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

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.

Potential Reform to Qld's Annual Rent Increase Frequency Limit

July 17, 2023 Edward Dever

In April 2023, the Queensland Government amended the Residential Tenancies and Rooming Accommodation Act 2008, with effect from 1 July 2023, to prevent landlords increasing rent more than once in each 12 month period. The reform was enacted with little industry consultation and bypassed Parliamentary Committee review.

One apparent consequence of this reform has been the eviction of tenants by some landlords so that rents can be increased with greater frequency. This is despite no fault evictions being heavily restricted under previous reform amendments in October 2022.

The Government now proposes that the rent increase restriction apply to the property rather than the tenancy agreement.

It is not clear how widespread the practice of no fault evictions to circumvent the rent increase restriction has become and whether it is limited to the period up to 1 July 2023, the reform's effective date. As the Qld government points out, in other States, the rent increase restriction generally applies to leases not the property. This does not appear to be a widespread issue in those States.

The deadline for feedback on the latest rent reform proposal is 11 August 2023.

Discussion Paper - Ensuring the annual rent increase frequency limit is effective

July 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

Can Thailand Move Forward?

May 18, 2023 Edward Dever

The aptly named Move Forward Party has claimed victory in the recent Thai national elections.

But the biggest question is whether MFP and their coalition partners will be allowed to govern for a full term or will Thailand be subject to yet another military coup?

MFP's platform includes revision of the Lese Majeste laws often used as a political weapon to stifle dissent. It is not clear how quickly they will move on this reform and how it will be viewed in the corridors of power. The appointed members of the Senate under the most recent military-backed Constitution further complicate matters, including the appointment of MFP's nominee as Prime Minister.

Thailand has been the subject of many coups over the years. There's a running joke that, at some point, the Thai Navy should be allowed to mount a coup as the army takes the lead each time.

The most recent coups have been preceded by mass protests by rival groups wearing colours signifying support for their side of politics.

In 2006, yellow shirts protested the Thaksin Shinawatra government. The protests appeared to have run out of steam before Thaksin sold his stake in AIS mobile business to Singapore's Temasek Holdings after enacting a new law which increased the sector's foreign ownership limit from 25% to 49%. He also insisted no capital gains tax was payable on the approx. USD 1.88b sale proceeds. He was ousted in a coup in September 2006 and lives in exile in Dubai, periodically promising to return.

The shadow of Thaksin Shinawatra hung over the 2023 election with his daughter nominated as a Prime Ministerial candidate under the Pheu Thai banner.

In 2008, the yellow shirts blockaded Suvarnabhumi Airport, stranding many travellers. It was surreal travelling the empty highways at night to U-Tapao Airport near Pattaya which became the de facto international airport for rescue flights.

In 2010, the red shirts blockaded parts of central Bangkok. The military crackdown on 19 May saw the military use live fire to quell the protests. The dead included a Japanese journalist. Numerous buildings were set alight that day, including Central World shopping complex near the centre of the protests.

19 May was probably the only time a colleague will ring me early in the morning to let me know that she wanted to go to work that day but there was a tank outside her home.

2013 saw the yellow shirts back on the streets protesting the government led by Thaksin's sister, Yingluck. Once again, parts of central Bangkok were blocked. Protests continued in various forms until 22 May 2014 when another coup was launched. Yingluck also now lives in exile in Dubai.

The 2023 election result showed voters rejecting parties affiliated with the military, including those headed by the current PM and Deputy PM. The country wants to move forward but it is not clear whether the institutions of power will permit it.

MFP attention turns to Senate

May 2023

Stage 2 Rental Law Reform - Have Your Say

April 28, 2023 Edward Dever

The Queensland Government has released its Options Paper for 5 priority areas under the Stage 2 rental law reform.

The priorities identified for Stage 2 are:

- installing modifications

- making minor personalisation changes

- balancing privacy and access

- improving the rental bond process

- fairer fees and charges.

The deadline for feedback on the Options Paper is 29 May 2023.

Stage 2 rental law reform

Meanwhile, the Queensland Government has bypassed Parliamentary Committee review of its proposals to limit rent increases to once in each 12 month period, by apparently attaching amendments to the Local Government Electoral and Other Legislation (Expenditure Caps) Amendment Bill and passing the amendments on 18 April 2023.

Under the amendments to the Residential Tenancies and Rooming Accommodation Act 2008, with effect from 1 July 2023, any rent increase after that date will only be valid if it has been 12 months since the previous rent increase.

More frequent rent increases written into tenancy agreements prior to 1 July 2023 will not apply. The restriction applies to all new and existing tenancies.

Once in effect, rent may only be increased within a 12-month period if there is a new tenancy agreement and none of the tenants are the same as those on the previous agreement. The 12 month minimum period continues to apply regardless of a change to the rental property owner or manager.

Changes to rent increases to give Queenslanders who rent a fair go

April 2023

Queensland Government Opts For Low Impact Rental Reform

March 30, 2023 Edward Dever

In a move which brings Queensland in line with States such as Victoria and South Australia, Queensland landlords are to be limited to varying rent on a residential rental property once in each 12 month period.

The reforms are low impact as many landlords use 12 month leases and do not elect to include a rent increase provision in the lease. For any such landlords, the reforms should have no impact.

For landlords who have generally increased rents on a six monthly basis, they will now only be entitled to do so once per year. The reforms should therefore slow the rate of rent increases on these properties.

Limiting rent increases in this manner falls far short of the Greens' Rent Freeze Bill currently before Queensland Parliament. That Bill seeks to impose a two-year rent freeze on residential property rents throughout Queensland (with effect from 1 August 2022) followed by maximum rent increases of two per cent each two-year period thereafter. Queensland Parliament's Community Support and Services Committee has recommended against passing this Bill.

After floating the prospect of some form of rent cap, the Queensland Premier has walked back on this suggestion, preferring for the moment to merely restrict the timing of rent increases.

Further details of these changes are still to be released. It also remains to be seen if there will be any unintended consequences of the reforms.

Rent stabilisation to give Queenslanders who rent a fair go

March 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

Property Costs and Qld's Youth Crime Crisis

February 11, 2023 Edward Dever

A 77 year old woman is allegedly threatened with a knife by a 12 year old at a local shopping centre and told to hand over her car keys. Locking herself in her car, she calls police and the youth and his 13 year old accomplice are soon arrested.

A BMW driver is followed home and allegedly bashed with a hammer for his keys and car stolen.

A 75 year old man is allegedly bashed and critically injured outside the city's main shopping centre just after 5.00pm.

Just another couple of weeks in Queensland's garden city, Toowoomba. 92 cars were stolen in December 2022 with over 700 stolen in 2022. 34 cars were stolen in the first two weeks of 2023.

Youth crime in Queensland is nothing new. I recall helping on a matter as a summer student with a small law firm in the late 1980s. Several teens thought the path to riches was by knocking over the local milkman at 3.00am while he was delivering to a primary school. They escaped with just loose change. Balaclavas knitted by their girlfriends were discarded in a nearby garden. Police driving past a local park the next day were amazed when they stopped next to the youths and one asked "how did you find us so quickly?". They may not have been the brightest in their class.

The apparent escalation in home invasions and car theft in recent years is quite extraordinary. The quest for people's cars and the notoriety of posting one's exploits on social media seems never ending. On the victim side, there are daily reports of multiple break-ins and attempted break-ins by groups of youths. So far, the Government's proposed increased maximum sentences do not seem to have been a deterrent.

Resolving youth crime is a complex task and not my field of expertise. There are organisations trying to turn troubled youths' lives around, including some in Toowoomba. Police say that it is a minority of offenders who continue to flout the law - around 400 offenders across Queensland. Judging by the reports on social media and in the news media, they are quite busy.

One of the most shocking recent images is that of a youth dressed in black and brandishing a machete walking up a suburban driveway in Toowoomba in the middle of the afternoon. That may be one of the defining images of the crisis.

Residential property landlords must deal with the costs associated with break-ins, attempted break-ins and rising insurance costs. Despite low vacancy rates, landlords who wish to retain tenants must consider upgrades to security screens, installing security systems and engaging security services. These costs need to be recovered at a time when landlords face criticism for increasing rents and The Greens attempt to introduce rent freeze laws.

Commercial property landlords face similar security upgrade costs and also risk shoppers going elsewhere. As one commentator said in relation to violent crime in Brisbane's Queen St mall - if people have to look over their shoulder and view every stranger with suspicion, they will simply go elsewhere.

Perhaps that is the dilemma facing the 2023 Toowoomba Carnival of Flowers. Will tourists visit if the city becomes better known for its carnival of crime?

Options for Reducing and Preventing Youth Crime

February 2023

Six Ways To Save Money On Your Strata Costs - Updated

January 2, 2023 Edward Dever

Since this article was written in 2020, the Australian economy has changed.

Following Covid-19 and the downward pressure on residential property rents, the rental market has since developed chronic under supply issues. This has caused rents to increase, in many cases dramatically.

While rents have increased, so have costs. Consumer price inflation in Australia is currently 7.1 per cent per annum although increases for some costs borne by landlords such as insurance are increasing at a far greater rate than CPI.

It is therefore worthwhile revisiting ways to manage strata costs.

Here are six things you should be doing to keep a lid on strata expenses:

1. Get involved in the management of your strata community. You are an owner, it's your money they are spending, so you should be aware of how it is being spent.

2. Review your strata building insurance. It is quite likely that you are not getting the best deal. Shop around. Also, update your building valuation and check the appropriate valuation is being used in your insurance. I have seen one example where the (much higher) building valuation used was from a different building.

3. Get quotes and get them often. I have lost count of the number of times I have seen competing quotes which are thousands of dollars apart. If you have the time, talk to the contractors. Get to know which contractors have a good reputation and are genuinely interested in the work. Not all contractors will be interested and may be submitting high quotes that reflect their level of interest.

4. Find a reliable handyman. Worth their weight in gold and may save you just as much. A reliable handyman can fix a lot of the little common property issues that often get farmed out to the large contractor agencies. They operate on a different cost platform and will invariably cost more. That's not the fault of your strata manager. They need to streamline work orders and the large contractor agencies allow them to do this. I recall an example where a handyman's $90 fix solved a problem a contractor agency wanted to solve by a partial demolition and rebuild.

5. Don't over fund your administrative and sinking funds. While you need to ensure annual expenses are met and the sinking fund is adequate, it doesn't need to be over funded. Remember, it's your money and you won't get it back if you sell. I don't know of an instance where there was an adjustment at settlement to reflect a generously funded administrative or sinking fund.

6. Stop talking to your strata manager. At least minimise the discussions and have a single person act as point person. Many of the larger strata managers charge on an hourly basis for dealing with your building's file. If you are discussing every issue in minute detail with them (or several owners are separately), the cost will add up.

This list is by no means exhaustive.

January 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