Friday, March 31, 2017

What's wrong with keeping a sneaky pet?

Kirsten Robb penned an interesting piece for Domain this week, outlining how real estate agents know when you're keeping a sneaky pet.

Thing is, we know you know, and we know you know we know. We also know that because you know, and because we know you know, you've probably given implied consent for us to keep the pet. It's now just a matter of evidence - and the system works!

Actually, no, it's broken, and Robb's article points us to two key problems that could do with a fix. While discussing how to easily evict a tenant for keeping a sneaky pet, by giving them a termination notice without grounds because keeping a pet is often not actually a breach of a tenancy agreement, Sam Nokes of the Real Estate Institute of Victoria's property management chapter says:
I can’t tell you how many times I’ve had owners that would have said yes to a pet, but because the tenants lied and hid it from them, they’ve said no — the dishonestly reflects a general dishonesty.
The first problem is easy enough to spot - landlords using "no grounds" eviction notices to end tenancies after forming a negative view of a tenant. Landlords should always be required to give a reason - one that they are prepared to stand by - when requiring a tenant to leave. The law should provide landlords with some additional grounds for termination, such as "the property is no longer available for rent." They should no longer be able to mask their bad reasons, such as "I have formed the view that the tenant is dishonest", by ending tenancies without grounds.

The idea that tenants have to ask the landlord for permission to keep a pet is the second problem. It encourages dishonesty, and facilitates mistrust, in situations where a landlord might otherwise take a reasonable approach to the matter. Renting laws would be better served by taking any requirement for consent to keep pets out of the equation, by prohibiting the use of "no pets" clauses in tenancy agreements. As we said not long ago, there are some good reasons why landlords should get behind this. Perhaps we can add "because honesty is important" to the list.

Thursday, March 16, 2017

Third anniversary of the announcement to sell all public housing properties in Millers Point

(To Jack Mundey Place … photo from website of Property NSW)
This Sunday, 19 March 2017, is the 3rd anniversary of the announcement by Minister Pru Goward, currently Minister for Social Housing, of the sale of all the public housing properties in Millers Point. There's a march to celebrate those who have stayed and to commemorate a lost community. For details of the march, visit the 'Save Our Public Housing' website here. If you miss the march or it rains, come to the sausage sizzle on the Village Green or the Harry Jensen Community Centre across the road at 17 Argyle Street.

Millers Point enjoys ‘an iconic location in the heart of Sydney Harbour’. These are the words of the website of Property NSW. Here, you will find the NSW Government flogging the 'exclusive High Street ... an exceptional opportunity'. So far in 2017, McGrath Real Estate, on behalf of the NSW Government, has listed 6 High Street blocks, each comprising 4 units that provide a selection of 2 and 3 bedrooms, and four other properties elsewhere in Millers Point. Included is the former infamous 'Hit or Miss Hotel' which was licensed from 1852 until 1923 and remodelled into five apartments in the 1930s, and two terraces to be sold in one line. Ray White also is selling a pair of adjoining terraces currently configured as seven one-bedroom apartments. Price tags range from a mere $2 million to $5.5 million.

Millers Point is fast becoming an enclave of the rich. Yet, not so many years ago, Housing NSW produced a wonderful publication on the Millers Point community. It is called 'Millers Point Oral History Project: Summary Report', 2007 and was written by Frank Heimans for Housing NSW. It reads (page 6, 7, 19):
Millers Point … has a very integrated community who love living there and have a sense of belonging and allegiance to the place. … The residents have a rich reservoir of memories of living at the Point, going, in some cases, as far back as six generations. They were born, worked, lived and died in the houses at Millers Point. They also have a strong sense of history and heritage. It’s a community within a community where everyone knew each other through work and place of living.
Just a few years later, the NSW Government decided to evict them all ...

At 21 March 2017, 143 properties have been sold for $374.06M, with a median sale price of $2.41M and sales in the range $1.54M and $12.30M. This represents 130 sales, with the top price being for a block of 12 one-bedroom apartments covering 7 properties sold in one line. Based upon sales to date, an estimate of funds to be received from these sales is $681.23M. This is far in excess of the Government's target of $500 million.

But at what cost? At the beginning of the process 579 tenant and household members (in 399 tenancies) were to be relocated. At 15 March 2017, 548 tenant and household members (in 378 tenancies) have either vacated or are committed to moving, with a further 31 (in 21 tenancies) still uncommitted to moving. Three 'Notices of intention to issue a Notice of Termination' have been served on remaining tenants. You will find information about this process here. 'Brutal' is how residents described the actions of Housing NSW in Millers Point. Professor Alan Morris of University of Technology Sydney documented the experiences of residents in a report called 'A contemporary forced urban removal: The displacement of public housing residents from Millers Point, Dawes Point and the Sirius Building by the New South Wales Government'. Shelter NSW and Tenants' Union of NSW held a forum in October 2016 to discuss Professor Morris's findings.

By the second half of 2016 the NSW Government was pitting residents who remained against Sydney's homeless population. It implied that the Millers Point residents were selfish and prejudicing homeless people getting housing. In a media release, then Minister Brad Hazzard said: ‘I thank the Millers Point residents who have moved for understanding the need to provide more social housing for the 60,000 vulnerable people on the waiting list.’ No mention of the trauma endured by residents of Millers Point being forced out. Indeed, the then Social Housing Minister is quoted as saying: '... sometimes I have to ask people to come on that journey with us.' It poses the question, if portfolios such as health and education are not funded by cannibalising themselves, then why must social housing be funded this way?

Across 2015 and 2017 the Tenants' Union of NSW made submissions to Elder Abuse Inquiries of both the NSW Legislative Council and the Australian Law Reform Commission (ALRC) here and here. We argued that a government policy, in itself, may constitute a form of elder abuse. We submitted that the NSW Government’s decision to relocate all the social housing tenants in the suburb of Millers Point is an example of systemic elder abuse. See, for instance, the story of Flo Seckold, who moved out in February of this year.

A win for the residents over the last year was the Sirius Building becoming subject to a green ban. This followed a loss for residents when the NSW Government refused to accept the unanimous recommendation of the Heritage Council of NSW for it being given heritage status. The Land and Environment Court will consider this matter on 6 April 2017. At this hearing, residents will argue that such a rejection by the Minister for Planning did not comply with the relevant law. You can read more about this process in news reports here and here. Note the Sirius Building was not included in the original social impact assessment for Millers Point and The Rocks.

What does this all mean? A recent blog of Martin North of Digital Finance Analytic may hold part of the answer. His blog is called 'Property Investment and the Financialization of Housing'. The financialization of housing has its origins in the rise of neo-liberalism. C.W. Chun ('Exploring neoliberal language, discourses and identities' in S. Preece, ed. The Routledge Handbook of Language and Identity, London: Routledge, 2016, p. 560) argues that in a neo-liberal world 'nothing will remain untouched by the drive to monetise every imaginable and imagined private and public domain constituting and constitutive of our everyday lives'.

Martin North refers to a report of the Special Rapporteur to the Human Rights Council of the United Nations. At Paragraph 6, it reads:
In many countries in the global South ... the impact of financialization is experienced differently, but with a common theme — the subversion of housing and land as social goods in favour of their value as commodities for the accumulation of wealth, resulting in widespread evictions and displacement.
Sounds like Millers Point, Sydney, Australia ... even though we're a so-called first world country. (For more commentary on the report of the Special Rapporteur, visit here.)

For more on Millers Point over the past three years, visit the Tenants' Union of NSW previous blogs here and here. We have said on many occasions: 'Come on NSW Government, allow the remaining older residents a real choice'. This may be ageing-in-place in their current homes and, an alternative that is supported by the residents, retain some of the units within the Sirius Building and some of the workers cottages for a semblance of a social mix. It's not too late! A win-win situation! You'll make your money and older residents still there can stay.

[Sales data updated on 21 March 2017]

Thursday, March 9, 2017

Why landlords should support pets in rentals

The Daily Telegraph has published an article about a push from the left of NSW Labor for a ban on "no pets" policies in rentals. We've previously discussed why reforming no pets clauses is a really good idea. This is a good signal that significant parts of the Labor party are realising that property ownership is not the be all and end all of the way we create homes. For many people, creating a home includes caring for a pet.

The NSW Greens have held renter positive policies for a while now, and the push from Labor left indicates that the political appeal of renters across the spectrum is growing. We encourage all parties to adopt these kinds of policies. To help in this effort, we'd like to address the landlords in the room, and talk about why you should support this push, and whether you support Labor, Liberal, the Greens or the Christian Democrats, let your representative know that you are on board.

It is better for the animals.
Even if you don't like your tenants, from an animal welfare point of view this is a no-brainer. The RSPCA has been calling for these changes up and down the east coast - and their interest is clearly on the animal welfare side of this issue. Our shelters are full, and there is a large and growing population of people crying out to help.
No one is proposing Palominos in penthouses, or Angus cattle in apartment complexes. A reasonable restriction on the types of animals allowed in homes is acceptable - but should be set with the animal's welfare and needs of the community as the guide.

It is better for your insurance.
Every sensible landlord holds insurance on their investment. For most good insurance policies these days, pets are covered - but only if you have declared them to the insurance company.

The pets are here, whether you know about them or not. While many tenants don't have pets for fear of being caught and losing their loved one, sometimes tenants who owned a pet before moving also couldn't face the thought of their companion being put down in the shelter - so they conceal them or pretend they belong to neighbours. Isn't it far better that tenants can be honest and tell you about their pet and you can enjoy the confidence knowing that even if there is some damage over the bond, your costs will be covered?

And in all likelihood, it won't cost you.
Tenants pay bonds. Less than 10% of bonds are claimed in full by landlords, and in our experience the majority of those claims are actually made on rent arrears or tenants leaving the lease early. That means you've got a whole lot of bond to give you comfort around the more minor every day costs like fumigation, and extra wear and tear on carpets or floorboards. Most pet owning tenants pay for these things before it gets to the bond anyway, but the system is there.

Even if you do need to make a claim, no worries - us tenants have already subsidised your tribunal application. We pay $14 million a year from the interest on our bonds to the Civil and Administrative Tribunal to make sure your costs aren't too high.

In the end, the question you really need to ask yourself is - would you vote against this face?

Wednesday, March 8, 2017

News from down the Hume...

The Victorian Government has shown plenty of good form of late, kicking goals by announcing a suite of new housing policies: funds for social housing, new supply, first home buyer grant boosts, stamp duty exemptions, shared-equity schemes, a vacant property tax and long fixed term tenancies! Ticking all the boxes, right? Could this be the game changer Victorians have been waiting for, and should New South Wales promptly follow suit? Or is it yet another case of a government dropping the ball on housing?

Let's take a look.

Reform, growth and better outcomes for social housing
Announced late in February, this includes the establishment of a $1billion Social Housing Growth Fund as part of a collaboration amongst "government, the private and philanthropic sectors", an additional loan scheme to give community housing landlords access to cheaper finance, the transfer of some 4000 properties from public housing to community housing management, and a commitment to push the federal government not to abandon the National Affordable Housing Agreement.

What does this mean?
There has been a long and steady push across Australia, over many years, to move away from Government owned and managed social housing - or what many of us might once have called "public housing" - and place it in the hands of the non-government sector. This is reflected in the National Affordable Housing Agreement and the relatively recent establishment of a National Regulatory Scheme for Community Housing. It explains the continued rise of the Community Housing sector.

Governments are spending less and less on the construction of new public housing, and hoping more and more that the non-government sector will partner with private interests to build and manage it for them. As these partnerships develop, large swathes of our governments' existing public housing stock is being transferred over to Community Housing landlords to manage, and in some cases title has also been transferred. In other places, public housing is being demolished and rebuilt, with Community Housing landlords and private developers dividing up the new stock between them.

Should NSW do this?
Growing the social housing sector by supporting and funding Community Housing landlords makes sense, but it shouldn't come at the expense of our existing public housing system. In New South Wales the horse has already started to bolt. We've got a long history of transferring properties from the Land and Housing Corporation to a range of registered Community Housing landlords, and we have plans to transfer about another 18,000 towards the end of this year. We've established our own Social and Affordable Housing Fund, which looks remarkably similar to the Victorian model, that is intended to give Community Housing landlords access to a guaranteed revenue stream if they build and manage new social housing dwellings without the help of government.

We don't as yet have a guaranteed low-interest lending facility for Community Housing landlords, and our Government has made no public commitment to the National Affordable Housing Agreement. Given the direction our social housing policies are taking, these would both be good things for New South Wales to do.

Unlocking new communities and affordable housing
Also a late February announcement, this is essentially a rezoning package that will allow new residential housing to be built across the outer suburbs of Melbourne. It comes with a commitment to build 100 new social housing dwellings, and makes reference to experimentation with "inclusionary housing".

What does this mean?
New supply means more affordable housing, right? Well, taken on its own that's not always the case. This was explained quite well in a recent article by Peter Phibbs and Nicole Gurran in The Conversation - well worth a look if you haven't already seen it. Essentially, housing markets are not like other markets, where supply and demand are said to impact upon one another in predictable ways. With housing, bringing new supply online tends to coincide with rising prices, because it is rising prices that stimulates demand.

The Victorian Government's mention of inclusionary housing here is interesting. We expect this would require developers to set aside a proportion of any newly constructed housing for Community Housing landlords to manage as affordable rental housing. This usually means setting rents at around 80% of market value, and renting to low income workers. It's not clear what the impact of rezoning and redevelopment would be on rents in affected locations, though, but we can expect them to go up because affordability will be set against the value of newly developed, higher value homes. Thus "affordable housing" rents might actually not be as as affordable as we'd have hoped.

Should NSW do this?
Any discussion about housing affordability should place a strong focus on increasing supply - this is especially especially true for policies at state and local government levels. This is reflected in a number of rezoning and urban renewal discussions around Sydney, such as for Arncliffe and surrounds, the Central to Eveliegh corridor, Sydenham to Bankstown, the Bays Precinct, Riverwood and Telopea, to name a few. As these discussions progress, it is clear that urban renewal and redevelopment must be approached with sensitivity to established communities who stand to lose as much as others might gain. It is also clear that good urban renewal requires well developed transport and infrastructure policies as well as a focus on the design and delivery of good housing options.

The Greater Sydney Commission is toying with small targets for inclusionary zoning as part of its grand new plan. This is great, but it needs to go further. Indeed, our Government could implement an inclusionary zoning scheme that covers even greater parts of the state, so that more affordable housing becomes a feature of every new residential development where it's needed. But, as we've cautioned above, this shouldn't be seen as a solution in isolation because affordability will be set against the value of newly developed homes. Renewal and redevelopment implies bringing higher-value stock into the neighbourhood, and this puts upward pressure on final costs to the householder. It is also not in renters' best interests if new developments are driven by investors' appetite for capital gains, rather than stable housing for families and others who need it.

First home buyer grant doubled for regional Victoria
Announced in early March, the Victorian first home owner grant - or first home builder grant as it might better be known - will double from $10,000 to $20,000 for regional properties from July 1st.

What does this mean?
The grant is only available for first home buyers who purchase or build new homes valued at $750,000 or less. In theory it encourages first time buyers to increase supply by commissioning new construction or buying off the plan - but homes at below $750,000 are getting harder and harder to find. Doubling the grant for "regional" buyer/builders is likely to stimulate construction and development outside of Victoria's metropolitan centres, and give first timers an even shot against investors who are happy to borrow up big and negatively gear. But it's not likely to have much impact in areas where highly paid jobs are hard to come by. It might just end up pushing up prices in parts of the state where housing is still nominally affordable, as the availability of grants are factored into land values and developer costs.

Should NSW do this?
NSW already limits first home owner grants to newly built dwellings, but it doesn't double the grant for regional buyers. The newly announced Victorian scheme does bear some resemblance to the old Regional Relocation Home Buyers Grant, which could be applied to any home 100 kilometres or more from any metropolitan centre in NSW purchased for less than $600,000 (or land under $450,000). It was later amended to apply to homes 50 kilometres or more from a metropolitan centre, to give it a bit of a kick-along. The scheme ended late in 2014 amidst claims that demand for it was weak. Reports at the time confirm this, citing then Deputy Premier Andrew Stonor:
The Regional Relocation Homebuyers Grant - which has no direct tie to employment - has not been as successful as the Skilled Regional Relocation Incentive in stimulating growth and employment in regional NSW and therefore it will not be continued.
So, any inflationary concerns of a first home builders grants aside, it appears attracting first home builders to regional areas is not the best way to develop regional economies. You've got to put jobs there first. Even so, if first home buyer/builders aren't so easily lured from the city to take up an option in the regions, the impact on rental markets in the city will be negligible. On the other hand, rental markets in the regions could start to falter, as local renters move to owner-occupation while increasing supply and creating new vacancies, and this could prompt regional investors to look to city markets instead. Given the majority of investors buy established dwellings rather than newly built homes, and those who do buy off-the-plan buy properties that are not well suited to the needs of renters, this would compound the affordability problems that are already at play for renters in New South Wales' metropolitan centres.

Stamp duty abolished for first home buyers
Also announced in early March, stamp duties will be abolished for Victorian first home buyers on properties valued at under $600,000. Concessions will apply for properties valued between $600,000 and $750,000. Significantly, this will apply to both newly built and established dwellings, while exemptions for investors purchasing newly built homes will be wound back.

What does this mean?
Stamp duties are levied as a percentage of a property's purchase price, on a sliding scale. In Victoria, properties purchased at between $130,000 and $960,000 attract duties of $2870 plus 6 per cent of the value that exceeds $130,000. Thus, a first home buyer purchasing a property worth $600,000 will save around $15,000. Or, as is more likely, first home buyers looking to buy at around the $600,000 mark will feel like they have an extra $15,000 to spend. Set against an investor who is prepared to borrow up big because they can negatively gear, this could help to level the playing field. But it won't make houses more affordable. It will instead bring first home buyers back into the bidding war, with more money in their pockets. As it wont do anything to stimulate new supply, it is unlikely to create new rental vacancies by removing frustrated home buyers from the rental market. They'll most likely be displacing a household and creating new demand for another property anyway.

Should NSW do this?
First home buyers in New South Wales are already exempt from paying stamp duties on the purchase of newly built homes valued at up to $550,000, and concessions apply for newly built homes valued at between $550,000 and $650,000. Exemptions also apply to land valued at up to $350,000, and concessions for land valued at between $350,00 and $450,000. Stamp duties are payable where a first home buyer purchases an established dwelling.

Theoretically the New South Wales exemptions are preferable to those announced for Victoria, because they act as a direct stimulus for new supply. However, property in New South Wales is no more affordable today than it was when these exemptions were introduced in 2012. Stamp duty exemptions and concessions can not rightly be regarded as a housing affordability measure.

Shared-equity schemes
The Victorian Government will set up a new scheme to purchase up to 400 homes and on-sell a 75% stake in them to first home buyers. The scheme will retain the remaining 25% interest in each property.

What does this mean?
There are a number of variables that need to be considered before this can be properly answered - what, aside from equity, does a 75% stake in property get you? Who covers the costs of ongoing repairs and maintenance? Who receives the gain from any capital improvements? Can the property be placed into the private rental market some time down the track?

There's no doubt these questions and more can be answered. There's also no doubt they'll need to be before the scheme can be properly rolled out, and we look forward to seeing the detail. But questions aside, there's still the matter of whether or not it's a good idea. Some have suggested it will encourage home buyers to take on a more expensive home than they might otherwise have considered - or even have been able to afford! - which could have an inflationary impact. We're inclined to agree, but in a policy environment in which house price reductions are never, ever contemplated a well designed shared equity scheme might be about the best a frustrated home buyer could ask for.

Should NSW do this?
There is no comparable program in New South Wales. As we've suggested, we're not entirely convinced it's the best idea ever, but we'll be keeping an eye on it. Again, if it is to have any beneficial effect on the rental market it would need to be directly linked to the construction of new homes.

Vacant residential property tax
The proposed introduction of a Vancouver style vacant property tax has also been announced. This will be a 1% levy on the "capital improved" value of property in Melbourne's inner and middle rings that sits vacant for more than six months in any year. Of course, exemptions will apply, and it will be up to property owners to self-nominate their liability to pay the tax. Exemptions include properties used as a holiday home, those needed for city-based workers who principally reside elsewhere, deceased estates and homes whose owners are temporarily overseas.

What does this mean?
Put simply, habitable properties in Melbourne's inner suburbs, that are left vacant, will attract a new tax. This will encourage property owners to put their dwellings to more effective use, either by selling them or renting them out. But the exemptions may be too broad, and too easily applied, for the tax to have any real impact. Property owners - especially those who do not live in Australia - might be prepared to try their luck and avoid notifying the authorities that their property qualifies for this new tax. Nevertheless, the introduction of a vacant property tax sends an important message.

Should NSW do this?
There is no similar tax for Sydney, and there ought to be. The ideal solution of a broad based land tax that would apply regardless of whether a property is vacant remains our hope, but a vacant property tax is a good step along the way.

Long fixed term tenancies
... and now for our favourite announcement: long term security for tenants and landlords. The Victorian Residential Tenancies Act will be amended so that fixed term tenancy agreements of five years or more are no longer excluded from its coverage, and a new standard long term tenancy agreement will be developed. A website will be developed to help landlords and tenants who want a long term tenancy agreement to find each other.

What does this mean?
Long fixed term tenancies of five years or more are rare throughout Australia, and Victorian tenancies are no exception. The Victorian law reform process seems to have concluded that bringing five year agreements under their renting laws will encourage their use - but actually the opposite is more likely to be true. Not being bound by the provisions of a Residential Tenancies Act means that parties are free to contract with one another as they see fit, and can enter into agreements that are suited to their specific needs. When forming a long term legal relationship as a landlord and tenant, being able to determine who takes responsibility for what, and how proprietary interests are to be shared between the parties without regard to a particular regulatory scheme, should encourage people to negotiate and take on such agreements in much higher numbers. But it has not, which tells us that it is not the prevailing regulatory environment that is hindering the establishment of long fixed term tenancies.

None-the-less, the idea that long fixed term tenancies need to be encouraged by producing "standard long term agreements" that alter the established, legislated rights of tenants and landlords - such as we have recently been discussing in New South Wales - persists. The Victorian announcement suggests a new standard form long term tenancy agreement will be developed in consultation with stakeholders - much as we have been discussing in New South Wales. From what we are hearing, one of the first suggestions to find its way into these discussions is to shift the repairs and maintenance obligations from landlords to tenants - much as we have been discussing here in New South Wales.

Should NSW do this?
Encouraging the use of longer fixed term tenancies is certainly a worthy discussion, but as we've seen it is not really the regulatory environment that will drive them. Our Residential Tenancies Act already covers long fixed term tenancy agreements, and it already allows certain mandatory terms of a tenancy agreement to be waived for fixed term agreements of 20 years or more. But, just like in Victoria, long fixed term tenancies are very hard to come by in New South Wales. Trying to encourage their use by legislating reduced rights and increased costs for tenants who would like one is not something we're comfortable with.

On the other hand, we know that stability and security are critical issues for tenants, so we can understand the appeal of an announcement like this. When people hear "long term tenancies" they probably think "protection against unfair eviction". That's something we'd like to see built into our renting laws, too, and it is possible that long fixed term tenancy agreements could deliver this. But to do that in any kind of meaningful way long fixed terms would need to become the standard, rather than something that could be offered by landlords on a take-it-or-leave it basis. This does not appear to be what's getting traction in Victoria, and it is not what's being considered in New South Wales.

The website is an interesting idea though, and it could be worth setting something up along similar lines and using it to inform any decision about introducing a new standard long fixed term agreement in New South Wales. It would give a clear indication of the demand for long fixed term tenancies, and could also give us some insight into the kinds of terms on which landlords would be willing to offer them. Moreover, it could tell us whether tenants would genuinely accept those terms. For this to be useful, landlords would need to share information and data relevant to the terms they are prepared to offer. For instance, if a long term tenancy is to be offered on the condition that a tenant takes on repairs and maintenance obligations, details of the condition of the property would need to be disclosed. This would include, for instance, an independent assessment of projected repairs and maintenance costs over the course of the agreement.