Anglicare Rental Affordability Snapshot 2018

Anglicare Australia have released their latest 'Rental Affordability Snapshot' and find that the rental crisis is worse than ever. The Snapshot surveyed over 67,000 rental listings across Australia and found that there is a chronic shortage of affordable rentals across Australia. The Snapshot is consistently a powerful reminder of how tough it can be surviving in the rental market on lower incomes.

(C) RL Crabb 2015

We've had a look at the numbers for NSW - it's bleak.

Across Sydney, for any household type with children and relying on any form of income support there were 0 properties available and affordable for rent.

Across NSW, for any singles on Newstart or Youth Allowance there were 0 properties available and affordable for rent, including in sharehousing.

Across the rest of the country
– 485 rentals were affordable for a single person on the Disability Support Pension
– 180 rentals were affordable for a single parent with one child on Newstart
– 3 rentals were affordable for a single person on Newstart
– 2 rentals were affordable for a single person in a property or share house on Youth Allowance
– 0 rentals were affordable for a single person on Newstart or Youth Allowance in any major city.

One thing to keep in mind with the Rental Affordability Snapshot and most measures of rental affordability is that they are measuring the rents at the point people are moving. The complete absence of available and affordable options may weigh heavily in the minds of tenants who are living in substandard, inappropriate but not quite as expensive accommodation - what are their real options? Even if they were to move, would any one approve their application?

One of the findings of the report is that there are more rental properties available than before - but it hasn't helped with affordability. The market is failing to provide homes for people on lower incomes. What we need is a massive increase in the number of "market-proof" housing - housing supply which is aimed not at achieving the most profitable outcomes, but the most necessary. This is the role of good government - we hope they are listening!

Getting in to hot water: energy charges for common hot water systems

This post authored by Grant Arbuthnot, Principal Solicitor at the Tenants' Union.There has recently been some developments in the NSW Civil and Administrative Tribunal for renters with common hot water systems. The Tribunal has found, and the TU agrees, that tenants are not liable for paying the energy bill required to heat hot water systems which are shared by multiple homes.

What is a common hot water system?

Some blocks of flats have common hot water systems.  This is where one water heating plant provides hot water to all the flats – individual flats do not have their own hot water systems. This was probably to keep the costs of building the flats lower.

How do they work?

Most common hot water systems are gas fired.  A large central hot water heater is connected to each flat.   Some have a circulation pump to reduce waste by cold water coming from the tap first.  The good systems are well insulated and well maintained. 

In a flat with its own hot water system, the tenant pays the gas or electricity bill used to heat the water. However, this is through an account with their own separate meter.

How were bills being calculated in common hot water systems?

Gas and water entering the plant are metered to allow calculation of the energy per water volume ratio (also known as a common or conversion factor) for the system, over a billing period.  This ratio is then applied to the water volume measured by each flat’s hot water flow meter.  This produces a figure for gas energy for each flat that can be multiplied by the tariff charged by the energy provider on the gas used.

What can go wrong?

We find that with both common and individual hot water systems, some are not well insulated or maintained.  The bad ones leak heat and water and they deliver much cold water, at the tap, before it gets hot.  Gas combustion may also be inefficient by neglect.

In both types of hot water system, because the tenant pays the bill, there is no incentive for the landlord to ensure the efficiency of the system unless the inefficiency can be seen as a repair issue. When tenants complain about common hot water systems, inefficiency is always mentioned. That is, it is very expensive to heat the water and users receive much higher bills than they would expect.

See the end of the article for an explanation of how we might calculate efficiency, and what we should expect in terms of the cost to heat water. It is not unreasonable for tenants to expect an efficiency of 70-80%. Two bills we have obtained from tenants were almost half as efficient and there are common hot water systems that are even more inefficient again.

Good news!

However, there is good news for tenants with common hot water systems. The Residential Tenancies Act 2010 says, at section 38, that the tenant shall pay for gas supplied to the tenant at the premises, if the premises are separately metered.  Further, the Act says, at section 40, that the landlord shall pay for gas supplied to the tenant at the premises if the premises are not separately metered.

With a common hot water system the gas is not supplied to the tenant at the premises or separately metered.  Therefore, the landlord shall pay the gas bills.

This has been backed up by two recent tenancy cases (though neither have been published):

In one, the landlord agreed that the landlord should pay the gas bills before it went to a decision.

In the other, NCAT decided that the landlord should be paying the bills going forward and ordered repayment of some of the tenants’ previous gas payments.

So, if your apartment has a common hot water system, where more than one unit is sharing the hot water tank, then you are not obliged to pay for the gas or other energy used to heat the water. If you think you might have a system like this, get advice from your local Tenants’ Advice and Advocacy Service.

Calculating efficiency

The bills people receive for common hot water systems are confusing because the units of volume are not litres and there are figures called Units, Multiplier, Conversion factor, Heating value, Pressure factor and Base usage.  Bills do state daily use of energy and compare it to prior bills.  This is helpful, but it does not tell you how efficient the plant is.  An efficiency figure would tell us what proportion of the heat of the gas used is actually getting into the water.

It is possible to estimate the efficiency of your common hot water system, by making two assumptions:

• it takes 4.186 kJ to heat a litre of water one degree Celsius &
• the water is being heated 50⁰ (from 15 to 65⁰C)

Note that the second assumption may vary between systems and weather conditions.

Based on these assumptions, 209.3 kJ per litre (4.186 x 50) would be 100% efficient.  This can also be expressed as 0.2093 MJ/l.

The two bills we obtained from tenants have effective energy per water volume ratios of 0.494311 and 0.49123.  The bills use MJ as the energy unit.  Assuming the order of magnitude for MJ/l as 0.49… the efficiencies for the bills are:

-        44.33% (0.4433 = 0.2093 /0.494311) &

-        42.61% (0.4261 = 0.2093 /0.49123) respectively.

EWON (Energy & Water Ombudsman NSW) investigated the gas bills of one of the tenants and reported that the common factor [or conversion factor] for an efficient common hot water system ranges from . . . 0.3 to 0.7 . . .

Doing the same calculation (divide into 0.2093) for that range we get:

Factor	% efficiency
0.3	69.77
0.4	52.33
0.5	41.86
0.6	34.88
0.7	29.90

What could we compare these figures with?

An American National Standards and Technology study from the 1990s demonstrates that the greatest difference to thermal efficiency of electric domestic hot water systems is made by insulation.  The uninsulated units averaged 40.6% (which is similar to the cases we described above) and the insulated units averaged 88.2%.  American advertising claims 80% thermal efficiency for a conventional domestic natural gas hot water system.  Elgas (Australia) correlates 4 to 7 star ratings with 73 to 94% for LPG domestic hot water systems.

Note that all the above figures are for the water heating plant only.  They take no account of loss of heat or water between the plant and the flats.  Calculating efficiency figures at the tap would need temperature measurements at the tap.  That would provide information on the efficiency of the whole system, plant to tap.

UPDATE

The second NCAT decision referred to above was briefly subject to appeal - but the appeal by the landlord has not continued.

Wealthy landlords and more sharehousing: how the rental sector is changing

This article by Chris Martin, UNSW was originally published on The Conversation. Read the original article. 

[TUNSW comment: This research highlights the need for modernised renting regulations. Renting in Australia in the 21st Century is increasingly for everyone - but our laws are designed to entrench insecurity and diminish the ability of renting households to create homes for themselves.]

 More people are becoming heavily indebted by buying rental properties and shared accommodation is flourishing, as third party tech platforms help people find a place without a real estate agent.
A new report from the Australian Housing and Urban Research Institute explains how the private rental market is changing over time for both landlords and tenants.

Over the 10 years to 2016, the number of renters grew 38% - twice the rate of household growth. More renters now are couples, or couples with children, so it seems the sector is shaking its image of unstable housing or perhaps these people are left with few other options.

Households by type, 2006 and 2016

 

The report analyses data from the 2016 Census, the 2013-14 Survey of Income and Housing and the 2014 Household, Income and Labour Dynamics in Australia (HILDA) Survey. It also draws on interviews conducted with 42 people involved in all aspects of the private rental sector: financing, provision, access and management.Rental property ownership also grew. We found the number of households with an interest in a rental property grew and the number that own multiple properties grew slightly as well.

But the typical landlord is still the conventional “mum and dad” investor. Two-thirds of rental investor households have two incomes, and 39% have children.

However they are also mostly high-income and high-wealth households: 60% are in both the highest income and highest wealth bracket. Interestingly, about one in eight landlords is themselves a private renter.

Housing finance ($A), 2000 - 2016

The biggest change in ownership is in finances: owners of rental properties are relying more heavily on debt.

Financing rental properties

 

The people we interviewed highlighted the Australian Prudential Regulation Authorities’ (APRA) guidance to lenders on loan serviceability calculations as having the greatest impact on overall investment levels and investor decisions.

Adding to the complexity is the proliferation of intermediaries, such as mortgage brokers and wealth advisers. These advisers are telling borrowers what lenders and loan products to use to maximise their borrowing power and negotiate lender and regulator requirements.

Houses are the most commonly rented in Australia, but everywhere rental markets are moving away from this and towards dwellings like apartments.

There’s now more diversity in rental properties too. For example the building of high-rise student accommodation, “new generation boarding houses” and granny flats.

These allow landlords to house more people in the one building, increasing revenue and making management more efficient.

The informal sector of shared accommodation appears to be flourishing, like improvising shared rooms and lodging-style accommodation in apartments and houses.

Finding a rental

 

People have moved from finding rentals in real estate agents’ high street offices and onto online platforms. New third-parties like apps and other digital platforms offer non-cash alternative bond products, schedule property inspections, collect rents, and organise repairs.

Even though these technological innovations avoid agents, they have in fact increased their share of private rental sector management. Agents themselves are use these platforms to change their businesses, and the structure of their industry.

Our research found that revenue from an agency’s property management business (its “rent roll”) has become increasingly important. Some players in the industry are consolidating their businesses around it, to make higher profits from tech-enabled efficiencies.

However, the real estate business still depends on building personal relationships, particularly in high-end markets.

The new tech platforms of the private rental sector raise issues for tenants too, particularly in terms of the personal information they collect. For example, one of the online platform operators told us they looked forward to using applicants’ information to score or rank applicants. Another one of the new alternative bond providers uses automatic “trust scoring” of personal information to price its product.

These innovations may be convenient to use, and may give some tenants an advantage in accessing housing - but at the expense of others who are already disadvantaged.

Rental properties meeting demand?

 

If the private rental sector is going to meet the demand for settled housing, governments will have to intervene. This can’t be left to technological innovation, or higher income renters exercising their consumer power.

Federal or state governments could create public registers of landlords, or licensing requirements, to police landlords who are not “fit and proper” and exclude them from the sector.

There could also be stronger laws around tenancy conditions and protections for tenants against retaliatory action. The Poverty Inquiry in the 1970s set the basic model of our present laws and they haven’t changed much.

Tenants’ personal information also needs to be protected, to properly take account of the rise of the online application platforms; another is the informal sector, which is currently in a regulatory blindspot.

The popular emphasis on “mum and dad” investors diminishes expectations of landlords. Rental property investment should be regarded as a business that requires skill and effort. As for-profit providers of housing services, landlords should be held to standards that ensure the right to a dignified home life.

Chris Martin, Research Fellow, City Housing, UNSW