Property Sector in Political Crosshairs Again

September 27, 2024 Edward Dever

Rent controls, National Renters Protection Authority and negative gearing changes.

In the lead up to the 2024 Qld State election, Ch 9 News is reporting that the Qld Government is considering ACT style inflation-linked rent controls.

Sounds like a pre-election thought bubble. Any move towards greater rent controls in Qld runs contrary to the position of the Government's own Department of Housing, Local Government, Planning and Public Works

In May 2024, the Department stated that it believed forms of rent control are generally ineffective.

The ALP risks losing several seats to The Greens at the October election so it is not surprising that they may make election promises that seek to limit voter bleed to The Greens.

Meanwhile, The Greens want to implement a National Renters Protection Authority.

Costing $200m per annum and staffed by 1,000 public servants, the NRPA would investigate rental breaches as well as offering advocacy, advice and education to renters around Australia.

The NRPA would deal with tenancy disputes and enforce the minimum standards the Greens want, including rent freezes, ventilation, heating, cool and insulation standards. The NRPA is part of a wider $2.5b Greens Plan to convince the States to enact rent freezes.

How the NRPA would work in practice is unclear. There seems significant overlap with the role of State Government Departments.

Victoria, as an example, is planning to implement far reaching housing standards to include heating, cooling and insulation.

Qld's latest round of rental changes come into force on 30 September 2024. These include new standards for re-letting costs, methods for paying rent, timelines for utility bill payments, and supporting evidence for bond claims.

NSW is also moving towards tightening the rules for no-default evictions.

And just to top it off, media reports indicate that the Federal Government has asked Treasury to look at the implications of changing negative gearing rules.

Lots of political obfuscation peppered with some denials by Government members.

Similar to the Government's superannuation changes which targeted the higher end of superannuation balances, it wouldn't be surprising to see the Government target negative gearing changes, for example, at the 5% of landlords who own 6 plus properties.

Any uncertainty over rent controls and negative gearing just reinforces nervousness amongst investors at a time when Australia needs greater investment in rental housing.

Ch 9 News - Rent Controls

Report No. 7, 57th Parliament Housing, Big Build and Manufacturing Committee, May 2024

National Renters Protection Authority Plan

Negative Gearing Changes

September 2024

The content of this publication is intended to provide a general overview on matters which may be of interest. It is not intended to be comprehensive. It does not constitute advice in relation to particular circumstances nor does it constitute the provision of legal services, legal advice or financial product advice.

Greens Target Brisbane LGA Rent Freeze

November 8, 2023 Edward Dever

To date, The Greens have tried and failed twice to implement a rent freeze in Queensland and once at the Federal level. In this latest attempt, 2024 Greens Lord Mayoral candidate Jonathan Sriranganathan plans to implement a two-year rent freeze on residential properties in the Brisbane local government area, backdated to January 2023. This assumes The Greens control Brisbane City Council after the election in March 2024.

To implement their plan, The Greens propose to control rents via penalty rates applied to any investor who raises rents above January 2023 levels. Rental properties where rent has increased would be "reclassified into the new ‘Uncapped rental home’ rating category."

The penalty is an additional 650% of the current rates bill so the total rates bill would be 750% higher following The Greens' market intervention. Using The Greens' example of a unit rented for $750 per week with a rates bill of $1,500 per year, any rent increase would result in an extra rates bill of $9,750, with a total rates bill of $11,250.

Any landlord who has increased rent with the tenant's agreement between January 2023 and the Council election in March 2024 would be penalised, whether that rent increase was less than 1% or 30%.

The Greens' plan is to apply the rent freeze to the property rather than the tenancy and to use median suburb rents for any new build or substantial renovation.

Penalty rates are claimed to be revenue neutral as the Greens contend that landlords will not put up rents. However this ignores the fact that many landlords will have raised rents over the 15 month period prior to the 2024 Council election.

Landlords in Brisbane (and elsewhere in Queensland) are currently subject to an effective 12 month rent freeze following the State Government's amendments to the Residential Tenancies and Rooming Accommodation Act preventing landlords from increasing the rent within a 12 month period.

Rent controls in other jurisdictions (such as Ireland and San Francisco) have resulted in reduced residential rental supply as landlords change use to avoid the controls or sell out of the market. It also acts as a disincentive for new investment builds. (Note that The Greens plan to increase rates for Airbnb-style properties by 1,000%.)

Any developer who views The Greens as potentially controlling Brisbane City Council post-March 2024 is likely to look more favourable at projects outside the Brisbane LGA (e.g. Redcliffe, Logan, Ipswich) rather than risk the imposition of a two-year rent freeze on their projects.

Similar to the Queensland government's proposed (then scrapped) land tax changes, the prospect of a rent freeze throughout Brisbane is likely to alter investors' decisions well ahead of any actual imposition of a freeze.

Lord Mayoral candidate Jonathan Sriranganathan proposes two-year rent freeze in Brisbane

Freeze Rents in Brisbane: No more unlimited rent increases

November 2023

Rent Freeze Proposal Gets Frozen Out At National Cabinet

August 24, 2023 Edward Dever

Landlords could be forgiven for feeling a little confused, particularly those with investment properties in different States.

Last week, National Cabinet ruled out imposing any form of rent freeze as demanded by The Greens.

The Greens proposal involves a nationwide two year rent freeze followed by a maximum 2% increase every two years thereafter with no end date.

Then it gets a little confusing.

For example, in Queensland, the Greens Residential Tenancies and Rooming Accommodation (Rent Freeze) Amendment Bill provides for rents to be frozen as at 1 August 2022. Qld Parliament's Community Support and Services Committee has recommended against passing the Bill.

The Greens NSW Rent Freeze Bill specifies 30 June 2023 as the relevant date. The NSW Bill is silent on what happens after the initial two year rent freeze.

The Greens Federal Freeze on Rent and Rate Increases Bill stipulates that rents will be frozen as at 1 January 2023.

Instead of a nationwide rent freeze or rent caps, National Cabinet prefers a nationally consistent policy on renters’ rights including reasonable grounds for eviction, minimum rental standards, and limiting rent rises to once every 12 months.

Many of these outcomes have already been implemented in Queensland. New minimum housing standards rules come into effect in Queensland for new tenancies on 1 September 2023.

Meanwhile, The Greens are softening their stance, with their chief spokesperson on the issue moving away from a strict rent freeze to some form of rent cap.

Even The Greens-promoted polling from The Australia Institute shows only minority support for a rent freeze among voters from all parties, including The Greens.

Some landlords may take comfort from the statements following National Cabinet, thinking the rent freeze saga is at an end.

Others may continue to raise rents disproportionately on the basis that, while the issue may be dead, it is not buried and some form of rent freeze may still be forthcoming.

Meanwhile, The Greens will continue to campaign on the issue of rents and the Prime Minister is no closer to passing his housing bill.

Stories of rogue agents and massive rent increases at the current hearings of the Federal housing inquiry will keep the issue in the headlines.

From public holidays to rental freeze and housing supply, National Cabinet showed there are limits to Anthony Albanese's power

August 2023

Pressure Builds For Further Residential Rental Reform

August 10, 2023 Edward Dever

National Cabinet meets in Brisbane on 16 August and one of the key topics will be residential rental reform.

The Greens continue to block the passage of the Government's housing reform package in the Senate and use social media and other media to demand a two year rent freeze throughout Australia.

As recently as 9 August, the Prime Minister explained that "the Commonwealth does not control rents" and "does not have the capacity, either, to abolish the private rental market." In his view, "the key to fixing up these issues is supply".

ABC News is of the view that, National Cabinet, as a whole, won't be agreeing to an Australia-wide rent freeze or cap with NSW Premier Chris Minns, for one, already ruling that out.

However, it seems possible that at least one State, perhaps Victoria, may embark on a rent freeze experiment. (In 2021, Qld Parliament rejected the Greens 2021 Rent Freeze Bill. Qld Parliament's Community Support and Services Committee has recommended against passing the Greens 2022 Rent Freeze Bill.)

Overseas experience in places such as Ireland and USA suggests rent controls distort residential rental housing supply as investors take steps to avoid rent control measures or exit the sector. Rent controls also act as a disincentive to new investment housing builds.

It is worth noting that ACT currently has a form of rent cap in place. Landlords are restricted to an increase equal to 110% of the percentage increase in CPI for rents. Approval can be sought from ACAT for an increase above that limit.

The Greens often use the Covid period as an example of rent freezes being enacted in places like Victoria. However, they fail to mention the various rates and land tax concessions which accompanied these measures.

With property expenses such as rates, land tax, insurance, strata levies and interest rates all increasing, often well above CPI, it is hard to see how the imposition of a two-year rent freeze (plus rent increases limited to 2% every two years thereafter, as demanded by The Greens) will not simply exacerbate the rental crisis.

The Greens claim that their policy includes funding an increase in public housing but it is not clear whether there will be sufficient funding available to deal with the current deficit in public housing and the likely deficit created by a reduction in new private rental housing.

Separately, the Federal Senate Community Affairs References Committee invites submissions on the worsening rental crisis in Australia. The deadline for submissions is 1 September 2023.

Inquiry - The Worsening Rental Crisis In Australia

Renters are an increasingly influential voting block

August 2023

Greens' Nationwide Rent Freeze Proposal - Update

June 29, 2023 Edward Dever

Federally, The Greens continue to push for a nationwide rent freeze as part of a deal to pass the Federal Government's housing Australia future fund package.

Their proposal involves the Federal Government providing additional funding to States which impose rent freezes on residential rental properties.

Broadly, as outlined in the Qld Bill, The Greens seek to impose a nationwide two-year rent freeze on residential property rents followed by maximum rent increases of 2% each two-year period thereafter.

Federally, The Greens have indicated they will compromise on these restrictions.

Qld Parliament's Community Support and Services Committee recommends that the Qld Bill not be passed.

In NSW, The Greens have now introduced a similar Bill. However, the NSW Premier has declared that rent freezes are off the table.

The Qld Bill freezes rents as at 1 August 2022 (which seems impractical). The NSW Bill targets 30 June 2023 as the rent freeze date.

Unlike the Qld Bill, the NSW Bill does not deal with the post-two year rent freeze period. The Greens plan to use the two year period to develop and implement "a radical, and much needed, reshaping of our rental and housing system."

UNSW has also released commentary on The Greens' rent freeze proposal.

Dr Peter Swan contends that the rental crisis would become “far worse for tenants and landlords” if the policy came into force.

“While it is true that tenants who are not evicted may gain temporarily, tenants as a whole lose as rental accommodation is withdrawn, fewer new places are provided, and maintenance of rent-controlled housing deteriorates."

The Greens often cherry pick facts. They claim that, during Covid, commercial rents in some States were frozen as justification for their proposal. But they fail to point out the rates and land tax assistance which was provided to commercial landlords during this period.

The Greens also highlight rent control examples in San Francisco and Ireland but fail to publicise the studies that show the impact these rent controls have had on rental housing supply.

A chief criticism is that the proposal fails to address how landlords will deal with cost increases during the rent freeze period. Many of these costs, such as insurance, are increasing well above CPI.

The Greens also fail to recognise the likely impact of a rent freeze - landlords would sell off properties (which may benefit some first home buyers in the short term) or switch property use to schemes like Airbnb to circumvent the rent freeze. The more significant impact would be a decrease in new investment home builds against an increasing population through natural birth and interstate and international migration. The Greens want more public housing but it is not clear that any increase in public housing would offset the deficit left by investors leaving the sector.

Qld Residential Tenancies and Rooming Accommodation (Rent Freeze) Amendment Bill 2022

NSW Residential Tenancies Amendment (Rent Freeze) Bill 2023

UNSW - Would you benefit from a rent freeze?

June 2023

Greens' Rent Freeze Bill Likely To Be Put On Ice

February 24, 2023 Edward Dever

On 20 February 2023, Qld Parliament's Community Support and Services Committee released their Report on the Residential Tenancies and Rooming Accommodation (Rent Freeze) Amendment Bill 2022.

You can find the Report here - Community Support and Services Committee Report

The Committee recommends that the Bill not be passed.

The Rent Freeze Bill seeks to impose a two-year rent freeze on residential property rents throughout Qld (with effect from 1 August 2022) followed by maximum rent increases of two per cent each two-year period thereafter.

In view of the experience in countries such as Ireland, imposing a broad rent freeze does not appear to be a workable solution to the current rental crisis.

In the past, the Qld Deputy Premier has downplayed the need for rent freeze legislation, saying "it was the government’s preference to avoid enforcing new laws to curb the greedy behaviour."

It is clear that some landlords and agents in Qld are forcing excessive rent increases on tenants - far above the current rate of inflation or reasonable cost increases. Landlords would argue that rents in some areas were static for years and the rent increases are just a catch up as rents rise everywhere. This is little comfort for tenants bearing the burden of the rent increases.

Increasing rental housing supply (both private and public) is a solution but will take time, particularly in view of declines in residential investor lending as interest rates increase.

Perhaps the Residential Tenancies Authority (RTA) needs more teeth in determining what is fair in terms of rent increases. Currently, a tenant in Qld can use the RTA's conciliation service or QCAT to dispute a rent increase.

While the Greens seem destined to lose this round, the failure to exercise restraint by landlords may ultimately lead to some form of temporary government intervention.

February 2023