Thursday, November 23, 2017

There goes the neighbourhood - Renters in the Census 2016

This week saw the publication of new research from the ANU showing that the problems of housing affordability in Australia don't stem from an undersupply of housing. This is something we've been saying for years - it is not the overall supply that matters, but the kind of supply. Specifically, supply of housing for lower income people.

A few days earlier, the Urban Displacement project in the US updated their San Francisco maps. That project is looking at where people with lower incomes are going when they become priced out of the area they are living in. That updated prompted the crew at #WeLiveHere2017 to ask if anyone was doing similar work here.
We thought this was definitely something worth looking into ourselves and we intend to devote a few posts to exploring this issue through crunching some Census data. This first post explores the very lowest income households. The following pictures are here for our mobile readers - they come from an interactive map available here where you can zoom in to any location in NSW and get more details.

We calculated the range of weekly household income for all households in NSW and found the first quintile, or lowest 20% of household incomes, in local areas (for the nerds, 2016 Statistical Area 2) across the state in both 2011 and in 2016.

Then we started looking at how many rental properties in local areas were reporting paying rents that would be affordable to that income level. This includes all forms of public and community housing, as well as private rentals. Using the 30% rule, in 2011 the lowest quintile could afford a property being rented at $155 per week. By 2016 this had risen to $198.30. The following two maps show the raw numbers of properties meeting that number across Sydney. About two thirds of these properties across the state are public or community housing.

Unlike all other rent price sources, such as bonds data and advertisements, the census exclusively measures sitting rents. This is significant in that it explains why some areas may have a higher number of these affordable premises than might be expected if you are used to looking at articles talking about rent movements.

Click the image for a larger picture or the interactive version here

Click the image for a larger picture or the interactive version here

The change is only slight when looking at these raw numbers, but the story becomes much more clear when we look at the change between the Censuses. Across Sydney the proportion of housing available for people on the lowest incomes is dropping - except in a few areas potentially indicating a concentration of this affordable housing.

Click the image for a larger picture or the interactive version here

However, we reckon there's a bit of a difference between an area with very few properties affordable to the lowest income quintile dropping and an area with quite a few affordable properties losing them (or gaining them). To explore that a bit more we've created a final map, which categorises the local areas into 12 groups depending on their placement on a scatter plot. This scatter plot measures on one axis the proportion of housing in the area which on Census night in 2011 was being rented at a rate that was affordable to households in the lowest income quintile and on the other the movement in the proportion of that affordable housing between 2011 and 2016 censuses.

The colour scheme divides those areas losing affordable housing into three equal sets and those areas gaining affordable housing into three equal sets. They are then further divided based on whether they have more or less than the median amount of affordable housing at the 2011 Census.

Once that scatter plot has been mapped we get the following map - zoomed in on Sydney here but the interactive version covers all of New South Wales.
Some of the areas that may seem surprising to appear in the affordable column are there because whilst they are generally affluent areas they do have concentration of public and community housing - or at least did. As one example the Hunters Hill - Woolwich statistical area comes up as affordable due to approximately 167 of the 683 total rental properties in the area being public or community housing - nearly 25%. This is a high proportion considering that across the state only a little over 15% of properties fall into this category.

Click the image for a larger picture or the interactive version here

So what do we learn?

In Sydney it is essentially a bad news story everywhere we turn - either there are unaffordable places getting worse or there are nominally affordable places getting worse. All that bright blue is areas with affordable housing disappearing. The orange is areas with unaffordable rentals that are disappearing. Across the state there appears to be a concentration of affordable housing occurring with most areas falling in the proportion of affordable housing but increases in pockets.

That these rents are sitting rents raises another concern - what happens when people are forced to move? Fortunately a high proportion of these properties are public or community housing but a significant number are in the private market. As such these are households who are in very vulnerable positions. If they do need to move, especially in the private rental sector, they are likely moving on to much higher rents as the market continues to rise.

This is an early version of this data - we haven't adjusted rents and income for household size for instance. It is clear that a single person on the same income as a household of five is more able to fit in a smaller dwelling more comfortably and likely in more affluent areas.

In the next version of these maps we'll be making these adjustments and drawing out the changes in public and community housing as well as looking at slightly higher income groups.

Wednesday, November 15, 2017

Uncertain futures - Renters in the Census 2016

The second round of the 2016 Census was released last week, and amongst employment, education and travel statistics there's the question of whether respondents had moved in the previous few years.

We took a look at this question across different tenure types. It probably comes as no surprise that renters in the private sector were nearly 3 times more likely to have moved in the last year as any other tenure type. In fact, more than a third of renters in New South Wales moved home in the last year.

In the last 5 years, more than three quarters of renting households had changed. This is entirely consistent with findings included in our latest Rent Tracker about the churn of rental bonds in NSW.

The story continues for people aged 60 years and over:

People who may particularly need to remain in a single home are, because they are in the private rental sector, three times as likely to have moved in just the previous year as any other tenure type. There were about 136,000 tenants aged 60 or over at the Census, meaning 23,000 had moved in the last year, and a further 44,000 in the last five.

This level of insecurity is unsustainable. Previously, people who were unable to purchase their own home in order to have housing stability and affordability in retirement would be able to rely on social housing. As above, movement in social housing is fairly comparable to owner occupiers, but years of under investment has meant it is reaching historically low levels.

As people are increasingly renting into retirement, change is needed to ensure private renting is stable, livable and affordable - primarily, the removal of unfair evictions.

Monday, October 23, 2017

Making sense of social housing in NSW

Social housing operates within a complex glob of morphing policies and procedures, prodded by occasional shifts in public policy at both a state and federal level that draw various laws, instruments and agreements into contact with one another in a range of ways. A sound working knowledge of the sector in its entirety can take years to develop, and once established could fall apart within an instant should one glance away at precisely the wrong moment.

A case in point is last year's announcement that the management of large swathes of tenanted public housing properties will be transferred to community housing landlords in New South Wales, in keeping with the Council of Australian Governments' (COAG) National Affordable Housing Agreement (NAHA), which was negotiated during the early days of the Rudd-Gillard-Rudd Government era. The announcement of the Management Transfer Program sparked some discussion here on the Brown Couch, and across the broader sector, about just who these community housing landlords are. How do they come to be in the business of housing people from the public housing waiting list since they're not run by the Government of NSW?

The plot thickens, as the results of the Program's tendering process have now been announced. Over the next couple of years, management of around 14,000 tenanted public housing properties across six different regions is to be handed to nine community housing landlords who are already operating in other parts of the state. So... now is a good time to take a look at what it means to be a "social housing" landlord in New South Wales.

Given we've already mentioned the NAHA, we should note it is the intergovernmental agreement that determines who takes responsibility for what within our housing systems across Australia. As an agreement among the Commonwealth, state and territory governments it is a static document, although it is intended to be renegotiated and updated from time to time. It has been altered quite a bit since its series of predecessors first took form: established in the 1940's as the "Commonwealth State Housing Agreements" as something of a post-war nation building scheme; and it is currently being renegotiated as a "National Housing and Homelessness Agreement".

Regardless of form, or name, these agreements have generally all set out to achieve the same objective: to set the conditions under which the Commonwealth would give funding to the states to run their public housing schemes. These agreements have been broad enough to allow each state and territory to run their housing programs as they see fit, as indeed they do. A strong focus of the current agreement has been to shift the delivery of housing assistance and services away from government to the not-for-profit sector, and successive NSW Governments have responded - indeed contributed - by attempting to consolidate and build our community housing sector. Notably, this included the regulation of the sector in 2010, with a state based scheme that has since been replaced by the National Regulatory System for Community Housing. It also included the establishment of a single waiting list for housing assistance, accessible through a portal known as Housing Pathways, under which any participating landlord could both process applications for and make offers of subsidised rental housing to eligible households.

In this context our language and legislation has come to reflect the idea of "social housing". With this term we could be referencing either or both of its constituent parts: "public housing" or "community housing"; and for practical purposes the only difference is whether the landlord is the government or a not-for-profit agency who has been contracted by government to provide the same essential service. Of course, things become more complicated when we consider the public policy implications of this rhetorical shift, as it gives our still predominantly neoliberal governments easy cover to withdraw from the direct provision of public housing proper, and focus entirely on the setting of policy instead. They do this on the grounds that "community housing landlords are well placed and can do it better", although this is far from an established truth. While we can have no objection to the growth of this community housing sector, the fact that it only ever seems to happen at the expense of our established public housing provider is a simple reflection of the State's entrenched reluctance to pay for and provide social housing. Given the sector has spent the better part of a decade trying to attract private finance to its cause, it reflects a certain level of disinterest in housing-as-shelter from the profit-driven private sector as well - as an aside, it will be interesting to watch how the emerging "build-to-rent" discussion proceeds from here.

Right - so while all of that is going on at the higher level, there is a somewhat consistent legal framework setting the scene in the meantime for social housing landlords and tenants across New South Wales. Although with the right political will the statutes under which social housing policies are determined can be changed - as we have seen throughout the last couple of years with mandatory evictions for social housing tenants and the introduction of concurrent leasing by the Land & Housing Corporation to enable the current Management Transfer Program - keeping tabs on the legislative framework can be a useful way to maintain one's bearings while trying to make sense of social housing.

The Residential Tenancies Act 2010 devotes an entire Part to social housing tenancy agreements, a discrete form of residential tenancy agreement to which a number of additional provisions apply. This Act defines a social housing tenancy agreement as "a residential tenancy agreement where the landlord is a social housing provider", and then defines a social housing provider as:
  • the New South Wales Land & Housing Corporation
  • the Aboriginal Housing Office
  • a registered community housing provider within the meaning of the Community Housing Providers National Law (NSW)
  • an organisation for the time being registered under Part 5 of the Aboriginal Housing Act 1998
  • an organisation or a member of a class of organisation prescribed by the regulations
This immediately brings a number of other statutes into play. There's the Housing Act 2001, under which the Land & Housing Corporation is established as the legal entity that enters into residential tenancy agreements and other related dealings in residential property on behalf of the government; and under which the income based rental subsidy scheme is established. This is the legislation that gives us public housing, and it is amendments to this legislation that has enabled the emergence and establishment of community housing over many years.

There's the Community Housing Providers (Adoption of National Law) Act 2012, under which regulation of the community housing sector is provided by adoption of the Community Housing Providers National Law. This Act brings New South Wales into the National Regulatory System for Community Housing and, in some circumstances, allows the government to conditionally transfer title from the Land & Housing Corporation to a registered community housing provider. Note this has fallen out of fashion as concurrent leasing has come into play, having been made available by amendment to the Housing Act in 2016. For the time being property is being transferred to the community housing sector using this form of head-lease, but transfer of title under the Community Housing Providers (Adoption of National Law) Act remains an option.

Finally there's the Aboriginal Housing Act 1998, under which the Aboriginal Housing Office is established along similar lines to the Land & Housing Corporation, but with a specific remit to develop policy and deliver subsidised housing for Aboriginal households who rent. This Act also allows regulation of a broader Aboriginal Community Housing sector, for whom the National Regulatory Scheme for Community Housing is also being brought into play. By association, we must mention the Aboriginal Land Rights Act 1983, under which Local Aboriginal Land Councils who provide rental housing to their members may register with the Aboriginal Housing Office or the National Regulatory Scheme for Community Housing in order to have the requirements for approval to run a community benefits scheme that includes the provision of residential accommodation to their members waived by the NSW Aboriginal Lands Council.

The policy framework in which social housing operates is likely to keep changing, and where required legislative changes will sometimes follow. But for now, the above provides an overview of social housing in New South Wales. We'll keep an eye on the development of the National Housing and Homelessness Agreement, and take further note of any impact it might make.

In the meantime we'll do our best to answer any questions left in the comments, or sent through to us via the usual channels.

Tuesday, October 10, 2017

Victoria's rental revolution - how does New South Wales compare?

Yesterday we celebrated Victoria's proposed tenancy law reforms, and reflected on some tired old lines that turn up every time we give serious contemplation to improved rights for renters. Today let's take a closer look at just what the Victorian Government's "Rent Fair" package includes, and how it compares to our own laws in New South Wales.

Victorian landlords: ready to cross the border at the first sign of tenants' rights
Victoria's proposed reforms are many and varied. They've been categorised into six different groups: rental security, tenants' rights, faster payments and rental bonds, fair priced rent, pets are welcome, and modifications.

Let's dive in.

Rental security
This includes the big one: landlords must give a reason to end a tenancy. This should be rolled out in every Australian state and territory, except Tasmania where it already applies. Along with others from the community sector we've been actively campaigning on this issue here in NSW (find out more at Make Renting Fair NSW). Allowing landlords to end a tenancy without a stated reason actively undermines tenants' confidence in renting laws because they worry they'll be evicted unfairly if they make a fuss or stand up for their rights. By now this should be well established, but if you still need some convincing we recommend a quick look over the recent Unsettled report published by Choice, National Shelter and the National Association of Tenants Organisations. Three cheers for Victoria for announcing this change!

We should note that Victoria already has a long list of reasonable grounds available for landlords to use, and their "no grounds" notice comes with 120 days notice. In New South Wales we are missing some key grounds, such as where the landlord needs to recover the property for their own personal use; and our notice period is a full month shorter at 90 days. Any suggestions we can fix our own laws in New South Wales by expanding the list of grounds for termination and leaving the "no grounds" option intact just took a bit of a hit.

But here's where it starts to get flakey: the law will limit the use of the ‘end of fixed term’ notices to vacate. This will allow landlords to use what is effectively a "no grounds" notice of termination at the end of the first fixed-term period (usually six or twelve months), but not in any subsequent period if the fixed-term is renewed rather than proceeding on the basis of an open ended agreement. Make no mistake, this would be an improvement and we'd welcome a similar change in New South Wales. But in practice it will turn fixed-terms into a "probationary" period. Tenants who stick up for their rights during an initial fixed term would still have no protection against an unfair eviction, so might hold off reporting repairs and maintenance needs, or raising other concerns about their tenancy, until after the fixed term expires. It would be better to just ban the use of no-grounds notices altogether, perhaps with an exception for longer fixed-terms of say three years or more (in the spirit of compromise). This might be something the Victorian lawmakers will consider as they're working out how to encourage more long term leases, which is also included under this heading.

As for the rest of the reforms under this heading - prohibiting false, misleading or deceptive representations and requiring pre-contractual disclosure of the presence of asbestos or an intention to sell, Victoria is mostly just catching up with New South Wales, but taking a few steps further while they're at it. The need for New South Wales landlords to disclose material facts prior to entering into a tenancy agreement was introduced with our Residential Tenancies Act 2010, but it wasn't given any measures for enforcement. We're still hoping this will be fixed - along with adding the presence of asbestos in the property as a fact for disclosure - as per the recommendations of the recent review of our own renting laws.

Tenants' rights
There are two proposals under this heading. A commissioner for residential tenancies who will "champion the rights of Victorian renters in the private sector" strikes us as an interesting idea, but we'll wait and see how that plays out for awhile before we get too hung up on it. A landlord blacklist seems like an odd thing for a government to introduce, when they could just encourage greater compliance with the law by investigating complaints and issuing penalties, but we'll keep an eye on this one as well.

Faster payments and rental bonds
A move to allow a 14 day automatic bond repayment is more or less in keeping with what we've long since known and loved in New South Wales - if you can't get an agreement and both signatures on a bond claim form, then either party can make a unilateral claim that will be paid out after 14 days unless the non-claiming party raises a dispute and takes it to NCAT. Sensible, although we do think it would be better if only tenants were allowed to make a unilateral claim, allowing landlords to dispute the claim or apply to NCAT after a reasonable time if they felt they were entitled to it. Changes  to the way the early release of bond works in Victoria will be of little consequence to us in New South Wales - our law allows this at any time as long as all parties agree, or the requesting party is handing it all over to the other, whereas the Victorian proposal will extend the right to an early refund to be available in the last fourteen days of a tenancy, rather than the last seven days. The same goes for updated bond cap & up-front rent cap for most properties - these are already in place in New South Wales, where a bond may not exceed four weeks rent and no more than two weeks rent in advance can be required regardless of the type of property or amount of rent payable. The move for faster repairs reimbursement, where tenants can seek reimbursement for the cost of urgent repairs they have effected because they couldn't wait for the landlord, is a small step ahead - Victorians will be entitled to this within seven days of a request, while we could still be waiting up to fourteen days. That is, of course, assuming we've followed the process correctly - never effect an urgent repair without reading up on the law first, because failing to follow all the steps could see you permanently out of pocket.

Fair priced rent
Victoria has announced a very modest change here, that will leave us in their dust. Rent increases are already restricted in Victoria - they can't happen more than once every six months, and under the proposal this will change to once every twelve months. Meanwhile, in New South Wales, there is no limit or cap on the frequency of rent increases. In theory, your rent could go up daily and there ain't a damned thing you could do about it - provided you've been given the proper notice on each occasion - other than apply to the Tribunal and argue that a proposed increase is "excessive". Limiting rent increases to a maximum of once a year would be alright in New South Wales, but we'd also need to rework the way tenants can respond to them. It should be up to the landlord to show that a significant increase is reasonable, rather than the tenant to show that it is excessive.

This plan also proposes cracking down on rental bidding, which is something we can all get behind. The law in New South Wales is not really clear on whether it's lawful for landlords to solicit bids, but it seems okay to accept a higher rent if a tenant jumps in first. Just because you can pay more doesn't mean you should, and landlords shouldn't dangle properties in front of desperate tenants with a wink, a nudge, and a sign saying "pssst, make me an offer" hidden in the top drawer. Victoria says it will prohibit landlords from "inviting" bids, which is bad news for a couple of rent bidding apps that are sniffing around at the moment, but perhaps it could go a little further. We should be clear - in an era when governments are relying on the private sector to make up the shortfall created by chronic under-investment in social and affordable housing, allowing those with greater means to push up prices for the rest of us should be well and truly outlawed.

Pets are welcome
Pets in rental property will be allowed by right of every Victorian tenant! Or will they? The proposal says tenants will need the landlord's written permission first. It also says the landlord won't be able to unreasonably refuse, but that leaves a lot of grey area around just how rigid this new "right" will be. Further, this seems to be more of a right for people who rent and want a pet than people who have a pet and want a home to rent. Landlords will still be able to discriminate at the point of application by simply declining to rent to people with pets.

A better way to give tenants the right to keep pets would be to take a "don't ask, don't tell" approach. We should confirm once and for all that landlords have no business making decisions about who besides themselves shall get to keep a pet, and prohibit including a "no-pets" clause in tenancy agreements.

Ensuring that tenants can make minor modifications to their home is the final piece of news coming out of the Victorian proposals. It makes good sense, and again it brings Victorian laws in line with ours in New South Wales. With this kind of reform the devil is in the detail, as questions of who gets the value of an improvement if the tenancy ends prematurely will need to be considered thoughtfully. We haven't quite gotten this right in New South Wales yet, either.

Monday, October 9, 2017

More news from down the Hume

There's been massive news out of Victoria over the weekend, with the Andrews Government pledging to make renting fair!

The announcement refers to an "unprecedented package of tenancy reforms" that includes doing away with the Victorian equivalent of unfair evictions, preventing discrimination against tenants with pets, and cracking down on rental bidding. All of these sound pretty good to us here on the Brown Couch, and we look forward to seeing further details as these proposals are implemented by amendment to Victoria's Residential Tenancies Act 1997. Early details are available here.

Of course, not everyone was happy with this announcement. ABC online reports:
The Real Estate Institute of Victoria (REIV) said the changes would force up costs, which would be passed on to renters. 
"Rents will go up, people will leave the market, there'll be less supply and that's only going to push people out of the rental market and make it more difficult for those who are seeking to rent premises cheaply," chief executive Gil King said.
But our colleague from the Tenants' Union of Victoria, Mark O'Brien, wasn't having any of it:
"Every time there's reform of the residential tenancies law, the institute claims it's the end of the world as we know it and that's never what occurs," he said.
O'Brien's view is supported by a great deal of research, which suggests property investors tend to be motivated by financial considerations rather than tenancy laws.

Still, it's a line the investor lobby and landlord advocacy groups like to trot out at times like this and we expect a similar conversation will emerge in New South Wales when at last the results of our own review of renting laws make their way towards Parliament. We've been expecting this would occur before the year is out, but now that's looking unlikely. This means we've still got time to convince our own government they should be following Victoria's lead to make renting fair - you can lend your support to our claims here.

But it also means our own landlords' and real estate agents' groups will have more time to practice their lines about tenants' rights leading to all sorts of doom and gloom for renters. "Careful what you wish for," they might say. "The changes will force up costs, rents will go up, people will leave the market, there'll be less supply and that's only going to push people out of the rental market and make it more difficult for those who are seeking to rent premises cheaply".

The thing about all this is that there's not much stopping rents from going up as it is. For a quick refresher on why this is, have a look at our earlier post about why rental affordability continues to deteriorate.

But back to the specifics of the claim. The Real Estate Institute of Victoria seems to have skimmed over their suggestion that rents will go up to offset an increase in landlords' costs. Perhaps they've cottoned on that such claims are a furphy, because even though most landlords would go out backwards without them rents are a function of what tenants can pay rather than what landlords' choose to spend when buying and holding property. Or perhaps they just don't think the Victorian proposals will add significantly to their costs so they've steered clear of any further detail. Either way, they've put their emphasis on the slightly different argument of "people will leave the market, thereby reducing supply".

We should keep an ear out for this one in New South Wales, too. It's the idea perhaps that fair renting laws will take all the fun out of property investment, so landlords will take their money and spend it on other, much simpler things. Keep in mind the same argument was made when our current laws were drafted in 2009/10, and the private rental market was hands down the most likely place for a property in New South Wales to turn up in following sale or construction between the 2011 and 2016 Census events.

Still, given the prices property owners could expect at the moment it stands to reason some might be tempted to cash out. Some might even use the prospect of law reform as a cover for their decision. Rest assured they'll be factoring in capital gains before all else, and nobody likes to sell before hitting their targeted windfalls unless they really, really have to.

Those who do sell will be doing immediate damage to their sitting tenants - just as any landlord does when selling for any other purported reason. That is, unless they sell to another investor who is not so concerned about law reform (or other purported reason), and will keep the tenancy going. Given it's mostly an investors' market at the moment this scenario is becoming more and more likely. But, on the off chance an investor cashes out by selling to a first home buyer, the net impact on supply will be zero if the buyer is leaving the private rental market in order to take up home-ownership. And if a whole lot of investors suddenly decide to sell up all at the same time, prices might start to come down a little and first home buyer activity might find some renewed vigour.

It's the landlords who take their properties with them when exiting the market that are the real problem. These are likely to be in the very small minority, since most landlords run at a loss for tax purposes, and rely on any rental income to cover their main costs which includes the interest on their loans. Nevertheless, this risk could be easily countered with a vacant property tax, the likes of which the Victorian Government has also recently proposed. The revenue from such a tax could be used to fund new social housing dwellings.

Despite what we can expect to hear from the investor lobby in the coming months, the NSW Government would do well to start taking notes on Victoria's tenancy law reform proposals.

Thursday, September 21, 2017

How do you solve a problem like Airbnb?

With the deadline for comments on the Government's options paper around short-term holiday letting in New South Wales drawing near - they're due at the end of October - we're starting to see a resurgence of articles and musings about the impact of short-term holiday listing companies on Australia's fragile housing system. We thought we'd weigh in with some early thoughts.

The week kicked off with a comment from Stephen Goddard, strata lawyer and spokesperson for the Owners Corporation Network, in Domain. The OCN advocates that strata lot owners should be given the right to make rules about short-term letting at the micro-level - that is, owners within each individual apartment block should be able to decide for themselves whether they will allow short-term lettings in their building, and under what conditions. Goddard makes some strong points, and it's hard to disagree with the notion of short-term lettings being regulated at that very local level as far as strata is concerned.

It's worth pulling out a couple of items for further discussion. The first is that strata laws in New South Wales don't allow tenants to have any meaningful representation on strata committees, which is where by-laws that would include rules about short-term lettings would be made. Once a by-law is made, tenants can't really challenge them - only the owner of a lot can do that. This presents a problem for the "local democracy" model: those residents who do not want their building to allow short-term letting, and who rent, would be excluded from any discussions or decision around the relevant by-laws. On the other hand their landlords - who may not reside in the same town or city, let alone within the strata complex - would be invited to contribute. That means decisions about short-term lettings would be influenced by people who have no direct interest in the day-to-day concerns of their strata community. The issue could be fixed with a few tweaks of the Strata Schemes Management Act 2015, along the lines argued by the Tenants' Union prior to the Act's implementation, to allow tenants greater say on the management of their strata schemes.

The second is Goddard's comments about the impact of short-term letting on housing affordability more generally. On this he cites research from the University of Sydney's Urban Housing Lab which he says "recently found that short-term letting platforms have removed 6,000 properties from the long-term rental market throughout NSW". He links to an earlier article in which the research was discussed - it quotes the Housing Lab researcher and provides further context around the findings - but we'll have to wait until the research is published before we can get a clear look at what it tells us. Given the fluidity of Australia's housing markets, where properties are traded back and forth between owner-occupiers and investors with relative frequency, the growth of short-term letting raises some interesting questions around the interplay between existing and emerging residential property uses.

The journalist who wrote the earlier story also sought comment from the Tenants' Union prior to publication. Our remarks were not included in the piece, but reference was made to our own research into the impact of Airbnb on Sydney's rental market. This research found no clear correlation between rising rents and an increase in listings in Sydney's Airbnb hot spots, suggesting that deteriorating rental affordability across the city is not necessarily down to Airbnb. This is in keeping with other analysis we've presented about declining rental affordability and the changing shape of the private rental market.

Not surprisingly, vocal opponents of short-term letting are unimpressed with our report, and we've been accused as recently as last week of "cosying up to Airbnb". To be fair, Airbnb Australia has taken to citing our report as part of their arsenal in fending off claims about their company's negative impact on housing affordability - and well they might. But let's be clear, where short-term lettings are concerned the impact on rental affordability is not the only game in town. Far more concerning is the impact on housing security for people who rent, and who can be evicted without grounds by landlords who might consider themselves simply experimenting with a new investment strategy by trying their luck with short-term letting. To be fair again, our "cosying up" accuser has agreed with us on this point.

As our report highlighted, listings for short-term lettings tend to spike during peak tourist times, and many listings do not result in numerous or frequent bookings. This is in keeping with Airbnb's repeated claims that the majority of people listing on their platform are just ordinary folk looking to cover their own costs while taking time away from home. Available data doesn't tell us how many listings are made by owner-occupiers or renters, and how many are made by investors, so we're only able to guess as to the specific impact of landlords turning away residential tenants over the summer in order to take on short-term holiday makers. But there can be no doubt such an impact has long been felt in popular tourist areas across New South Wales, and there can similarly be no doubt the increased ease by which property owners can solicit short-term lettings by using Airbnb is making this worse. Reforming the Residential Tenancies Act 2010 to ensure tenants can't be evicted "without grounds" to allow experimentation with short-term lettings will be critical to solving this problem.

Even with the above-mentioned reforms in mind, there will still be a need to regulate the short-term letting sector. Findings in our report suggest landlords would need to operate on a more-or-less commercial basis if they are to make short-term letting a viable financial alternative to simply renting a place out, but of course there are some who are already doing that. With various examples of third-parties offering their services to manage such operations there is a huge risk this practice will grow, particularly in high demand tourist areas that are already struggling with affordability issues. This is clearly a problem. A commercially operated short-term letting business should only be allowed subject to local government approval, and there should be clear guidelines as to what constitutes a "commercial operation" and the conditions under which it will be approved.

We'll return here to Airbnb's oft quoted claim that the majority of their hosts are not commercial operators, but everyday people simply sharing a spare room for extra cash or keeping their homes lived in and looked after while taking some time away - all part of the global "sharing economy" that some are even calling a financial lifeline. As far as a corporate narrative goes, it's not a bad one, but it clearly sidesteps some of the problems that are created or exacerbated by this highly profitable business. If they were genuine about the claim, they could very easily make it true by limiting the number of bookings a host could solicit via their online platform. There is no doubt they'd lose listings, as the commercial operators would take their business elsewhere, but they'd recover some credibility and perhaps even restore a little faith in their so-called sharing economy. They could trade a bit of money for some moral high-ground. But they don't.

Make sure you get your response to the Government's short-term holiday letting options paper by October 31st.

Tuesday, August 29, 2017

Building to let

The concept of "building-to-let" seems to be gaining some traction as a solution to Australia's housing affordability woes. As the name suggests, building-to-let happens when a developer builds residential dwellings - presumably apartments - with the intention of renting them out rather than selling them off once complete. As circumstances (aka house prices) are forcing many of us to re-imagine the great Australian dream, this is just the kind of blue sky thinking we need.

Imagine...! A landlord who is interested in a relationship with tenants rather than property! Who won't cringe at the thought of picture hooks, curtains, a new light fitting. Who will let you keep a pet, subject to reasonable by-laws. Who won't put the rent up just because everyone else is doing it. Who won't kick you out because they want the place for their kids, or to sell it, or simply for no reason at all.

Just imagine!

Perhaps the reason this would appeal to so many Australian renters is that it is the polar opposite of what our private rental market currently delivers. As we discussed in a recent post, Australia's landlords are
... mostly one-off or small-time investors, "mums and dads" who are more interested in property for its capacity to generate wealth than providing homes for families. They'll hang onto a property for maybe five years or so then sell it, banking the gains or putting them towards their next investment. For the most part, Australian landlords are not interested in building large portfolios, and they don't want to concern themselves with the day-to-day workings of property investment. They tend not to engage with things like renting laws, tribunal procedures, or tenants' rights unless they have to. Many are happy to ignore these aspects of investment altogether, handing them all over to real estate agents who know only too well they won't have anyone looking over their shoulder as long as the rent rolls in and the outgoings stay under control.
Building to let offers a genuine counter to this. At least, it does in theory.

But there's a problem, and it's one of culture. Australia's approach to housing is built on the assumption that you rent when you're young, then you buy a home, and then you buy an investment property. There's been a recent shift in this assumption, at least for some, so that you rent when you're young and then buy an investment property so you might be able to afford a home when you retire.

No doubt the sudden emergence of this build-to-let discussion is an indicator that whatever underpins these assumptions is faltering. That in itself is a very interesting development. But it will take a great deal more to change Australia's values when it comes to renting versus owning your own home for the long term. This is important, because it affects the rules and regulations under which our rental markets operate, and how they might change.

The establishment of "build-to-let" schemes could aide in the evolution of Australia's renting laws, as a new class of landlord emerges with interests that are somewhat less in conflict with tenants' than our millions of "mum and dad" investors' are. On the other hand, pushing against long-established cultural norms may prove all too difficult, or even undesirable, for such landlords. As always, the proof will be in the pudding.

Institutional investment does not mean investment in tenants' interests. For all the good they may do, consider the dearth of support from community housing landlords for a simple proposal to make renting fair: more than eighty organisations from across New South Wales are calling on the Government to end unfair evictions by removing no-grounds notices of termination and expanding the list of reasonable grounds available for landlords to use when a tenancy must be brought to an end - but socially responsible, not-for-profit landlords are notably absent from that list. You might think institutional landlords with a mission to improve outcomes for the households who need it most would be the first to engage with such ideas, but evidently the status quo suits.

So when you read statements from major developers who say things like
I believe, and based on the experience in other parts of the world, institutional grade multi-family housing tends to streamline the process of renting by providing tenants with the stability to live long term in rental property, should they elect to do so, without the risk of the owner selling, greater reaction time to any repairs and maintenance, access to modern properties within sought after locations and security in tenure over the property
Creating a sustainable, affordable housing market in NSW means providing a diverse range of housing options and build to rent could be a viable choice to provide certainty and security of tenure to people who want to rent rather than buy
... without reference to tenancy law reform, it should be taken with a grain of salt. If we can't even get our social housing landlords to commit to improved security of tenure for renters, what hope do we have for the private sector?

Consider comments attributed to Treasurer Dominic Perrottet while discussing the NSW Government's possible support for build-to-let schemes recently, that "finding ways to give renters that security without excessively curtailing the rights of property owners is a fine line to walk". Evidently the build-to-let solution has already surrendered to Australia's established housing culture.

Again, the proof will be in the pudding. We're aware that some developers in Sydney are already building to let - we know this because we sometimes hear from their tenants. What we're hearing are stories of unlawful, non-refundable "pet licenses", and evictions without grounds.

We'd like to see building to let flourish in New South Wales. A genuine market intervention from institutional landlords could be just what many of Australia's long-term renters need. Unfortunately, for the time being at least, it looks like it would be just another sideline for developers.