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.

United States Plans Nationwide Rent Controls - With A Catch

July 17, 2024 Edward Dever

US President Joe Biden has announced a plan ahead of the 2024 US Election to cap rent increases across the nation at five per cent per annum.

On 16 July 2024, the Biden-Harris Administration called on Congress to pass legislation giving corporate landlords a choice to either cap rent increases on existing units at five per cent or risk losing current valuable federal tax breaks.

The proposal would apply during 2024 and the following two years but would only apply to corporate landlords who own at least 50 units of housing stock. Over 20 million units of rental housing would be affected by the proposal. An exception would apply to new construction and substantial renovation or rehabilitation.

Failure to comply would see these landlords unable to take advantage of faster depreciation write-offs available to owners of rental housing.

It seems unlikely Congress will get on board with the rent control proposal, particularly in the run up to the 2024 Election in November. (As an aside, former President Trump's son-in-law Jared Kushner's somewhat controversial family group controls 20,000 multi-family apartments and would be caught by President Biden's proposal.)

The Australian Greens will no doubt pick up on this proposal. Their plans to date have not included a minimum rental housing ownership threshold before their controls kick in. Their plan also has no sunset date - two years of rent freezes followed by a maximum two per cent increase every two years thereafter. The Federal government has repeatedly distanced itself from the Greens proposal. The Queensland government has also shut the door on rent controls - for now.

President Biden Announces Major New Actions to Lower Housing Costs by Limiting Rent Increases and Building More Homes

July 2024

Queensland Government Shuts The Door On Rent Controls - For Now

May 20, 2024 Edward Dever

On 10 May 2024, the Housing, Big Build and Manufacturing Committee released its report on the Residential Tenancies and Rooming Accommodation and Other Legislation Amendment Bill 2024.

One of the more interesting matters in the Report is a statement that the Department of Housing, Local Government, Planning and Public Works believes forms of rent control are generally ineffective.

The Report (on page 20) states:

"the department noted that economic research has identified that rent price controls, such as restricting or limiting the amount rent can be increased by, are generally ineffective at improving rental affordability and can have other negative effects, such as reducing the quality of rental stock and reducing renter mobility. They noted that the best way to address rental affordability is by increasing housing supply."

The Greens continue to press the Federal Government to introduce a form of rent freeze followed by rent caps.

As recent as 16 May, Greens MP Max Chandler-Mather, commenting on Twitter/X about PM Albanese's move to evict his tenant ahead of a likely property sale, stated that "[i]f the Prime Minister wanted to treat renters fairly, he would coordinate a freeze and cap on rent increases". The Greens are unlikely to drop rent controls as part of their platform ahead of the next Federal election.

The Committee concluded that the Government's Bill should be passed although it noted a number of areas where the Department needed to do more homework.

These include:

- the time frame for the retention of tenant records

- wider consultation on a portable bond scheme

- the documentation needed for utility bills payable by tenants

- the prohibition of accepting more than four weeks rent in advance, and

- disclosure in leases of the last rent increase as it applies to newly purchased properties.

The Bill, when enacted, will restrict residential property rent increases to once every 12 months and apply the restriction to the property rather than the lease.

It will also legislate that a landlord cannot act unreasonably in refusing a tenant’s request to attach a fixture or make structural changes to the premises either relating to safety, security and accessibility, or for personalisation purposes. Tenants may seek recourse through QCAT if denied approval. This also applies to modifications related to strata common property with strict timeframes for strata approval.

Over time, we will see if some of these provisions act as a further disincentive to residential rental property investment in Queensland.

UPDATE - The Residential Tenancies and Rooming Accommodation and Other Legislation Amendment Bill 2024 was passed by Parliament on 23 May 2024.

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

May 2024

Queensland Government Shelves Plans To Amend Property Valuation Laws

May 9, 2024 Edward Dever

Last week, the Queensland Government shelved proposed land valuation amendments under the Land Valuation Amendment Bill 2023.

Resources Minister Scott Stewart pulled the proposed amendments for further consultation and revision, a process which should push out any progress beyond the October 2024 State election. It is not clear whether a future LNP Government (if elected) will proceed with the amendments.

Much of the stakeholder feedback on the Bill centred on the introduction of binding Valuer-General guidelines for valuations with concern raised that there would be no prior consultation and future guidelines could enhance property values resulting in higher land taxes and Council rates.

Also of concern was the proposal to remove the $750,000 threshold which requires a person objecting to a valuation to advise the Valuer-General of the valuation sought. This would require all landowners to state the valuation sought in their objection and would increase the costs of lodging an objection.

Changes to the definition of “unencumbered” were also considered controversial, resulting in uncertainty over how land is to be valued.

Qld land valuation laws shelved by government following input from property industry

May 2024

Further Proposed Changes to Queensland Residential Tenancy Legislation

April 2, 2024 Edward Dever

On 21 March 2024, the Queensland Government introduced the Residential Tenancies and Rooming Accommodation and Other Legislation Amendment Bill 2024.

The Bill’s purpose is to further strengthen tenants’ rights and stabilise rents in the private rental market.

The proposed amendments include:

- adopting a standard rental application form (as yet only partially specified) which limits the information a tenant need provide.

- applying the 12 month rent increase restriction to the property rather than the lease, regardless of a change in property ownership. Lease breaks may lead to rent increases during future lease terms rather than at the commencement of the lease term.

- requiring leases to state the date of last rent increase, with tenants permitted to request evidence of such increase. Existing leases are exempt.

- prohibiting rent bidding, including accepting an unsolicited offer higher than advertised.

- capping reletting costs in the event of a lease break.

- legislating that a landlord cannot act unreasonably in refusing a tenant’s request to attach a fixture or make structural changes to the premises relating to safety, security and accessibility. Tenants may seek recourse through QCAT if denied approval.

- capping rent in advance payments to a maximum of 4 weeks rent - the amendment changes the prohibition on requiring an advance payment to accepting an advance payment. This may necessitate refunds in certain circumstances to prevent breaches although perhaps less problematic with periodic payment arrangements.

- adding new time limits for the provision of water service charges payable by a tenant.

One of the Bill’s stated aims is to improve the rental experience for Queensland renters and property owners. Some landlords may contend that the seemingly endless legislative amendments are having the opposite effect. Agents are also facing more compliance tasks and complicated leasing arrangements.

The deadline for submissions on the Bill is 10 April 2024.

RTA - Have your say on new rental law reforms

April 2024

The Lithium-ion Battery Condundrum Facing Landlords

January 12, 2024 Edward Dever

The increased use of lithium-ion powered devices such as e-scooters presents a conundrum for landlords and strata committees.

A rise in the number of lithium-ion linked fires in homes is occurring amid a vacuum of government standards for dealing with these risks.

"Research by the organisation EV Fire Safe found that if a battery goes into thermal runaway inside a home, there is a 64% chance of being injured and requiring hospitalisation, and a 7.8% chance of death."

While there are some fire extinguishers available to suppress lithium-ion fires, in the absence of government standards, some fire safety consultants are currently reluctant to make specific recommendations in relation to lithium-ion fires.

In the linked article, Professor Christensen advises that lithium-ion devices should only be charged outside.

The Owners Corporation Network, an independent body representing apartment owners, has now made a similar recommendation.

But how practical is this suggestion in the context of apartment living? And are landlords and strata committees really aware of the number of devices currently used in their properties? (OCN has suggested that strata management maintain e-scooter and e-bike registers.)

Given the number of devices in properties across Australia, the risk seems relatively small at present but experts warn the risk increases where people use cheaper mismatched chargers or engage in unsafe charging practices.

Fire blankets commonly available are inadequate for dealing with lithium-ion related fires. Fire blankets capable of suppressing lithium-ion fires are coming to market but are generally not of an appropriate size or realistically priced for home use. Over time, this should change.

The insurance sector appears silent on the issue. But there is a risk of fires from lithium-ion batteries forming an exclusion from future policy coverage or at least a reluctance on the part of insurance companies to honour coverage if (as yet undefined) appropriate charging practices are not followed.

In the meantime, landlords and strata committees await the development of appropriate government standards for charging lithium-ion devices and dealing with related fires.

The ‘ticking time bombs’ inside Aussie homes sparking a rising number of fires

Owners Corporation Network proposes new e-bike, e-scooter rules

January 2024

Minimum Housing Standards Commence in Queensland

September 20, 2023 Edward Dever

From 1 September 2023, any new residential lease in Queensland or lease renewal is subject to the new minimum housing standards requirements. All remaining leases will be subject to the requirements from 1 September 2024.

Some of the requirements such as adequate plumbing and drainage, connected water supply and a functioning toilet seem obvious to most landlords.

However, these requirements, together with items such as functioning latches or locks on external doors and windows, effectively place an onus on the agent and owner to confirm compliance prior to any new lease or lease renewal.

There are already examples of agents advising owners they will not lease properties that, in their view, do not comply with the minimum housing standards.

Tenants have a variety of remedies where a residential rental property does not meet the minimum housing standards.

These include ending the tenancy within seven days of occupying the property, requesting emergency repairs, or applying to QCAT for a repair or termination order.

Minimum housing standards fact sheet – general tenancies

September 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

Public Hearings Held On Greens' Queensland Rent Freeze Bill

December 22, 2022 Edward Dever

In 1987, renting a student house at Indooroopilly in Brisbane's western suburbs would set you back $125 per week. That worked out at $33 per week for each of the three larger bedrooms and $26 per week for the small one. Inexpensive housing. Comfortable surroundings with fresh paint and carpet, provided you ignored the termites slowly consuming the downstairs bedroom.

35 years later, the median asking rent for houses in Indooroopilly is $650 per week although that particular house is no longer there. Demolished long ago (along with numerous neighbours) to make way for a car dealership car park.

Public hearings on the Greens' rent freeze Bill were held in Brisbane on 5 December.

Under the proposed Bill, a two year rent freeze will be implemented with the maximum permitted rent being the relevant property's rent on 1 August 2022. Future rent increases (after the two year freeze) are limited to 2% every two years with no end date. There are no plans to implement any form of freeze on expenses such as rates, water rates, land tax etc.

Resolving the current rental crisis is a complex task. However it is not clear that broad-based rent control measures are the answer. Increasing the supply of both public and private rental housing is key. The entire housing stock in that street in Indooroopilly is now lost to commercial development. Rent control measures are likely to stifle private sector housing investment.

Examples elsewhere in the world highlight the housing supply issues associated with strict rent controls.

Ireland’s 2016 rent control measures are considered counterproductive and ineffective and have resulted in a serious lack of supply of residential rental properties available for rent with landlords leaving the market because they are not permitted to charge market rent for their properties.

St Paul, Minnesota is introducing rent control measures from 2023. Ahead of its implementation, the number of building permits issued in St Paul from January 2022 to July 2022 dropped 31.4% compared to the previous four-year average for building approvals.

San Francisco - a Stanford University study in 2017 relating to rent controls implemented in 1994 on small multi-family housing built prior to 1980 found that rent controls reduced residential rental housing supply by 15%.

Qld Parliament rejected the Greens' last attempt to introduce rent control measures in Qld. The Committee is due to table its report on the Bill in February 2023.

Residential Tenancies and Rooming Accommodation (Rent Freeze) Amendment Bill 2022 - Public hearing(s): Monday, 5 December 2022 - Brisbane

December 2022