Monday, July 30, 2012

Three cents for TAASs... what's negative gearing cost?

We noted the other day that Tenants Advice and Advocacy Services cost about three cents a day for each renter household... and that to get a service that's properly funded to do duty advocacy at the Tribunal and get more specialist Aboriginal advocates to cover the State, as recommended to the NSW State Government, it'd cost a bit under five cents a day. And all of this is tenants' money.

Which got us wondering: what's Australia's uniquely generous tax treatment of negative gearing worth to landlords, in terms of tax saved? That is to say – what does it cost the rest of us, in tax revenue forgone?

As discussed previously, the Australian tax system allows landlords to deduct the costs of a rental property (interest, etc) from their income from all sources, not just income from the rental property. In other words, a net rental loss reduces a landlord's total taxable income, and hence the tax they pay. As far as the taxman is concerned, it's as if the part of their income they've put towards those costs was never received in the first place (while those of us who save by putting a part of our income in the bank get taxed on it).

And, also as discussed previously, most Australian landlords (64 per cent) do post a net rental loss in their yearly tax returns. On the latest figures, there's 1.1 million of these net loser landlords, and their total net rental losses came to $10.1 billion for the year (2009-10).

So that's $10.1 billion in landlords' incomes that the taxman doesn't see. If he did, how much tax would be raised from it?

We can answer this, in very rough and ready terms, by reference to the following table (Table 2.6) from Tax Stats 2009-10, which breaks down the net loser landlords by tax bracket.

Five tax brackets, and the (2009-10) marginal tax rates for each are, respectively, zero, 15, 30, 38 and 45 per cent. We'll assume that the income would have been taxed at the relevant marginal rate – and note: this is a big assumption. In real life, including this income could cause a landlord to go up a tax bracket, and hence pay tax at a higher rate – one reason why this is a rough and ready calculation.

Here's the Brown Couch's back-of-the-envelope calculations, from tax bracket 1 (ie $6000 or less) to 5:

1. For each of these very low-income landlords, the average net rental loss is $10 755 pa, but on the basis of our assumption above, they're not paying tax on their income anyway, so the tax they save is zero (which goes to show how generous that assumption is).

2. Average net rental loss here is $7 411 pa. Marginal tax rate is 15 per cent, so tax saved is $1 112 pa, or $3.05 per day.

3. Average net rental loss: $7 907 pa. Marginal tax rate is 30 per cent, so tax saved is $2 372 pa, or $6.50 per day.

4. Average net rental loss: $10 289 pa. Marginal tax rate is 38 per cent, so tax saved is $3 910 pa, or $10.72 per day.

5. Finally, for net loser landlords at the big end of town, the average net rental loss is $20 763 pa. Marginal tax rate is 45 per cent, so tax saved is $9 343 pa, or a very handy $25.60 per day.

As we said, this is all tax revenue forgone by the taxman and, hence, a burden borne by the rest of us. In total, it amounts to $2.79 billion for the 2009-10 year. Or, on average, $6.88 per day for every net loser landlord.

As we also said, it is a rough and ready calculation. If you factored in the cases where the deducted income would have otherwise put the landlord into a higher tax bracket, the amount of tax revenue forgone would be higher. If you factored in that some net rental losses would otherwise be deducted from realised capital gains, it would be lower. If you factored in that by not allowing net rental losses to be deducted against other income, landlords would not borrow so much to spend on rental properties, and the amount would be lower... but houses would be less expensive too.

But one is still left strongly with the image of a tax system that stuffs dollars into the pockets of landlords every day, while a State Government cuts a valuable service for tenants for the sake of a few cents.

Wednesday, July 25, 2012

Three cents a day

The ABC used to remind us of the good value it represented by saying that it cost every Australian just eight cents a day

Here's more good value: Tenants Advice and Advocacy Services cost each renter household just three cents a day.

That's for New South Wales, and for Queensland, too, where the Queensland State Government has announced that the service is to be discontinued. Three cents a day.

Not every renter household uses a Tenants Advice and Advocacy Service every year, though a lot do – about 35 000 in New South Wales. But you never know when a tenancy problem will arise, and when you'll need some independent information and advice – and three cents a day for access to a Tenants Advice and Advocacy Service is good insurance.

The good value gets even better. The bill (tiny as it is) is not paid by the taxpayer. Tenants Advice and Advocacy Services are funded by tenants' money. In New South Wales, half the funds come from interest earned on tenants' bonds lodged with Renting Services, and the other half comes from interest earned on monies in real estate agents' statutory accounts (and, really, that's money that's been put in by tenants too. Mind you, just a tiny fraction of the interest gets spent this way; more goes to funding the Consumer, Trader and Tenancy Tribunal.)

It's similar in Queensland, too: the Tenants Advice and Advocacy Services there have been funded by tenants' money.

The NSW State Government has twice reviewed the Tenancy Advice and Advocacy Services in New South Wales, and twice found them to be good value services for tenants, but that funding has not kept up with the growth of the rental housing sector and the demand for service. The reviewers  recommended increased funding for Tenants Advice and Advocacy Services, particularly to improve tenants' access to duty advocates at the Tribunal, and to ease the stretch on the four Aboriginal services that between them cover the whole of the State... to a bit under five cents a day.

Five cents a day, for even better Tenants Advice and Advocacy Services. Better value, and still tenants' money.

Tuesday, July 24, 2012

Queensland to defund tenancy services

News from Queensland: the State Government there has announced that it will stop funding the Tenants Advice and Advocacy Services.

Twenty-four community organisations will lose their funding – and more than half a million Queensland households will lose access to independent information and advice about their rights and obligations as tenants.

Housing Minister Dr Bruce Flegg said:

“While it would be nice to be able to continue to fund programs like the TAAS, our primary focus needs to be on the core business of putting roofs over people’s heads.” 

'Nice'? Tenants Advice and Advocacy Services keep roofs over people's heads. They also keep a lot of tenancy disputes from getting out of hand, and keep rents being paid – a point that is sometimes missed by landlords and governments.    

The defunding will save about $5 million per year – but cost the whole of the community there a lot more.

Let's hope sense prevails and this valuable service – part of the core business of housing people decently – is funded to keep working for Queensland tenants.

Comment on the draft Boarding Houses Bill (part 2)

The TU and the Tenants Advice and Advocacy Services have been poring over the draft Boarding Houses Bill 2012, circulated recently by the NSW State Government. We posted some initial comments here; now that we're getting into the detail of the draft Bill, here's a further comment.

We said previously that the relatively narrow coverage of the draft Bill was a major concern; but there's another problem with the draft Bill's coverage. The draft Bill would not apply to boarding premises that are subject to a residential tenancy agreement under the Residential Tenancies Act 2010 (or for that matter, the Landlord and Tenant (Amendment) Act 1948) (clauses 5(3)(b) and 35(2)(a)). This appears to us to be a potentially fatal defect in the draft Bill, for two reasons.

First, there are many premises let in lodgings that are subject to a residential tenancy agreement... between the owner and a head-tenant, who does the lettings (sometimes without the owner knowing about the lettings). A great many lodging arrangements for international students operate on these lines. The Government has indicated that it intends to address these arrangments; on its present terms, however, the draft Bill would not.

Secondly - and this is even more important - just about any boarding house proprietor could avail themselves of this exclusion and step out of coverage of the draft Bill, just by granting a residential tenancy agreement for the premises to an associated company or other person (or they could do it in reverse, transferring ownership of the premises to a company and then granting a residential tenancy agreement to themselves). They could then let the premises in lodgings and run it as they always have, but the tenancy agreement would shield them from the application of the provisions of the draft Bill.

We think the defect is an unwitting one - but it needs to be fixed. And it can be fixed easily: just specify that the draft Bill's provisions relating to occupancy principles do not apply to residential tenancy agreements or leases under the 1948 Act.

We'll keep poring over the details, and posting further comments, until submissions on the draft Bill close 10 August.

Friday, July 20, 2012

The real housing supply problem - part 2

In part 1, we discussed the National Housing Supply Council's analysis of what we called the real housing supply problem in Australia: the supply of affordable rental accommodation to the lower-income households who need it. 

Across Australia, 60 per cent of lower-income households renting privately are in 'housing stress' (in New South Wales, it's 65 per cent); 25 per cent are in 'housing crisis' (in New South Wales, 28 per cent).

Those figures are, for the most part, worse than previously. And they are not affected by the overestimate of household formation that has undermined the NHSC's headline claim of a 'housing shortfall.'

The NHSC presents the rental affordability problem as a supply problem in the section of its report headed 'Affordable and available rental properties'.

We've discussed this part of the NHSC's work in a previous report and, as we said there, it can be tricky to get one's head around – but once you do, you get a clear view of the problem.

Here's the headline claims; we'll then discuss how they're calculated:
  • In 2009-10, there were 1,256,000 private rental dwellings that were affordable for the 857,000 private renter households with incomes at, or below, the 40th percentile [so, an apparent surplus of 399 000 affordable rental dwellings].
  • Of these, 937,000 were occupied by households in higher income groups. As a result, the apparent surplus of affordable rental dwellings for the lowest two income quintiles was actually a major shortfall of 539,000 dwellings (over 60 per cent of underlying demand), up from a shortage of 473,000 dwellings in 2007-08.

What the NHSC has done here is to basically separate the Survey of Income and Housing data into the data about households and their incomes, on the one hand, and the data about what rents are being charged for their dwellings, on the other hand.

Looking at the households, the NHSC says, 'OK, let's divide the households into groups by income'. They use five groups, each with 20 per cent of households ('quintiles'), so the bottom two quintiles represent the bottom 40 per cent (ie the 'lower-income households' we're talking about).

Looking at the rents data, the NHSC says,  'OK, we have so many dwellings rented for this amount, so many for that amount, so many for that other amount – indeed, for a whole range of rent amounts.'

As a first step, the NHSC then says 'Our first quintile of households (ie the lowest 20 per cent) would find such-and-such a number of dwellings affordable (that is, they'd pay not more than 30 per cent of their income in rent); the next quintile would find this-and-that number of dwellings affordable, and so on.'

Then the NHSC takes a second step: 'Now, in real life not everyone gets lined up with the dwelling that's affordable for them. Let's go back to the data and see how many of those affordable rentals are actually getting to the lowest two quintiles.'

And that's the basic problem. There's lots more dwellings that go for rents that are affordable for lower-income households than there are lower-income households – but too few of the affordable dwellings are getting to those households.

Now, you'll notice that the NHSC is again using absolute numbers of households and dwellings. These numbers, as we've said, are based on the data from the Survey of Income and Housing, scaled up according to the ABS's estimate of the number of households in Australia – which, as we know, was an overestimate. This means that the absolute number of households referred to by the NHSC is over-inflated – but so is the number of rental dwellings to which they relate. In other words, both sides of the relation have been inflated – so while the absolute numbers used are off (by ten per cent, roughly), the shape and relative dimensions of the problem described by the NHSC still hold.

And the shape of the problem is depicted in the graph below. Once again, it is tricky to get one's head around, but persistence pays off, because it shows you what's happening in more detail, within those quintile groups.

The horizontal axis (marked 0, 2, 4, 6, 8 and 10) is all those renter households lined up in order of their incomes (lowest to highest), with the quintile groups marked (the NHSC has, a little unhelpfully, slipped into using 'deciles' (ie 10 per cent groupings) here, but just think of that 2 as marking off the lowest 20 per cent, and the 4 marking off the lowest 40 per cent, and so on to 10, which marks off 100 per cent – that is, all households).

The vertical axis is the surplus (up) or shortfall (down) of affordable dwellings, relative to households. As we said, you should knock about 10 per cent off the numbers marked (200,000 etc), but it is the shape of the lines that's important.

Looking at the red line first: this shows the first step in the NHSC's analysis, as described above, in terms of the shortage or surplus of affordable rental dwellings. Imagine that you're some sort of uber-bureaucrat, allocating households to dwellings that are affordable for them.

Starting at 0, move along the horizontal axis – the line of households – and observe what the red line does.

About half way into the first quintile (so, about the bottom 10 per cent of households), you'll see the red line has dipped down. This means that there is a shortage of dwellings affordable for these very low-income households: if you tried to allocate each household to a dwelling that's affordable for them, you'd quickly run out of dwellings, and you'd have to start allocating households to dwellings that are unaffordable for them.

But once you get to about the end of the first quintile (ie the bottom 20 per cent), you'll find that the red line has turned up and is just about at zero again. This means as you've moved along the line of households, allocating them to dwellings, you've found more and more dwellings that are nearly affordable, such that by the time you get to around the end of the quintile group, you're allocating them to affordable dwellings.

And as you keep moving into the second quintile, the red line keeps going up: meaning that if you tried to allocate each household to a dwelling that's affordable for them, you'd have dwellings to spare. Keep allocating households, and the spare dwellings keep mounting until you're past halfway along the line of households. After this point, the red line dips down – but not to worry, this is just you leisurely drawing down on your surplus of dwellings as you allocate increasingly high-income households to dwellings, until you allocate the last (highest-income) household to the last dwelling.

Looking now at the grey line: this shows the second step in the NHSC's analysis. This is real life, where households have gotten their dwellings themselves. You're not an uber-bureacrat allocating households to dwellings; this time, you're just an observer, armed with a clicker counter, counting the households who are paying more than 30 per cent of their incomes for the rental dwelling they actually occupy. 

Starting at 0 again, you move along the horizontal axis, counting the households renting unaffordably. For every one you count, the grey line heads down.

As you move through the first two quintiles of households, you're clicking your clicker counter a lot and the grey line heads down at a steady clip – 60 per cent of households in the line so far you've counted as renting unaffordably.

As you move along the axis into the middle quintile, you find yourself clicking less often, as fewer of the households you encounter are paying more than 30 per cent of their incomes in rent. The grey line starts to level out. In fact, once you're past halfway, you scarcely click at all – and the grey line flattens out.

So that's the size and shape of the real housing supply problem: we've got affordable rental properties, but not enough for everyone who wants one, and certainly not enough for all the lower-income households who really need them. Most of those households – 60 per cent – are missing out, and renting unaffordably as a result.

As for the causes of the problem, and what to do about it – we'll discuss that in part 3.

Wednesday, July 18, 2012

More for affordable housing!

Every couple of months or so, Tenants' Advocates from all over New South Wales get together for a coffee and a chat. We reflect on recent victories and defeats in our efforts to improve renting by looking out for the interests of tenants. And we discuss the hot topics of the day.

Today we've been meeting in Sydney, and we talked briefly about the Australians for Affordable Housing campaign.

You can talk about it too. Visit the campaign website ( or follow them on Facebook and Twitter to find out more.

Or take a picture, and add it to their photo petition.

We did!

Monday, July 16, 2012

Housing NSW's 'eRepair'

Getting Housing NSW to do repairs is hugely frustrating for many public housing tenants and their advocates.

So will this new initiative of Housing NSW improve things? It's eRepair, an online service where you can do your duty as a tenant (per s 51(2)(b) of the Residential Tenancies Act 2010) and inform Housing NSW of the need to repair damage and defects at your premises.

Well, maybe not. Your correspondent has just had a quick go, and of two pretty randomly formulated repair requests, twice wound up in a dead-end.

For example, clicking 'Doors'>'Internal doors'>'Other internal doors, for example, a bedroom'>'Door is difficult to open or close' ended with this:

My first impulse was to go back and see where I went 'wrong' – a bit like in the old 'Choose Your Own Adventure' books of your correspondent's childhood. (Maybe if I fudged things a bit and said the problem was with a bathroom door I would have gotten a different result, and when the tradie turns up I could just point him to the real problem.)

That was the first impulse; after that I just gave up on the whole frustrating adventure.

If you're a public housing tenant with a repair problem, by all means give the eRepair thing a go, but if it does not work for you, do as any tenant can do: apply to the Tribunal for an order that Housing NSW do the repair.

Whatever Housing NSW's 'program of works', you've got a contract that says they'll repair defects as necessary. Hold them to it.

Your local Tenants Advice and Advocacy Service would be interested to hear from you about any problems to do with repairs, too.

Friday, July 13, 2012

Eviction Rights and Wrongs

Following last week's story of the mortgagee repossession in Silverwater, we thought it may be a good time to talk about what to do if you are facing eviction.
First, it's important to note that there are a number of reasons that a tenant may have a Tribunal or court order ordering them to give up possession of the premises and as with the Silverwater tenants, many of them have nothing to do with a judgement on the tenant themselves.
In NSW, a Notice of Termination is a request to leave. It has no power of its own and does not, by itself, terminate a tenancy agreement. It is not a breach of the tenancy agreement or the Act to overstay a termination notice. For more information on how a tenancy may terminate, have a look at our factsheets.
If the Tribunal terminates an agreement, it will also make an order for vacant possession.  The date of this vacant possession is the day on which the tenant is required to leave. The amount of time the Tribunal can give is mostly discretionary- that is, it can be as long or as short as the Tribunal sees fit.  Although an order can be made effective immediately, this is generally reserved for the most severe breaches, or where the tenant may have already vacated.
Tribunal Members don't really have gavels!
Once the order is made, the tenancy agreement has been terminated, and the former tenant is legally allowed to occupy the premises until the vacant possession date as an occupant. A landlord is still not allowed to enter the premises for the purpose of taking possession early, or have someone else do it for them. In fact this behaviour comes with the danger of the largest fine in the Residential Tenancies Act 2010 - $22000, potentially to each individual concerned.
After the date of vacant possession has passed, if the tenant has not vacated, the landlord may ask the CTTT for a warrant to take to the Sheriff and ask for them to enforce the possession order. This copy is a sealed envelope containing the orders- the Sheriff will not enforce the order if the envelope was not still sealed when they receive it.

The Sheriff is required to enforce the order within 28 days of receiving the warrant. They will make an appointment for the execution of the warrant, and this is usually the soonest available time- although the Sheriffs do not operate on the weekend. The Sheriff is able to enforce the order from the day that they receive it, although generally they will have pre-existing appointments to perform. Once the appointment has been made, the Sheriff will attempt to contact the tenant to let them know when enforcement will occur.
The Sheriffs are empowered to remove any occupants in the premises, with reasonably necessary force. The Sheriffs are not empowered to remove any goods from the premises- the landlord will then have to abide by the goods left behind provisions of the Residential Tenancies Act 2010 to dispose of the goods properly. Our factsheet explains this process in some detail.

To summarise:
Termination notices have no power of their own
Only the CTTT or a court can order a tenant out
Only the Sheriffs can evict a former tenant
Always get advice!

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Wednesday, July 11, 2012

Who are the people in your neighbourhood?

We care very deeply about our homes. They are our sanctuary - that one place in the world where we can be assured of safety, security, peace and well-being. Where we can be our own masters, answerable to no-one. Our home is our castle - impervious and impenetrable. It has been this way since time immemorial...

Predjama's castle, Slovenija

But it's more than that.

We live and die in our homes. We sleep and we dream. We grow up, we raise our kids, we see and hear many of the things that make us who we are. In our homes, we can choose which parts of the world may come to us... and when we go out into the world it is to our homes that we will return. Our home is our context. It helps to shape us and to prepare us for what lies ahead. It enables us to establish routines, and helps us to stay in control.

Of course, our homes exist in a context all of their own - the neighbourhood. And we can't always choose our neighbours.

There is an uneasy relationship between the idea of complete mastery of one's domain, and the need to be getting on with your neighbours - especially when we don't all see eye to eye on questions of lifestyle. Put simply, this is where control and no-control will often meet head-on. As we turn to more high density housing in our cities' most populated areas, we can see the challenges of this relationship coming to the fore.

Newcastle Herald columnist Jeff Corbett wrote yesterday about the impacts of noisy neighbours on a family's ability to enjoy their home. "Should we have more protection from councils and police of our right to enjoy our home?" he asks. "Have your homely rights been challenged?" In getting to this question, Corbett tells the story of a Merewether couple who are forced to endure their neighbour's distasteful music until all hours of the morning. Oh, and of course, these neighbours are young tenants.

Says Corbett: "NSW Fair Trading recommended seeking the managing property agent to remind the tenants of their obligations under the lease, which didn’t work, and the landlord is happy to keep the young people paying a high rent for a dilapidated house."

Lucky for some, unlucky for others. We'll come back to this in a moment.

But in the meantime, it demonstrates a point. You can perhaps be the master of your entire neighbourhood, not merely your own domain, if your neighbours happen to be tenants.

The Residential Tenancies Act imposes obligations on tenants as neighbours that mortgagors and owners can not be subjected to. As a matter of contract with the landlord, tenants must not interfere with the reasonable peace, comfort or privacy of their neighbours. This means that the right to occupy a home as a tenant could, in theory, be terminated by a landlord who has had sufficient pressure brought to bear on him by the tenants' neighbours. (We hasten to add here: they'd also need some pretty strong evidence).

Mortgagors and owners, on the other hand, are not subject to contractual obligations concerning how their behaviour might affect neighbours. Their observance of good neighbourly behaviour must be with regard to such things as the torts of nuisance and trespass, and in some cases - such as noise - statutory requirements. But failure to observe such behaviour will never directly result in the loss of their right to reside in their home.

The pecking order is not hard to see. While a person's home may well be their castle, owners trump tenants. Owners can behave with a certain level of impunity in their homes. Tenants, not so much...

But what of Corbett's story of the landlord who is happy to keep those noisy tenants on? The idea that a landlord would rather keep a dilapidated house full of young tenants paying high rent, than terminate the tenancy due to noise complaints, does strike a chord. But the simple truth is they could easily rent it out again, in just as poor condition, for the same weekly rent or more, to the next group of tenants who come along. Many landlords and real estate agents would have absolutely no qualms with this, and it happens often enough.

Now, while we've been discussing all of this on the Brown Couch, there's been another conversation going on over at the Flat Chat Forum. Of concern is the idea that social housing tenants are being housed in head-leased units in strata. There seems to be an assumption - at least on the part of some forum members - that social housing tenants will bring with them a certain type of behaviour that is not conducive to the more communal nature of life in strata.

As we increase the density of our housing, so too we increase the diversity of those living in close proximity to one another. But it serves nobody to make assumptions about how a particular cohort is likely treat its neighbours.

Anyone is capable of behaving badly. The thing is, though, those who own their home are more likely to get away with it...

Who are the people in your neighbourhood?

The real housing supply problem - part 1

As noted here recently, the National Housing Supply Council has published its report 'Housing Supply and Affordability – Key Indicators, 2012', with the headline claim that Australia has a housing shortfall of 228 000 dwellings (calculated on the basis of dwellings built relative to estimated household formation.)

The NHSC did so on 14 June; a week later, the 2011 Census came out and revealed that, actually, there were about 900 000 fewer households than estimated, thus kicking the legs out from under the shortfall claim.

The NHSC has said it will go back to the ABS (the source of both the estimate and the Census data) and get to the bottom of the 'gigantic' discrepancy.

As we said previously, the calculation of the shortfall was always dubious, because it assumed that households would form and demand housing without regard to the affordability of housing, amongst other things. It ignored, therefore, what we might call the 'Packed to the Rafters effect': that some people, faced with rising housing costs or uncertainty about incomes, may stay with parents or friends, or move back in with them, rather than form households of their own.

But the NHSC's report is valuable – and remains so – for another reason: that is, what it says about affordable rental housing. And this is where the real housing supply problem is.

The headline figure here is that on the latest available figures, 60 per cent of lower-income households renting privately are paying more than 30 per cent of their incomes in rent, and 25 per cent are paying more than 50 per cent.

A quick explanation of terms:
  • 'lower-income households' means those in the bottom 40 per cent by equivalised disposable income (and 'equivalised' means adjusted for different household sizes). That's a lot of households. (If you're interested, the NHSC also gives figures for the bottom 50 per cent.)
  • 'paying more than 30 per cent of their income' is also known as 'housing stress'. Once a lower-income household goes past the 30 per cent threshold, there's a good chance they are going without something else that's reasonably regarded as a necessity: ie skipping meals occasionally, no visits to the dentist, no school excursions, etc. The 30 per cent rule of thumb is actually pretty conservative (an older rule of thumb was that anything more than one-sixth of a worker's pay (ie one day from the old working week) was getting unaffordable).
  • 'paying more than 50 per cent' is also known as 'housing crisis'. Lower income households paying this much are going without so many other things that typically they won't be able to keep it up.
  • 'latest available figures' means from the ABS's 2009-10 Survey of Income and Housing.
This is a worse result than the previous year (2007-08), when 57 per cent of lower-income private renter households were in housing stress, and 15 per cent were in housing crisis.

And it's worse in New South Wales, where 62 per cent of lower-income private renter households are in housing stress (curiously, this is down from 65 per cent the previous year), and 28 per cent are in housing crisis (up from 25 per cent).

As proportions from the survey, these figures are not affected by the overestimate of household formation (but note: the NHSC does also give absolute numbers, which would be affected by the overestimate).

The NHSC presents this affordability problem as a supply problem in the section headed 'Affordable and available rental properties' - and we'll discuss this in part 2.



Monday, July 9, 2012

Mortgage holder = lender

WARNING: pedantic rant follows.

Now see here, you lot. Let's get this straight.

The term 'mortgage holder'. It refers to a lender.

The lender holds the mortgage (that is, a legal interest in property) as security for the loan they've given.

The mortgage is given by the borrower. For this reason, the borrower is sometimes called a 'mortgagor' (and the lender a 'mortgagee'). If you want to call the borrower anything else, they should be called a 'mortgage giver'. You're probably better off just calling them a 'borrower'.

Long-time Brown Couch readers might recall that we've raised this issue before. At the time, we booed a couple of journalists for misusing 'mortgage holder'. Seems we didn't go far enough.  Seems that every journalist and sub-editor is doing it.

Now we've got the Federal Government – and even the otherwise learned National Housing Supply Council – misusing 'mortgage holder' for 'borrower'.

Seems everyone in Australia is getting it wrong.

Mind you, in other countries people get it right. Do a quick google of the term 'mortgage holder' and you'll find any number of international sources, including dictionaries, that refer to mortgage holders as lenders. And you'll find a bunch of Australian sources doing the opposite.

Keep it up and we'll probably end up also mixing up 'mortgagee' and 'mortgagor', while the rest of the world thinks we're babbling idiots.

Mortgage holder = lender.

Pedantic rant ends.

Thursday, July 5, 2012

Mortgagee evictions

The night before last, Ten News had a distressing story about four families evicted from their homes in Silverwater by a mortgagee, after their landlord defaulted on his loans.

There's some good news now: Mission Australia has helped the families out with temporary accommodation and other assistance. Thanks goodness – it is cold and wet in Sydney tonight.

Eviction by a mortgagee is a real worry, and it can happen to anyone. If you rent, you typically won't know whether your landlord owns the property subject to a mortgage (mind you, most landlords do); and you typically won't know whether your landlord is in trouble with the mortgagee – at least, not until the trouble is intractable and the mortgagee is taking proceedings for possession of the property.

We started to see worrying numbers of evictions by mortgagees in the mid-2000s – and back then, many of those who were evicted got no notice of it at all. To ensure that tenants got at least some notice, the law was changed in 2009 – and those changes were revised and strengthened in the new Residential Tenancies Act 2010. The changes to the law mean that scenes like those on the news should not happen now.

Under the current law, you are entitled to receive notice from a mortgagee if they take proceedings against your landlord for possession of the property (s 124). Even if you don't get this notice, you are entitled to notice from the NSW Sheriff that a possession order has been made and that you will need to move out. The Sheriff must give you not less than 30 days' notice (Sheriff Act 2005, s 7A(3)). During the 30 day period, you can move out at any time, and you don't have to pay rent (Residential Tenancies Act 2010, s 122(2)(a)). (Your tenancy, in fact, ended when the Court made the possession order.) After the 30 days, the Sheriff will return and evict you, if you're still there.

According to the news report, the Sheriff did indeed notify the tenants of the pending evictions. The problem, reportedly, is that the agent then told the tenants that the trouble with the mortgagee was sorted out, and that they should stay put. Again according to the news report, the agent did so on the advice of the landlord.

Any agent who passes on that sort of advice to tenants, in these sorts of circumstances, is an idiot.

If you ever find yourself in this situation, always take the Sheriff's word over the agent's or the landlord's. If the Sheriff gives you notice that you will have to leave, prepare to leave. If the agent or landlord says not to worry, it's all sorted out, stay put, do not believe them – contact the Sheriff, and ask if they've been instructed by the mortgagee not to carry out the eviction. Unless the Sheriff says otherwise, you will have to leave.

There's a few other provisions relating to evictions by mortgagees that may be useful – read the factsheet, and contact your local Tenants Advice and Advocacy Service for more information. 

Wednesday, July 4, 2012

NAIDOC Week – A time for reflection

This year The Brown Couch celebrates NAIDOC week with a guest post from the TU's Aboriginal Legal Officer, Gemma McKinnon.

Gemma is not long returned from the World Indigenous Housing Conference in Vancouver, Canada.

NAIDOC Week – A time for reflection

Chief Clarence Louie is the Chief of the Osoyoos Indian Band, which honours the hard working, self supporting lifestyle of the ancestors of the Okanagan First Nation people, who have lived in the region from time immemorial. The Osoyoos Indian Band have developed their own economy through business initiatives under the leadership of their Chief. Chief Louie holds strong in his opinions and while you might not fully concur with him, the proof is in the pudding when it comes to the Osoyoos Indian Band. Under Chief Louie’s motto of “creating jobs and making money” the Band has established a successful winery, resort, golf course and construction business to name a few.

Chief Clarence Louie - creating jobs and making money

This is just one example of many discussed at the World Indigenous Housing Conference in Vancouver, Canada last month. The theme of the conference was “Sharing our stories, sharing our successes” and although not all of the stories were those of success, and not all were on the same scale as the story of the Osoyoos Indian Band, the stories told made two things clear: When it comes to housing, Indigenous people in Canada, Australia, New Zealand and the United States face many of the same challenges, and, the common thread between all the stories of success, is ownership by local Indigenous communities. The evidence suggests that a solution developed and executed by Indigenous people, for Indigenous people is more likely to succeed than those provided by non-Indigenous people.

A step as simple as replacing the word “rent” with “loss recovery” in the context of Aboriginal housing, can institute change in a community; a change that would have no practical implications for housing providers but may result in a decrease in arrears and subsequently, less terminations and turmoil within Aboriginal community housing. After all, it surely cannot sit right with many on either side, to have tenants pay rent to live on land that has been inhabited and cared for by Aboriginal people for thousands of years. It’s unsurprising that when a government employee asks an Aboriginal person to pay their rent, such a tenant may be inclined to ask for the rent they’ve been owed since 1788 before handing over a good portion of the little money that they might have.

With NAIDOC week upon us, it’s time to stop and consider the state of Aboriginal housing in this country. Are the circumstances in which many Aboriginal and Torres Strait Islander people in this country are living, adequate to house the original inhabitants of the land on which all Australians live and from which our government and its most wealthy citizens have derived their fortunes? Perhaps the time has come for those who have gained so much from the land that Aboriginal people continue to treasure as their mother and lifesource, to pay at least a small amount of their owed rent by supporting and providing for a small step toward self determination for the Indigenous peoples of Australia. By allowing Aboriginal people access to the rights outlined in Article 23 of the UN Declaration on the rights of Indigenous Peoples:
“Indigenous peoples have the right to determine and develop priorities and strategies for exercising their right to development. In particular, indigenous peoples have the right to be actively involved in developing and determining health, housing and other economic and social programmes affecting them and, as far as possible, to administer such programmes through their own institutions.”

 Jenny Macklin - Federal Minister for Indigenous Affairs

In Vancouver, Minister Jenny Macklin stated:

“In modern Australia, it’s not acceptable that children live without running water, clean kitchens and good sanitation.
It’s not acceptable that children live in overcrowded houses, where they can’t get a good night’s sleep or do their homework in a quiet space.
It’s not acceptable – but for too many, this is the reality.”

The lesson seems to be clear, that not only is it the right of Indigenous peoples to determine and develop priorities and strategies for exercising their right to development in housing, it is also what is working for many Indigenous groups throughout the world. If the government acknowledges that the state of Aboriginal housing in this country is unacceptable then action like the passing of the Stronger Futures legislation last week was a clear step in the opposite direction to what the UN, and Aboriginal people in Australia have called for, and until the Australian government moves away from their paternalistic policies, the state of Aboriginal housing in Australia is unlikely to change.

Tuesday, July 3, 2012

Draft Boarding Houses Bill released

Following its commitment to reform the boarding house sector in New South Wales, the NSW State Government has released for comment a draft Boarding Houses Bill.

(Charles Blackman, Self-portrait in front of a boarding house)

This is an initial comment on the draft Bill's provisions in relation to occupancy agreements for boarding house residents. (We will consider and comment on the Bill's other provisions, such as in relation to the registration of boarding houses, later.)

The TU strongly supports occupancy agreements, that reflect certain occupancy principles, for boarding house residents and other marginal renters. We generally support the draft Bill's provision for occupancy agreements, subject to the following major concerns:
  • Coverage. The draft Bill's occupancy agreements provisions would apply only to unlicensed boarding houses for five or more residents ('Tier 1' boarding houses) and licensed residential centres ('Tier 2' boarding houses for 'vulnerable persons'). This would leave many marginal renters excluded, such as lodgers in private homes, students in halls of residence, persons in refuge or crisis accommodation, persons in share houses without a written tenancy agreement. These marginal renters should be covered by the occupancy agreements provisions (if not the other provisions of the draft Bill).
  • Compensation. The draft Bill provides that the Consumer, Trader and Tenancy Tribunal may resolve disputes about occupancy principles, and would give the Tribunal power to make orders to remedy a breach. However, the draft Bill would not allow the Tribunal to order the payment of compensation for a breach of the occupancy principles. This is contrary to fundamental principles of contract law, and removes much needed teeth from the occupancy principles. The Tribunal should be able to order compensation where a party suffers loss because of a breach.
  • Bonds. The draft Bill makes no provision in relation to resident's bonds. From our experience, many boarding house residents experience problems with bonds - in particular, getting them back at the end of their occupancy. The draft Bill should provide that any bond paid to a boarding house operator must be lodged with Renting Services, like any other rental bond.
The TU will make a submission of the draft Bill that addresses these and other matters, following consultation with residents, advocates and community sector colleagues. Our submission will be directed to making the draft Bill a strong, fair and effective reform for boarding house residents and other marginal renters.

Submissions on the draft Bill are due 10 August. Please let us know what you think of the draft Bill, in the comments here or by email: chris[underscrore]martin[at]clc[dot]net[dot]au. And keep checking the Brown Couch for further comments by the TU.

Sunday, July 1, 2012

Tenancy culture studies: Robert Menzies' 'The Forgotten People' (part 1)

While we've been observing the centenary of the New South Wales public housing system, another important anniversary passed us by: the 70th anniversary of the broadcast of Robert Menzies' seminal radio speech, 'The Forgotten People'. As far as we can tell, this anniversary also went unobserved in the media – forgotten, as it were – which is a shame, because the speech is one of the founding texts of a major political party and a significant piece of Australian political history and culture. (There are echoes of it in the speech delivered by current Liberal leader Tony Abbot to last week's Federal Council, but no express acknowledgement of the anniversary.)

(Robert Menzies)

The historian Judith Brett published a comprehensive critique of 'The Forgotten People' twenty years ago; we'll not attempt anything like a replication of her work here. For our own purposes, over this and a second post we'll consider the significance of 'The Forgotten People' in narrower terms – those of housing. The speech presents a number of points from which to reflect on housing policy, both during Menzies' prime ministership and now.  


On 22 May, 1942, Robert Gordon Menzies delivered 'The Forgotten People' as one in a series of radio speeches for broadcaster 2UE. It was not a great time for Menzies. Previously, things had gone very well for the golden boy from Jeparit, in country Victoria. While still in his twenties, Menzies made constitutional law as counsel in the Engineers Case; in his thirties, he commenced his parliamentary career (first with the Nationalists in the Victorian Parliament, then with the United Australia Party in the Federal Parliament), rising swiftly to the office of Attorney-General (1934); at the age of 44 he was Prime Minister of Australia (1939).

Things started going wrong after the 1940 election, when the UAP was returned with a minority government. In August 1941, bitter at disarray in his own party and in its coalition with the Country Party, Menzies resigned as Prime Minister. The government (under a Country Party Prime Minister) fell seven weeks later, replaced by John Curtin's Labor Party. With the UAP preferring a Country Party Opposition Leader to Menzies, he resigned the party leadership.

So in 1942, Menzies really was starting over. (He'd go on, of course, to found in 1944 the Liberal Party of Australia, win government again in 1949, and serve as Prime Minister again, and again and again and again, until 1965). And as he looked to restart the parliamentary organisation of the interests of property and enterprise, and restart his own career, 'The Forgotten People' is what he had to say, particularly to define and create a constituency.

Here's how he begins (we'll let Menzies do the talking, not least so you get a feel for the language and tone of the speech):

Quite recently, a bishop wrote a letter to a great daily newspaper. His theme was the importance of doing justice to the workers. His belief, apparently, was that the workers are those who work with their hands. He sought to divide the people of Australia into classes. He was obviously suffering from what has for years seemed to me to be our greatest political disease - the disease of thinking that the community is divided into the rich and relatively idle, and the laborious poor, and that every social and political controversy can be resolved into the question: What side are you on?

Now, the last thing that I want to do is to commence or take part in a false war of this kind. In a country like Australia the class war must always be a false war. 

But – there is a 'but':

But if we are to talk of classes, then the time has come to say something of the forgotten class - the middle class - those people who are constantly in danger of being ground between the upper and the nether millstones of the false class war; the middle class who, properly regarded, represent the backbone of this country.

Menzies defines this middle class first by exclusion: it does not include 'the rich and powerful, those who control great funds and enterprises' (says Menzies, 'the rich can look after themselves'); nor does it include 'the mass of unskilled people, almost invariably well-organized, and with their wages and conditions protected by popular law'. Then he gives examples: those of the middle class are 'salary earners, shopkeepers, skilled artisans, professional men and women, farmers, and so on' ('the kind of people I myself represent in Parliament'). But to really define and characterise the Forgotten People, Menzies employs a powerful metaphor: that of 'homes'.

The middle class 'has responsibility for homes - homes material, homes human, homes spiritual.' Says Menzies:

I do not believe that the real life of this nation is to be found either in great luxury hotels and the petty gossip of so-called fashionable suburbs, or in the officialdom of organized masses. It is to be found in the homes of people who are nameless and unadvertised, and who, whatever their individual religious conviction or dogma, see in their children their greatest contribution to the immortality of their race. The home is the foundation of sanity and sobriety; it is the indispensable condition of continuity; its health determines the health of society as a whole.
As Brett observes, there's a bit of a slip here, as it appears that Menzies is about to give us a three-part class scheme described in terms of housing, but when he gets to the workers, he refers instead to their 'officialdom', not their housing. Brett says 'it is as if the working class do not also have wives and homes and children; or rather, in as much as they do have them, they are invited to see themselves as middle class.'
This is Menzies' unspoken project in 'The Forgotten People': to open up the domestic sphere to politics, and set a conservative liberal agenda there.

Menzies works on that agenda as he goes on to elaborate what he means by 'homes material, homes human and homes spiritual'. His themes run across the headings, but like Menzies we'll consider each in turn. First, 'homes material':

The material home represents the concrete expression of the habits of frugality and saving "for a home of our own". Your advanced socialist may rage against private property even while he acquires it; but one of the best instincts in us is that which induces us to have one little piece of earth with a house and a garden which is ours: to which we can withdraw, in which we can be among our friends, into which no stranger may come against our will.

If you consider it, you will see that if, as in the old saying, "the Englishman’s home is his castle", it is this very fact that leads on to the conclusion that he who seeks to violate that law by violating the soil of England must be repelled and defeated.

National patriotism, in other words, inevitably springs from the instinct to defend and preserve our own homes.

We won't spend too long dealing with Menzies' connection of home ownership to patriotism, which we think is specious: after all, at the time of his speech, about half of Australian households rented and we're inclined to think (though we have no figure on this) that the typically young males enlisted in the armed services were less likely to be home owners than tenants or occupants of the parental home. For very many servicemen, home ownership came after their service, through the assistance of the War Service Homes scheme. More on that in a second.

We take the main point here to be that for Menzies, the material home should be one that is saved for, acquired and owned by the individual as their private property. Home ownership is one of our 'best instincts', says Menzies - and later, when in government, his housing policy would support and reinforce that instinct.

As we've observed previously, state support for home ownership was a feature of social liberal government since the turn of the century, preferred over public housing even by progressives. Australia's largest state program of direct assistance for home ownership was the War Service Homes scheme – not conceived by Menzies, but continued by him. Commenced in 1919, the scheme financed the construction of 310 000 dwellings to 1970 – 265 000 of them in the period after 1945. The scheme lent ex-servicemen funds for housing on very generous terms (in 1971, the interest rate was 3.75 per cent, over 45 years).

The distinctive contribution of the Menzies Government to support for home ownership came in through its changes to the Commonwealth-State Housing Agreement (CSHA).

The first CSHA, commencing 1945, had inaugurated Commonwealth funding of State public housing authorities and, relatively speaking, hugely increased their share both of house building – in New South Wales, the Housing Commission built on average about 18 per cent of dwellings completed in the decade from 1945 – and of the total housing stock – in New South Wales, from a mere 0.2 per cent in 1945, to 3 per cent in 1954.

The 1956 CSHA, on the other hand, diverted 30 per cent of Commonwealth funds to co-operative building societies, permanent building societies and, in some cases, state banks, to subsidise finance for home ownership. In the subsequent decade, public housing's average share of completions declined by a similar proportion (in New South Wales, to about 12.5 per cent).

Moreover, public housing authorities also could sell much more of what they built – something Menzies and the State Premiers had been looking forward to for some time. (After a conference with the premiers in 1953, Menzies is reported to have said 'I do not want to see a state of affairs in Australia – and I am glad to gather that the premiers do not – in which governments are the universal landlords. I think that is a shocking position for governments to get into.') In 1956-57, the NSW Housing Commission built 3030 dwellings – and sold 3197. By 1969, the Commission would end up selling one-third of all the dwellings it had ever built (that is, 32 193 dwellings sold from 93 817 built to that date).

From our experience of talking with people about housing, the historical role of public housing in facilitating home ownership in Australia is not much remembered these days. One wonders how many of the present generation of politicians and policy makers who have run down public housing, have parents who bought their first home from the Housing Commission.

Back to 'homes human and spiritual' in part 2.