BS Shrapnel

Forecasters to the real estate industry, BIS Shrapnel, are in the media today with a prediction that rents will increase 20 per cent over the next three years.

At the Brown Couch we are not in the business of making predictions, but we are blessed with the power of hindsight. Let's look back to what BIS Shrapnel were predicting for 2009 this time last year...

"In Sydney, the number of new medium and high density dwellings being completed is forecast to fall to a 20 year low in 2009, pushing the vacancy rate to below one per cent,” explains [BIS Sharpnel Managing Director, Robert] Mellor. “Rental properties will remain in short supply, and the national average rental growth is forecast to rise to 10 per cent in 2009, up from the current rate of 8.2 per cent, according to the Australian Bureau of Statistics rental index.”

10 per cent. Over the year to September 2009, Sydney rents actually went up 6.6 per cent (the national figure is a little lower - 6.2 per cent). BIS Shrapnel was out by a factor of 50 per cent.

Tricky business, forecasting.

(Asterix and the Soothsayer.)

Startling Steve and the draft Bill

While the Tenants' Union continues to pore over the details of the new draft Residential Tenancies Bill (I'll post some comments on it shortly), the president of the Real Estate Institute of NSW, Steve Martin, has today blitzed the media with his own analysis.

(Steve Martin. Yeah, a cheap shot, I know. As the namesake of another famous Martin, I'm allowed.)

Through this morning's Australian Financial Review, Steve startled the big end of town with his warning that the draft Bill was 'investment vandalism' that would 'deliver carnage to mum and dad investors and tenants across NSW.'

This is because, says Steve, the Bill would introduce 'rent controls.' Yes, RENT CONTROLS. I kid you not.

By the afternoon, Startling Steve was down the other end of town, accosting Sydney workers through the commuter organ mX with predictions that 'Sydney rents could jump 20 per cent in just one year' if the Bill is implemented.

This is because, says Steve, it would be so costly for landlords and agents to comply with the Bill's conditions. 'On an average rental of $500 per week, these new costs could be as high as $100, which is a 20 per cent increase', he said.

Perceptive readers may have spotted something of a contradiction in Steve's statements. Will the draft Bill punt rents through the roof, or freeze them where they stand?

It takes a special kind of analysis to come up with two contradictory propositions and get both wrong. Regarding the rent control nonsense – and it is nonsense – the draft Bill's provisions relating to rent increases are the same, almost to the letter, as those in the current Act. No rent controls there.

As for the rent increase nonsense – and it is nonsense, and they've tried it on before – Steve doesn't say how he came up with such extraordinary estimates of the costs of compliance. Unless he shows his workings (whether on the back of a napkin, or a coaster, or whatever), the rest of us are entitled to think that he's just making it up.

New draft Residential Tenancies Bill

At last, the long-awaited draft Residential Tenancies Bill has appeared.

The draft Bill is the product of the review of current New South Wales residential tenancies legislation that began in 2005 (though those with long memories will recall that our legislation first came under review way back in 1998)... as well as the efforts of the Tenants' Union, the Tenants Advice and Advocacy Services, other housing advocates and numerous individual tenants to draw attention to the deficiencies in the current law.

First impressions of the draft Bill: mostly good. It would make numerous sensible improvements on the current law. Some of these improvements would be very significant: in particular, the provisions about residential tenancy databases would finally set out an effective set of rules about how a person might get listed on a database, and how they can get off the wretched thing.

There are, however, some less happy provisions: in particular, changes to restrict the discretion of the Tribunal in dealing with no-grounds terminations.

In the coming weeks, the TU will pore over the draft Bill and keep Brown Couch readers posted as to what we make of it.

The status of the draft Bill is that it is an exposure draft: that is, it is not law yet, and it has not even been introduced into Parliament. Fair Trading is seeking comments on the draft Bill until 18 December, before it goes to Parliament next year. You can make comments to Fair Trading online, but please also let us know what you think, through comments here as we discuss the draft Bill, or by dropping us a line at the TU.

Dine out... help out

The good people at StreetSmart, who raise funds to help homeless persons, have launched their 'dine out... help out' appeal for the coming festive season.



How it works: dine out at a participating restaurant between 9 November and 24 December, and add $2 to the bill to help the homeless. Bon appetit.

Child safety in rental housing

Brown Couch readers will probably be aware of the terrible story of the three-year old Sydney boy who died on the weekend after falling through the window of his family's third-storey flat. The family rent the flat, and it is reported that they had previously complained to the landlord that the windows were unsafe.

I make no comment here about the fault or liability of any party in this very sad case – just some general comments on how the safety of children is addressed in New South Wales renting laws.

There's a few provisions of the Residential Tenancies Act 1987 (NSW) that are relevant to child safety, but with a single notable exception, the Act makes no provision for particular safety devices to be installed or for particular safety standards to be met.

Those provisions are:

• the habitability term. Under the Act, it is a term of every tenancy agreement that the landlord will provide the premises in a state fit for habitation.

• the repairs and maintenance term: it is also a term of every agreement that the landlord will provide and maintain the premises in a state of reasonable repair (and just what 'reasonable' means depends on the amount of rent payable and the age and prospective life of the premises).
  

• the locks and security term. It is also a term of every agreement that the landlord will provide locks and security devices sufficient to make the premises reasonably secure. (What's 'reasonably secure' depends on the circumstances, especially location. It also means that the landlord does not need to make the premises Fort Knox.)

(There's another term that's relevant too: the alterations and fixtures term, which provides that a tenant must not make an alteration or install a fixture – say, a window lock – without the consent of the landlord.)

These obligations are all generally stated - that is, they don't specify particular devices that need to be installed for the premises to be regarded as habitable, in a reasonable state of repair, or secure. That's all very well – it's good that our laws provide this general obligation – but it also means that if you want the landlord to install a specific safety device, you might have difficulty: for example, if you want a child-proof lock on the window, the landlord might reply 'no, the lock already on the window is sufficient to make the premises reasonably secure', or even 'no, the window is sufficiently high up that it does not need a lock to make the premises reasonably secure.'

This problem also arises in relation to residual current detectors (sometimes known as electrical safety switches), which switch off the electricity if they detect it zapping a person. RCDs were not required on electrical circuits before 1991, so many houses built before then don't have them. And if your house doesn't have them and you ask for them, be prepared for the landlord to reply 'no, the premises are habitable/in a reasonable state of repair without them.'

I mentioned a single exception to the no-specific-requirements approach of our renting laws. Smoke detectors are specifically required in all residential dwellings, and there's a term to that effect in every tenancy agreement. This requirement was inserted by the NSW State Government in 2005 and, to the TU's knowledge, has improved the safety of rental housing without any dramas.

It would be a good idea if our renting laws built on the general obligations they already provide with some new, specific obligations for landlords to improve their properties. Devices to promote child safety – in particular, child-proof window locks and electrical safety switches – would be an excellent place to start. (Western Australia and Queensland have each already moved to make RCDs specifically required in rental housing.) After that, some other types of specific improvements might be required – say, insulation and water efficient devices – in a rolling program to lift the standard of rental housing.

In the meantime, readers might be interested in the advice of Danny Cass from Westmead Children's Hospital, reported at the second link above.

Rather than wait for the government to pass legislation for better building design, Professor Cass urged parents to ensure windows accessible to children could not be opened by more than 10 centimetres.

A visit to a hardware store, he said, could enable parents to alter windows themselves at a cost of $10.

"So for the vertical ones, that's a Black and Decker and two drills and coach screws, and for the aluminium ones, a rod that just sits in the gutter or two little aluminium screws that screw down," he said.

Some home truths about property reviews...

Readers of the Brown Couch may be aware of an innovative new website where tenants can share news and views of their rental properties throughout Australia.

Home Truth: The online voice for the rental community looks great at first glance. Indeed an opportunity for disgruntled tenants to publicly vent some spleen is long overdue. But there are several things to consider if you're going to regard it as anything more than light entertainment:

• The website will be of more use to those who are able to "pick and choose" where to live, than those who need to find a new home pronto. With this in mind, it represents good value for the socio-economically blessed, but it offers very little for the rest of us (especially when vacancy rates are low).
• The website invites reviews of properties and real estate agents. It does not review landlords. It is therefore not on the same footing as a residential tenancy database which collects tenants' names, and holds them to ransom.
• There is an inherent problem with reviewing properties and real estate agents, and that is the transient nature of both. With property, ownership can change, and so can its level of repair. With agents, a person's employment can change. The review of a property or agent may become inaccurate or irrelevant by virtue of such change. It follows that such reviews could be apt to mislead.
• Reviews are likely to be made in response to a particular set of circumstances. While one person's experience may be defined in a certain way, it is unlikely that their story will resonate with others to the extent that a property or real estate agency will be boycotted.
• There is no way to verify whether reviews are genuine. Anyone who makes a decision to rent a property based on a website review must have rocks in their head.
• The website has potential as a pool of information to draw from while pushing the law reform agenda. But given the problems outlined above, tenants are better advised to take their grievances direct to the Office of Fair Trading. This can be done on a website too!

Tenancy Culture Studies: Jimmy Olsen and 'The Secret Slumlord of Metropolis'

Today's subject of study comes from issue number 127 of that fine periodical, Superman's Pal Jimmy Olsen, in which our hero does battle with a foe more sinister than Lex Luthor, or Mr Mxyzptlk, or Gorilla Grodd... housing-related poverty.

(Superman's Pal Jimmy Olsen no 127)

It's March 1970. Superman's Pal and cub reporter for the Daily Planet, Jimmy Olsen, has moved into a derelict tenement to get the inside story on the slums of Metropolis. His neighbours endure leaking ceilings, rotting stairways and vermin infestations. When Jimmy asks old Mr Collins, who sleeps under old newspapers because there's no heating in the building, 'why do you people stand for such neglect? Why don't you move?', Mr Collins answers:

'Cough-cough! Because the Bond Company, which owns most of these houses, makes us put up three months rent in advance... and we lose the money if we break the lease!'

Jimmy hits trouble too. His article for the Daily Planet is kiboshed by corrupt editor Perry White when advertisers threaten to withdraw their business. Undaunted, Jimmy writes the story up as a book, but loses the manuscript out his broken window (it gets caught in Superman's slipstream, who had popped in for a visit.) His landlord, the mysterious 'Mr Squeeze', kidnaps Jimmy, imprisons him in a basement, shaves his head and threatens to kill him if he continues his expose.

But Jimmy has his day. Discovering Mr Squeeze's true identity, Jimmy and his fellow slum-dwellers march on Squeeze Manor and unleash hundreds of rats and cockroaches on the society-types there assembled. Superman hauls Mr Squeeze off to prison for the kidnapping caper. And, finally, the slum is redeveloped, by Superman at super-speed, into a public housing estate, 'Olsen Gardens'.

This comic would be secure in its place in the annals of tenancy culture studies for nothing other than that final image of Superman soaring into the sky carrying aloft a prefabricated public housing unit, but there is more to it than that.

The publication date – March 1970 – is important. This places Jimmy Olsen no 127 at the head of the new Realism movement in comics, a month before the publication of the conventional front-runner, Green Lantern no 76 (in which Green Lantern and Green Arrow team up against another slum landlord). It also places Jimmy Olsen amongst the wave of writers, researchers and, later, government inquiries investigating the persistence of poverty and poor housing at the height of that postwar 'golden age' of economic development and prosperity.

This wave began with Harrington's The Other America (1960) and included, in Britain, Abel-Smith & Townsend's The Poor and Poorest (1965) and, in Australia, Ronald Henderson's survey of poverty in Melbourne (1970), then Henderson's national survey, conducted as Commissioner of the Federal Government's Inquiry into Poverty (1975).

That inquiry included a special report by Adrian Bradbrook on Poverty and the Residential Landlord-Tenant Relationship (1975), which analysed tenancy laws in three Australian States and concluded:

'Unfortunately, a study of the existing legal principles shows that the law is sadly deficient in most of the areas of tenant needs. No advice or assistance is provided for a prospective tenant by any governmental agency in any State, there is no legislation to ensure that the tenant is not bound by onerous or oppressive terms in a lease, and the means of solving any dispute between a landlord and a tenant are far from fair and sensible...'

Bradbrook then recommended law reform to regulate security deposits, prohibit other non-rent charges, oblige landlords to do repairs, create a fair standard form of lease, and provide dispute resolution by specialist tribunals, amongst other things. It took a couple of decades, but eventually all Australian States and Territories implemented residential tenancies legislation that more or less reflect the Bradbrook principles. These pieces of legislation represent pretty mild consumer protection – and the speed with which they allow tenancies to be terminated suits landlords very well – but without them rental housing would be governed by the principle of caveat emptor, and many of the abuses inflicted on Jimmy Olsen would be allowed to be perpetrated by our own local Mr Squeezes.