Wednesday, June 17, 2015

Happy anniversary, Residential Tenancies Act - part 2

On June 17th 2010, the Residential Tenancies Act 2010 became law in New South Wales. It came into operation a little later, on January 31st 2011, but it has now been on the statute books for a full five years. From today, the responsible Minister can commence the statutory review of the Act to see if its policy objectives remain sound, and whether its terms are still valid. He's got 12 months to table his report.

Looking forward to a comprehensive report

These questions need to be put into a bit of context. We should start by asking - what's been going in the New South Wales rental sector over the last five years?

Well, it's grown. There were 42 392 more renter households at the 2011 Census than at 2006, which itself saw an increase of 55 335 from 2001. There is no reason to think this trend has slowed, but research tells us the composition of these renter households has changed quite a bit over time.

Data from the tax office shows the number of rental properties in New South Wales has grown, too. From 2009-10 to 2012-13, the latest year for which this data is available, there was an increase of 85 930 properties in the market. In terms of its proportion to the number of rental properties across Australia, this is hovering around 30% but is in slight decline - probably due to the considerable price differences between NSW property and the rest of Australia.

This is all but confirmed by Lending Finance Data from the Australian Bureau of Statistics. The value of loans for housing investment in New South Wales has risen from 31.4% of the Australian total in 2009-10, to 41.3% in 2013-14. An eye-watering $51.9billion was lent to speculators buying up New South Wales property in 2013-14. We shudder to think what this figure will be for the end of the current financial year, with reports of a $5billion stamp duty windfall for the NSW Government giving a clear indication of what to expect.

It is absolutely clear that landlords have spent a fortune on their rental properties over the last five years. No doubt this will continue into the future. But, when we look at what they spend their money on, it is also clear that they would incur most of their expenses regardless of whether or not they have a tenant.

Of course, tenants have spent a fortune, too. The same tax data that tells us how much it costs to be a landlord shows how much rental income they've declared to the tax office each year. And tenants have paid a lot. In 2009-10 they paid $9.7billion in New South Wales. This had risen to $12.1billion in 2012-13. We expect it will have gone up even further since then.

These are all useful things to keep in mind when contemplating the policy objectives of a law like the Residential Tenancies Act 2010, and whether its terms remain valid.

We'll take a look at the terms of the Act in a forthcoming post.

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