounds that can't be challenged really is), tenants are forced to consider exercising their legal rights with extreme caution.
*The Tenants' Union of NSW has recently released a report on the Residential Tenancies Act 2010. You can find it here.
We've been observing the centenary of the public housing system in New South Wales, starting with the Housing Board, the State's first – albeit relatively short-lived – public housing agency, established a hundred years ago last month by a reforming Labor government. The next major development in the history of public housing in New South Wales was the work of a conservative government: the Housing Improvement Board, established in 1936 by the United Australia Party government led by Sir Bertram Sydney Barnsdale Stevens.
(Premier B S B Stevens (seated) and his Cabinet)
Stevens came up with the idea of the Housing Improvement Board following a study tour of Britain, where he was impressed by the slum clearance and home-building being done by local councils. The job of the Housing Improvement Board was to guide local councils in New South Wales to becoming builders and landlords themselves – not the State Government.
The idea that local government should be a provider of public housing was present at the commencement of the public housing system in New South Wales: at the same time as it introduced the Housing Act 1912, the NSW State Government also introduced the Sydney Corporation (Dwelling Houses) Act 1912, enabling the Sydney City Council to build rental housing; and one of the collateral benefits of the Housing Board's construction of Daceyville was that it might inspire local councils to do more of the same themselves.
In the case of the Housing Improvement Board, however, the Board's express purpose was to provide a persuasive demonstration of benefits of planned slum clearance and housing development to local councils. Its first task was to build a demonstration project of modern, sanitary flats. After looking about the inner suburbs of Sydney, it settled on Erskineville as the site. A good choice: Erskineville then had lots of crummy houses, lots of tenants (about 85 per cent of the population rented), and a large park that could be included in the redevelopment and reduce its cost. Unfortunately for the Board, Erskineville (then a municipality in its own right) also had one Alderman A P 'Pop' Henry, a key Labor machine man, sometime mayor and, as it happened, a real estate agent.
At Henry's agitation, Erskineville Council opposed the scheme; so did hundreds of residents, who signed the petition below, circulated by Henry:
WE the undersigned RATEPAYERS and RESIDENTS of ERSKINEVILLE desire to
protest against the proposed erection of FLATS in ERSKINEVILLE PARK, and wish
to emphaisse [sic] that if any rebuilding scheme is carried out the people shall be
supplied with semi-detached cottages or such other designs of building that will give
each family a definite form of homelife embodying a backyard to each home.
Our objections are based on the following grounds:
(1) FLATS are not desirable. Where they have been undertaken on Communal
lines in New South Wales they have invariably been a failure as instanced by
the efforts of the Sydney Council (City)
(2) FLATS are unsuitable in an industrial area because the industrial classes
have the largest families and large families and family homelife has been the
backbone of the development of the British Empire.
(3) FLATS on moral and religious grounds have a definite tendency to make
people limit their families by birth control methods, which has a definite
injurious effect on the health and morals of married people.
(4) Community grounds for drying clothes on washing day takes away from the
homelife which families have been used to and is foreign to industrial classes
who have always had their own drying grounds. The washing and drying of
women’s private garments (personal hygiene, etc) demands the amount of
privacy every female is entitled to.
(5) Private space for gardens and lawn tends to increase the homelife of the
individual supplying for him a hobby that is so essential. This also allows
children to play in their own backyards where they are under direct control of
the parents. The appalling number of street accidents to children speaks for
itself.
(6) If we desire to populate Australia with Austrlians [sic] we must encourage
them to propogate [sic]. If people are encouraged to live in FLATS small
families will result.
(7) The swampy area intended for building will make it necessary to have an
up- to-date drainage system instituted. In England it is illegal to build on made
soil.
(8) Infectious diseases in children must be isolated. How are we to isolate in
COMMUNITY backyards?
In view of the foregoing, we therefore voice our unified protest and ask the Housing
Board to refrain from building FLATS on the plan introduced.
As Harvey Volke, historian of early public housing in New South Wales, wryly observed, it is not known how many of those who signed had to pay their rent to Henry.
Despite the opposition of the Labor councilors, the scheme was built, but the Board's legal and financial weakness was exposed and its persuasive powers were spent. However, the Board's 56 flats, in seven walk-up blocks, still stand today – and thank goodness, because the Erskineville estate is a lovely spot, and still a model of the good that public housing can do.
Was hoping to make it along to the announcement, but by the time we got through to the Minister's office, it had already been done. You'd think they'd have liked a few extra happy faces in the crowd.
Later, the Minister sent through the media release. It says things like:
Minister for Disability Services, Andrew Constance, said the reforms will be included in a Draft Exposure Bill that will be provided to key stakeholders for feedback, before legislation is introduced to Parliament later this year.
"The NSW Liberals & Nationals are determined to put the appropriate legislation in place to protect and uphold the rights of vulnerable residents, whether they are people with a disability, students, or those on low incomes."
Proposed changes include:
- The introduction of a registration system for NSW boarding houses
- Occupancy rights for residents
- Standards for boarding houses
- Increased penalties for non-compliance with the regulations
- Increased powers of entry
Under the current laws, unscrupulous operators face fines of up to $500, which provide insufficient disincentives for operators who mistreat or neglect vulnerable residents.
"These penalties will dramatically increase with fines of $11,000 for individual operators or $22,000 for corporations if they breach the regulations," Mr Constance said.
Minister for Fair Trading Anthony Roberts said a registration system will be put in place and a website developed containing information on occupancy rights and standards for operators.
"There are currently no occupancy rights for residents living in boarding houses, such as the right to live in clean premises and be given notice of eviction, nor are there clear responsibilities for operators or residents on how the property should be maintained," Mr Roberts said.
"Our reforms will address these areas. The introduction of a registration system for NSW boarding houses will ensure vulnerable people are no longer living in unlicensed facilities where they have no rights.
The Tenants' Union has welcomed these proposals, and we look forward to seeing the details. They've been a long time coming... Check out our media release for more comments from the TU.
All in a days work...
(Actually, for some
background on the many years of work that the Tenants' Union of NSW,
Tenants' Advice and Advocacy Services, and many other advocacy groups
have been doing on this issue, visit the Tenants Union's website,
and have a look at some of our old
Brown Couch posts).
Last night's Federal Budget hasn't given us much to talk about on the Brown Couch today. Here are a few things that others have had to say:
"Inadequate income and unaffordable and unstable housing are two of the biggest drivers of intergenerational disadvantage. Neither of these issues has been addressed substantially, and I suggest young mothers and children will lose out as a result." - Grant Millard, CEO of ANGLICARE Sydney.
*
"While the Budget predictably (but unfortunately) failed to reform
negative gearing and CGT rules, it thankfully also did not attempt to
stoke demand by raising the First Home Owner Grant (widely viewed as a failed policy), or
allowing first home buyers to access their super to purchase a home
(effectively a FHOG in disguise). My number one wish with any Budget is that it does no harm. So, at
least in regards to housing, this Budget passes the test." - Leith van Onselen (aka The Unconventional Economist) who writes for Macrobusiness.
*
"For the past two years we have submitted our Convert to Rent housing initiative to Treasury for consideration. It involves grants of up to $21,000 to help landlords convert empty commercial space, shop-top rooms, and run-down homes into affordable rental housing. We argued strongly for $350 million, which would have resulted in 15,000 new affordable rental dwellings. The scheme has been very successful in Canada and the UK. Property, housing and social welfare groups have all voiced support for this policy to convert thousands of empty dwellings into affordable homes. Yet on budget night there was nothing but silence for Australia's 2.4 million rental households." - Senator Scott Ludlum of the Australian Greens.
*
"At a time when new home building is in decline in virtually every state and territory, the budget has failed to deliver any new measure to reinvigorate the home building sector, despite the sector's health being absolutely crucial to a healthy domestic economy. Without dedicated housing policy measures and housing supply-side reforms the residential building sector will continue to act as a drag on the macro-economy and the nation's growing housing shortage will continue to place undue pressure on the household budgets of home buyers and renters." - Andrew Harvey, senior economist with the Housing Industry Association.
*
"Wayne Swan’s budget might be back in black, but with no new spending on housing initiatives, the one in ten families who are in housing stress will remain in the red as they try to make the rent or mortgage each week. With no new money invested in social housing in this budget, the system will continue to decline, leaving almost 250,000 households languishing on public housing waiting lists. With no increase in the rate of Commonwealth Rent Assistance, over 450,000 renters in housing stress will have less to spend on food, clothes, transport and the other basics of life. Failure to tackle the negative gearing and Capital Gains Tax breaks that drive up house prices means thousands of young Australians don’t get a fair go in the housing market. Housing is the single biggest household expense. For families to get a fair go, the Government needs to fix our broken housing system." - Sarah Toohey, Campaign Manager with Australians for Affordable Housing.
*
"A halving of interest rates in the 1990s kick-started a decade-long
love affair with debt, which in turn fuelled a period of unrivalled
prosperity for households as they borrowed to buy assets, largely
houses, which doubled in value every couple of years. As household's balance sheets grew, they felt rich. But the debt boom has run out of puff. Borrowers reached
the limits of their new borrowing capacity about 2007, just before the
global financial crisis provided both the motivation and the means -
lower interest rates and government stimulus - to save. And they haven't looked back. Australia's household debt-to-income ratio peaked at 156
per cent just before the GFC. It has since shrunk to about 150 per
cent as households have begun saving. Treasury maintains in this year's budget estimate that
had households not reformed their debt-fuelled ways, and continued to
increase their net borrowing at the same pace as between 2002 to 2007,
the household debt-to-income ratio would be a whopping 185 per cent. Today, Australians are a nation of aspiring savers, and
it is this sense that the government is tapping into with its return to
surplus. In Statement 4 of the budget papers - known to
overexcited economic journalists as the ''Treasury Sermon'' - Treasury
boffins have chosen to extol the virtues of ''building resilience
through national saving". Higher household saving will help, in the longer term, to
act as a shock absorber for the economy, reducing household's exposure
to any sudden fall in asset prices - read house prices. It is in the
best interests of everyone that this should happen gradually. Because that buffer may soon be needed. House prices
have turned, falling 5 per cent over the past year. The get-rich-quick trick is over. Households no longer feel rich". - Jessica Irvine, columnist with the Sydney Morning Herald.
The Australian Tax Office has released its 2009/10 taxation statistics, which, for us at the Brown Couch, are most interesting for what they say about the nation's landlords and rental housing.
The headline figure, of course, is landlords' rental income, and in 2009/10 Australian landlords – all 1.75 million of them – together collected a new record high of over $28 billion in rents... which, after deductions for expenses (mostly interest payments), works out to be a $4.8 billion loss.
That's actually the best income result they've had since 2004/05 (not least because rents kept rising as interest rates went down post GFC).
Australia's landlords haven't collectively turned a net positive result
since the turn of the century. That's by design, of course: they're
taking advantage of the Australian tax system's uniquely generous
treatment of negativegearing, by which these sorts of losses can be
deducted against income from other sources, thus reducing the negative gearist's tax liability. This softens the loss, which the negative gearist is thinking they'll more than make up for when they sell the property later for a higher price (and the tax system helps here too, taxing the income from the gain at half the rate that applies to income from work, rent, or interest on a deposit in the bank).
Looking over the graphs, we can see that Australian landlords are not negatively gearing quite as intensely as they were pre-GFC: it's not just net losses that are down, but the proportion of landlords declaring a loss is down too. But they are still the majority: 64 per cent of landlords are net losers, and so are still banking on prices rising higher than their (tax-softened) losses.
(Or, perhaps it is better to say that they were of this frame of mind in 2009/10. Since then, prices have fallen....)
*
Meanwhile, Federal Treasurer Wayne Swan needs another $10 billion over two years to get the budget into surplus (a surplus required, it might be added, because the budget implicitly guarantees the banks, which have borrowed heavily overseas to fund their own lending to Australian borrowers – mostly for housing). Says the Treasurer:
... in a budget where we are looking for savings it's important to run your
ruler over a whole range of tax expenditures to make sure that they are
directed in the right areas....
He should be running the ruler over negative gearing.
Yesterday Anglicare Australia released its "Rental Affordability Snapshot" for 2012, and the findings have not been good.
Here are a couple of snippets from the press release:
Anglicare Australia's annual Rental Affordability Snapshot released by executive director Kasy Chambers shows the private rental market has failed Australians living on low incomes.
On the weekend of April 14 and 15, Anglicare agencies from every State and Territory in Australia conducted a snapshot of advertised private rental properties to test their affordability for two groups of people – households who rely entirely on Government payments, and households that rely on the minimum wage. 'Affordability' is classed as spending up to 30% of a low household income on rent.
“What the Snapshot shows is that people on the minimum wage need two incomes to rent a house. In many places even that is not enough,” Ms Chambers said.
“And for those trapped on the NewStart, supporting parent or youth allowance there is absolutely nothing suitable available at all.
“In our largest cities, Sydney and Melbourne, with over 20,000 properties advertised between them less than 40 properties were considered suitable across all of the household types.
“In our regional areas too, housing for families on a low income is virtually non-existent with results like 2% of available properties in the Southern Tablelands in New South Wales for a single parent on the minimum wage or 6% of properties in Gladstone for a family of four.
“Anglicare's Snapshot gives an insight into the experience of housing stress, makes it clear how distant safe and secure housing is for hundreds of thousands, even millions, of Australians, and raises the question of why it isn't a true national priority.
The Rental Affordability Snapshot has attracted its share of media attention, as can be seen by these excellent reports from SBS and the ABC.
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