Friday, May 30, 2014

I scream, you scream: reflections on an inequitable Budget

In today's guest appearance, legendary tenants advocate and now Older Tenants Project Officer at the TU, Dr Robert Mowbray, reflects on the Federal Budget.

My favourite gelato is scoops of panna cotta and hazelnut from Bar Italia in Norton Street, Leichhardt. But I always wondered what was planned for the long-time empty Harold Hawkins Court, a former aged care facility. It's smack-bang in the centre of the cafe strip along Norton Street and I look across at it everytime I indulge in my favourite gelato.

Just over a year ago, Leichhardt Council announced it was forming a partnership with UnitingCare Ageing to develop affordable housing in Leichhardt. The initial focus was providing accommodation for older people with intellectual disabilities and mental health issues. Old aged care facilities, such as Harold Hawkins Court and Annesley House (just around the corner), were to be given new leases of life through the National Rental Affordability Scheme (NRAS). That's really great!

But when I opened the Sunday paper after the Federal Budget, I found that the new round of NRAS funding has been scrapped. That means no NRAS funding for the proposed UnitingCare affordable housing in Leichhardt and elsewhere.

Although no one will feel the blow torch of this Budget more than the young unemployed with no family support who are being fast-tracked to homelessness, there are hidden in the Budget are other surprises for older persons, often struggling to meet housing costs. The Commonwealth-State agreement for concessions and discounts on travel, electricity and rates will be terminated. Financial planner Louise Biti says:

"It will hurt pensioners the most. This will cost $1000 to $2000 a year. No one was expecting that ... ''

Also cut: a voice in government for people with disability. The Coalition Government has announced that it will not fund a separate Disability Discrimination Commissioner at the Human Rights Commission when the term of the current Commissioner, Graeme Innes (ex-Residential Tenancies Tribunal Member), ends in July. This is despite the fact that 37 percent of discrimination complaints relate to disability, and those is so much more for a Disability Discrimination Commissioner to do.

Welcome to 'The Age of Inequality' – the paradigm for a future Australian society. We will see the wedge between the 'haves' and the 'have-nots' widen dramatically. High-income earners are barely affected: 'someone earning three times the average wage will lose just 0.9 per cent of their take-home income. And further up the income scale, 'the latest tax statistics show 75 ultra-high-earning Australians paid no tax at all in 2011-12':

It isn’t only millionaires. Tax Office figures show there are 1095 Australians earning in excess of $150,000 who pay no tax. Half of them sought tax advice and shelled out an impressive total of $98 million, which works out to $223,000 each. Their biggest lurk is negative gearing. Most lose large sums on properties they rent out in order to destroy their taxable incomes, hoping to make it up later when they sell the properties for a lightly taxed profit.

I wonder what high income earners will think should they sit down for a gelato at Bar Italia and just happen to look across the road at the empty Harold Hawkins Court?

Tuesday, May 27, 2014

Roomshare sector not complying with boarding house reforms

When the NSW State Government introduced the Boarding Houses Act 2012, it set out to address not only traditional boarding house establishments, but also houses and flats rented out in shared accommodation arrangements. This is the 'roomshare' sector, and it is often targeted to students and low-income workers, especially from overseas.

A few months ago the TU did some research into the roomshare sector, to get an idea of the extent to which the Boarding Houses Act applies to it (as 'general boarding houses', as defined by the Act), and the extent to which general boarding houses in the roomshare sector are complying with the requirement in the Act to be registered with NSW Fair Trading.

To do this we looked at roomshare ads on the online classifieds site, Gumtree.  

(A space on the branch rents for $150 per week)

Over five weeks we looked at Gumtree and found, on average, about 1 400 roomshare premises advertised each week (by contrast, there were 598 general boarding houses registered on Fair Trading's Register of Boarding Houses).

We analysed 224 ads to see whether the premises advertised fit the definition of 'general boarding house' at section 5 of the Act, and found:
  • 26 per cent very likely to be general boarding houses; and another
  • 18 per cent may be general boarding houses.
Of these, just two (0.5 per cent) were actually registered as general boarding houses.

On the basis of our analysis, we conclude that:
  • the roomshare sector is a large – if not the largest – part of the general boarding house sector;
  • it is hugely – almost completely – non-compliant with the requirement to register; and
  • its compliance with other aspects of the Boarding Houses Act, and other laws, is doubtful, to say the least.
The job of enforcing the registration requirement lies with local councils; we recommend that they more actively investigate the roomshare market and exercise their role.

We also recommend that the NSW State Government, local councils and representatives of boarding house residents and proprietors work together to
  • clarify what really can and should be expected of the roomshare sector, particularly in relation to planning law and local government legislation;
  • establish protocols to minimise hardship to residents where action is taken to stop roomshare premises operating; and
  • inform the development of policies for affordable housing to appropriate standards.  
Read the report here.

Monday, May 26, 2014

What is a sustainable surplus?

Chair of the National Commission of Audit, Tony Shepherd, laments the widespread criticism of the Federal Budget. He says:

I wish people could... stand back, look at the overall picture of the Commonwealth budget and rather than say 'don't touch me', say 'what can be our contribution to a sustainable surplus'.

The terms of reference for Shepherd's Commission of Audit included that it 'make recommendations to achieve savings sufficient to deliver a surplus of 1 per cent of GDP prior to 2023-24.'

So what is a sustainable surplus?

There's probably no such thing, at least for the Australian economy. Government deficits are more sustainable than surpluses.

First, let's get clear on what a surplus is, and what a deficit is. Each refers to the government's net income over a period (a year). If the Australian Government's income (primarily taxes) is more than its spending, the Government is in surplus; and if its spending is more than its income, it is in deficit.

Of course, one person's spending is another person's income, so if the Australian Government is in surplus, everything that's not the Australian Government (households, firms, other governments) must, by identity, be in deficit.

(This means, incidentally, that rather than saying a government 'delivers' a surplus, it is better to say that it 'takes' or 'extracts' a surplus.)

We can narrow down that broad non-government sector by distinguishing an external sector (ie foreign households, firms and governments) from the Australian private sector.

For any given period, one (or two) of the three sectors can be in surplus – and two (or one) in deficit. Not all of them can be in surplus, or in deficit, at once. Their total surpluses and deficits for the period must net to zero.

In the case of Australia, what we pay to the external sector is nearly always more the income we receive from it (we have a current account deficit). With that in mind, when the Australian Government takes a surplus, the Australian private sector must be in deficit – paying out more than it receives in income.

The Australian private sector can do this by running down stocks of money accumulated in previous periods of Australian private sector surplus (that is to say, periods of Australian Government deficits).

This cannot be sustained for long. Theoretically, if the Government persisted bloodymindedly in taking surpluses year after year, the private sector would end depleting all its net financial assets, then start offering up real assets (houses, cars, the shirt off your back) to the voracious Government. More realistically, financially constrained households and firms would try to shore themselves up individually by spending less and saving more, thus reducing overall income and economic activity.

By contrast, when the Australian Government is in deficit, its spending is not financially constrained, because it issues the currency. With an Australian private sector that is inclined to save Australian dollars and other net financial assets, and an external sector of trading partners pleased to accumulate Australian net financial assets, an Australian Government deficit is the sustainable and appropriate way to promote economic activity.

Friday, May 23, 2014

Your rights in action: Peace, comfort and privacy

In todays guest contribution, the Brown Couch welcomes contributor Anne Coates. Anne is a Distance Education Student with a story to tell! This article first appeared in the April edition of Tenant News - the TU's regular newsletter.

As a distance education student, my rented apartment is not only my home, but also my main place of study. So I particularly value the right to ‘reasonable peace, comfort and privacy’. One way this right is maintained is through the landlord or agent giving proper notice, prior to access – at least in theory! Recently I discovered in practice, things may be rather different.
Our landlord, it turns out, has decided to sell the property. In preparation, a tradesperson was arranged by the landlord to paint all the windows. Our notice of this work was a knock on the door by the painter, one Thursday morning just after 7am, requesting for all the windows to be opened, and left open ‘for the next few days’.
The failure to give adequate notice (not less than 2 days notice for maintenance), and the painter’s noisy scissor lift starting each morning from 7am, upset the 20 odd tenants in the apartment block. The tenants exchanged ideas for action. Some put up notices in response to the painter’s sign for ground floor tenants, while others sent emails to the Managing Agent. Eventually, the message made its way to the painter, so towards the end of the job the noise was not starting until 8am (the legislated time).

The following Tuesday a letter under our door advised that a Selling Agent (not the Managing Agent!) wanted to inspect the premises on Friday at 9.30am, another failure to provide adequate notice for access. Again, the protests of the tenants in the building resulted in the inspection not taking place. Our efforts in objecting to our rights being breached eventually resulted in the legislated 14 days written notice prior to showing the premises to prospective buyers. So, as one of my neighbours’ signs appropriately summed up, “Check your lease and be empowered!”

For more info, check out Factsheet 8, Access and Privacy at

Wednesday, May 21, 2014

Choose your parents wisely...

Choose your parents wisely, for they may be all that stands between you and poverty.

"A little high, a little low" ...
the Little household discusses rents and incomes.

Now that we've had a week to digest some of the proposed changes to the Australian budget, we can begin to wonder what life might be like if the brave new world it has set before us makes it through the Senate.

It will be particularly tricky for young people who rent. Reductions and limitations to income support will mean more rental stress and evictions in a market that is already failing to deliver housing for people on low incomes. We expect landlords will simply decline to rent to young people on low or insecure incomes, putting additional pressure on an already stretched social housing system.

But as we mentioned last week this budget is bad news for social housing landlords as well. Absent a well-funded saviour (State Government, anyone? Don't hold your breath...) the social housing sector will contract even further. The result: more people living with mum and dad for longer. Or, if that's not an option, homelessness...

Changes to income support are not just a concern for low-income or unemployed tenants who can't find a home. The prospect of a six month wait for Commonwealth income support will place all young people in the 'inherently risky' basket - even if you do have a job. If you can talk a landlord into renting you a place, expect it to be on a six month agreement at best. If you can't, you'll be living with mum and dad for longer. Or, if that's not an option, you'll be homeless.

Now, if you've been following our posts about the real housing supply problem, you might start to wonder at the sense of this. The Australian Government could have made some adjustments to the way housing is taxed, to encourage landlords away from speculative investment. As things stand landlords take a punt on high-cost housing because they think it will produce the juiciest capital gains. They'll need an increasing supply of mid- to high-income tenants to rent their houses to, because you just can't go renting high-cost housing out at affordable rents. Landlords need high rents to keep their losses manageable while meeting the interest payments on their loans.

At the 2011 census, 54 per cent of tenants in New South Wales earned less than $600 per week, and 29 per cent earned less than $300 per week. While the Government wants young people to avoid certain disaster by stepping up to the next income bracket, we're afraid it is just as likely to have the opposite effect. The ranks of low-income renters will swell. This could just as easily knock off a few underpaid landlords in the meantime; particularly those who have had to take the kids back in, without any income to contribute.

But thankfully for your landlord it doesn't stop there. Changes to tertiary education funding will result in lower disposable incomes and higher debts for students, but it will also mean reduced savings for graduates. Sure, this means your landlord will have to keep a spare room free while their kids are off earning or learning - just in case they come up short on the rent for six months or so... But it might also ensure mid- to high-income earners are priced out of home-ownership for longer. And that means they'll be renting. Look out while your landlord puts the rent up, because competition just got a little bit more stiff.

And if that means you can't afford it, don't worry. You can always just move back in with your parents.

Monday, May 19, 2014

Is government debt a burden on future generations?

The Treasurer, Joe Hockey, concluded his Budget speech and its agenda of cuts with an appeal to think of the next generation of Australians:

But unless we fix the Budget together, we will leave the next generation a legacy of debt, not opportunity.

As Australians, we must not leave our children worse off.

The Treasurer is talking about government debt. But is it really a burden on future generations?

Actually, no. In this admirably brief and clear article, Robert Skidelsky explains that while fears about one's own debts and legacies run deep, it really is wrong to apply them to government debt.

Says Skidelsky:

the national debt is not a net burden on future generations. Even if it gives rise to future tax liabilities (and some of it will), these will be transfers from taxpayers to bond holders. This may have disagreeable distributional consequences. But trying to reduce it now will be a net burden on future generations: income will be lowered immediately, profits will fall, pension funds will be diminished, investment projects will be canceled or postponed, and houses, hospitals, and schools will not be built. Future generations will be worse off, having been deprived of assets that they might otherwise have had
the national debt is not a net burden on future generations. Even if it gives rise to future tax liabilities (and some of it will), these will be transfers from taxpayers to bond holders. This may have disagreeable distributional consequences. But trying to reduce it now will be a net burden on future generations: income will be lowered immediately, profits will fall, pension funds will be diminished, investment projects will be canceled or postponed, and houses, hospitals, and schools will not be built. Future generations will be worse off, having been deprived of assets that they might otherwise have had
The national debt is not a net burden on future generations. Even if it gives rise to future tax liabilities (and some of it will), these will be transfers from taxpayers to bond holders. This may have disagreeable distributional consequences. But trying to reduce it now will be a net burden on future generations: income will be lowered immediately, profits will fall, pension funds will be diminished, investment projects will be canceled or postponed, and houses, hospitals, and schools will not be built. Future generations will be worse off, having been deprived of assets that they might otherwise have had.

There are two sides to a debt. On one hand, it's a financial liability to the debtor. On the other, it's a financial asset to the creditor. That's the same for government debt (issued in the national money, as government bonds), which is a financial liability for the government, and a financial asset for bond-holders (and if you don't own a government bond yourself, you're probably in a super fund that does).

The practice of governments is to issue bonds that pay interest and, as Skidelsky says, this stream of interest income to the next generation of bond-holders, particularly if the Government feels the need to balance it with tax revenues, may be 'disagreeable' as a matter of the equitable distribution of income throughout society.

But the Government, as the issuer of a sovereign currency, is always able to pay this interest: as we discussed recently, it cannot run out of money. And for that reason, the Government could, as an alternative to issuing interest-bearing bonds, simply spend by issuing currency (that is, crediting the bank accounts of payees, via banks' reserve accounts at the Reserve Bank).

Spending, of course, has two sides too. Money spent by the Government is money received as income by the private sector. In the name of 'saving' money (that it cannot run out of), the Budget will reduce income to the private sector by the equivalent of 1.3 per cent of GDP relative to last year; that's $20 billion taken out of an economy that is growing below trend and in which labour is underemployed, and in which there are useful and productive things to be done and investments to be made. But with less money, as Skidelsky observes, less of that will happen, to the disadvantage of future generations.

It should be said: the Budget papers do not envisage such a reduction in activity in the wider economy. But if government spending is reducing, the Government's forecast levels of production can only be met by... a huge expansion of private debt. But can households – real households, not fallacious ones – incur much more debt, on top of their already massive burden of past promises to repay?

the national debt is not a net burden on future generations. Even if it gives rise to future tax liabilities (and some of it will), these will be transfers from taxpayers to bond holders. This may have disagreeable distributional consequences. But trying to reduce it now will be a net burden on future generations: income will be lowered immediately, profits will fall, pension funds will be diminished, investment projects will be canceled or postponed, and houses, hospitals, and schools will not be built. Future generations will be worse off, having been deprived of assets that they might otherwise have had.

Friday, May 16, 2014

Apartment residents fined, locked out of their homes: reform needed.

In the first of a series of guest contributions, the Brown Couch welcomes guest contributor Tom McDonald. Tom is a Tenants’ Advocate at the Inner Sydney Tenants Advice & Advocacy Service at the Redfern Legal Centre.

If you live in NSW, it is becoming more and more likely that you will live in an apartment, flat or unit rather than a traditional freestanding house. It is also becoming more likely, therefore, that you will live in a place where strata laws apply.
The most noteworthy thing to say about strata laws is that they allow for each apartment building to have an owners corporation: a body run by a small number of elected individuals tasked with the job of setting and enforcing the building rules. Owners corporations have been called the ‘fourth-tier of government’. Its an apt label.
Owners corporations and their rules are generally a good thing for residents. Sensible rules help to promote harmonious (or at least functional) buildings. But not all rules are sensible. In their haste placate a particular group of residents or tackle a problem they believe is occurring in the building, owners corporations will occasionally introduce rules that are unreasonably harsh or oppressive on one or more (or all) building residents.
One problem currently giving headaches to a number of owners corporations and building managers is overcrowding in their apartment buildings. For the media attention that overcrowding attracts, we don’t know much about the extent of the problem, much less the best way to tackle it.
The owners corporation of the sprawling Regis Towers complex in Sydney’s CBD (reportedly the largest strata plan in the country) is now taking to locking its own residents out under the banner of tackling overcrowding and illegal activity that it says is rife in the building.
Tenants are having their electronic swipe cards (ie. their house keys) cancelled without warning over matters as trivial as lending the card to a visitor so they can go out to buy a carton of milk. For tenants to get back into the building they have to pay a swipe card ‘reactivation fee’ of at least $150. Some tenants have been locked out for days on end and it is understood that others have had to pay accumulated penalties in the thousands of dollars just to get back in to their homes. Many, if not most, of these tenants have nothing to do with overcrowding or ‘illegal activity’.
These kinds of blunt measures, while being potentially lucrative for an owners corporation’s coffers, are probably unlawful in much the same way as it is unlawful for a debt collector to stand at your front door and block you from entering your home until you pay them the money they say you owe.
You can bet that other owners corporations with similar problems are looking at what is happening at Regis Towers with great interest. Many buildings, after all, now have electronic key systems that allow for the locking out of residents at the stroke of a keyboard. Locking people out has never been easier.
Perhaps the most unfortunate thing for Regis Towers residents is that, so far, the law has been of little assistance. NSW Fair Trading has said, for example, that current legislation does not empower it to take action in these types of cases. Residents have the option of either pay the fee or pay to kick-off a potentially expensive and lengthy legal process. When you’re locked out of your home, it’s not much of a choice.
Compare this to a situation where a landlord unlawfully locks out a tenant. In these cases, there are very clear legal provisions that allow tenants to seek reasonably quick, affordable and effective redress in the NSW Civil & Administrative Tribunal, with offending landlords facing fines of up to $22,000. The law correctly identifies unlawful lockouts by landlords as a cardinal ‘no-no’ and there is no reason why it shouldn’t do the same regarding lockouts by owners corporations and building managers.
With the government currently reviewing the State’s strata laws and a draft bill expected sometime this year, now is an opportune time to make this reform. 
It is time for a provision that protects all apartment residents (both tenants and owners) against unreasonable interference with access to their homes by the owners’ corporations and building managers. This is not about creating new rights, but improving accessibility to a basic right that has long been recognised in the law.
This is not to say that owners corporations shouldn’t be able to take measures to address overcrowding in their buildings, just that those measures should not extend to preventing innocent tenants from accessing their homes.

This article first appeared in the April edition of Tenant News - the TU's regular newsletter.

Wednesday, May 14, 2014

Federal Budget 2014

The Abbott Government has delivered its first Budget. Usually, a Federal Budget doesn't deliver a whole lot for us to talk about here on the Brown Couch - but this one is an exception.

Here's a quick rundown of the things that matter:

Axing of the National Rental Affordability Scheme
The final round of the National Rental Affordability Scheme (NRAS) will not proceed. That's the scheme where private investors are given tax credits, over a ten year period, if they build and supply housing to people on low incomes at below market rents.

According to the Minister for Social Services, Kevin Andrews, "the scheme will be reviewed to address ongoing issues and ensure remaining incentives meet the scheme's original aim". We look forward to hearing more about that.

Essentially, this means a reduction in the supply of affordable housing. But more than that, it is the loss of a key mechanism by which the private market could be inclined towards affordability.

National Shelter said in its media release this morning: "Over the past five years the housing and homelessness sectors, including NGOs, business, and governments, have made significant reforms that are making a difference to supply and affordability, and reducing homelessness. We now risk losing that momentum. For modest government outlays NRAS was delivering significant boosts to affordable rental housing supply. It could have been adjusted to a new government's standards. It is the large reform we have now lost".

As far as we are concerned, NRAS has not been without its flaws. But as we said when NRAS hit the headlines a couple of months ago: NRAS delivers new supply of affordable housing, which is a lot more than can be said of the tax subsidy for negative gearing, or for capital gains tax.

Continued funding for Homelessness Services
We'll leave it to our colleagues in the Homelessness Services sector to provide the detail on this, but it appears funding under the National Partnership on Homelessness will continue - at least for now.

This is - er... 'good' news, because with the loss affordability drivers in combination with some other things, demand within the Homelessness Services sector might well start to rise.

Limits on Access to Justice
The decision to cut funds from Community Legal Services, and withhold promised enhancements to Legal Aid funding, will impact upon tenants as well.

For one thing, it will have a negative effect on some of the services in which the (state funded) Tenants' Advice & Advocacy Services operate - Community Legal Centres.

But a recent report from the Law & Justice Foundation of NSW suggests it might go further than that. The report - Are renters worse off: the legal needs of public and private tenants - concludes that "survey respondents living in rented accommodation were more likely to experience legal problems than were others. Renters also reported a higher rate of adverse consequences resulting from their legal problems. While renters reported the highest rates of handling their legal problems with formal advice from legal advisers, they also reported the highest rates of experiencing barriers when they tried to obtain advice. Private renters had the highest rate of reporting that their advisers were too expensive."

Changes to income support
Again, we'll leave the details of this to our colleagues in the sector but the long and the short of it is that income support will be harder to get, and there will be less of it. Given that 70% of people with an income of $400 per week or less live in rented accommodation of some kind, it's fair to say that this will affect tenants more than homeowners or mortgagors.

There are two things to take note of here.

The first is that the rental market is already a worrying place to be. Tenants are concerned about covering the rent and hanging onto their tenancies. Reducing the rate at which income support increases - or worse, taking money directly out of recipients' pockets - will not only add to their worries, it will make it significantly harder for them to meet their commitments. How will your landlord react to the news that you've lost your job, and can't get on the dole for another 26 weeks? Expect more rental-stress, more evictions, and more worry.

The second thing is that the social housing sector derives a considerable amount of revenue from rents that are based on tenants' incomes. Slowing the growth of income support and/or reducing tenants' incomes will affect the bottom lines for social housing landlords, too. And as we saw from the Auditor-General's report last year, they're already struggling to keep in touch with the demand on their services.

No change to housing and taxation
The tax treatment of negative gearing and capital gains, which encourages inflationary speculation in housing, reduces access to home ownership, and distorts the rental market to the disadvantage of low-income tenants, remains unchanged. For more of our thoughts on tax and housing, see our previous posts on negative gearing and the real housing supply problem, and our review of the Henry Review of taxation.

Tuesday, May 13, 2014

Save your money. Don't use 'My TICA File'

Tenancy database operator TICA Pty Ltd is offering to rip you off with a new service it calls 'My TICA File'.

(Blacklisted? Blackmailed, more like)

Please: don't sign up for this 'service' and don't give TICA any of your money.

You are entitled to know if you are listed on a tenancy database.  And you're entitled to a copy of the listing free of charge.

If you apply for a rental property and the landlord or agent finds that you are listed on a tenancy database, they are obliged to tell you that you're listed and who listed you (section 211 of the Residential Tenancies Act). If they don't say anything, ask them directly if they've found a listing, and remind them of their obligation.

The landlord or agent who listed you is obliged to give you a copy of the listing (section 216(1) of the Residential Tenancies Act). The copy must be given to you free of charge and within 14 days; if they don't comply, they're liable for a $2 200 fine.

It should be noted that TICA is also obliged to give you a copy of the listing (section 216(2)). The Act allows it to charge a fee for doing so, but the fee must not be 'excessive' (section 216(3)(a)).

TICA charges fees for each of its methods of giving a copy of the listing – $5.45 per minute by phone; $19.80 by mail; $33 by fax; $55 by My TICA File – and we reckon each is excessive, considering that it costs nothing for an agent to call up a listing and every other database operator manages to provide copies free of charge.

So if you absolutely must deal with TICA directly, write and tell them that their fees are excessive and consider complaining to Fair Trading about it.

Friday, May 9, 2014

New Minister for Fair Trading

Congratulations to The Hon Matthew Mason-Cox MLC on his appointment this week as NSW Minister for Fair Trading.

Minister Mason-Cox is from Queanbeyan, so he'd know that the lack of affordable rental housing, and the resulting insecurity and worry felt by tenants, are not just Sydney problems.

The chart below shows the incidence of rental stress (that is spending more than 30 per cent of income on rent) for households on very low incomes (that is, incomes less than half the median income), low incomes (incomes 50-80 per cent of the median) and moderate incomes (80-120 per cent of the median) in Queanbeyan, Sydney and all New South Wales.

(Source: Centre for Affordable Housing, Local Government Housing Kit Database (2011 Census). Median income in Sydney result is median income for Sydney; median income in Queanbeyan and New South Wales results is median income for New South Wales. Click on image for a better view.) 

As you can see, almost all very low-income tenants are in rental stress – whether you look at Queanbeyan, Sydney or all New South Wales. Low-income tenants in Queanbeyan are even more likely to be in rental stress (76 per cent) than low-income tenants in Sydney (69 per cent) or all New South Wales (62 per cent). On the other hand, the incidence of rental stress for moderate-income tenants in Queanbeyan (34 per cent) is lower than in Sydney (43 per cent). Still, the fact that one in three moderate-income households is paying more than 30 per cent of their income in rent is a problem – indeed, a worry, and it discourages tenants from asserting their legal rights.

Discrimination is not funny

... except this one time:

As the reporter says, discrimination on grounds of race in the provision of housing is against the law. If it has happened to you, get advice from your local TAAS, your local community legal centre, the Australian Human Rights Commission, or the NSW Anti-Discrimination Board.

(Hat-tip to Nick.)

Monday, May 5, 2014

Worried, and paying for it - our Housing Affordability Survey

Anglicare's annual Rental Affordability Snapshots tell us there has been a scarcity of affordable rental housing in Sydney over the last few years. But that doesn't stop people from living in unaffordable housing. It just means they're worried. We probably didn't need our Affordable Housing Survey to tell us that, but we've just released the results and they're pretty convincing.

We can lock it in. Tenants are worried about affordability and security.

57 per cent of our survey respondents rent because they can't afford to buy.

64 per cent of them worry about paying the rent.

92 per cent of them worry about what would happen if they had to move.

Nevertheless, many do move - sometimes as frequently as once a year.

Many express satisfaction with their homes, and few claim to have a bad relationship with their landlord. But landlords don't always keep to their end of the bargain, and tenants often put up with problems in order to ‘stay under the radar’. Many worry that if they ask for repairs, the landlord might increase the rent – or worse, give notice, and make them move out.

At the same time, large numbers of tenants are paying significant amounts of their income on rent. In fact the only people whose rent averages less than 30% of income are older tenants on high incomes.

The survey suggests that things are especially bad for older, low-income renters. But wealthier tenants, younger tenants, and tenants in relatively secure social housing are all worried about security and affordability in the rental market.

Tackling some of the tax policy settings that restrict housing affordability, and giving tenants greater assurance of security would go a long way to alleviating some of this worry.

Whenever we try to have these conversations, we're told not to rock the boat. We're told landlords will take their money out of the housing market and invest it in other things. We're told that would be a disaster for renters.

But with over a decade and a half of booming house prices and rising rents, landlords have been onto a pretty good thing. Perhaps it’s time we did ask them: what's in it for us?

View the full Affordable Housing Survey report here.

Friday, May 2, 2014

What the Commission of Audit says about housing

The much anticipated report of the National Commission of Audit was released yesterday.

 (Chair of the National Commission of Audit, Tony Shepherd)

Of the comment generated so far, we reckon Fairfax's Peter Martin has nailed it with his criticism of the partial nature of the Audit: it looks at government spending, but not really at tax, and certainly not at tax expenditures.

Martin gives the example of retirement incomes; we can also see the flaw in the Audit in what is says about housing.

The Audit zeroes in on spending on Rent Assistance ($3.6 billion pa), affordable housing – in particular, the National Affordable Housing Agreement ($1.3 billion pa), which funds social housing, and the National Rental Affordability Scheme ($1.5 billion over four years) – and alleviation of homelessness ($159 million pa). It frames these as 'programmes that duplicate State responsibilities' (on the basis that 120 years ago, it did not occur to the drafters to include 'housing' in section 51 of the Australian Constitution).

The Audit notes the 'limited success' of these programs in delivering affordable housing and reducing homelessness, and so considers that the Commonwealth should pull back and 'limit its involvement in this area to providing rent assistance to income support recipients'. That includes social housing tenants, who'd henceforth be paying market rents. There'd be no housing agreements or grants to the States and Territories for social housing or affordable housing; the National Rental Affordability Scheme would go too.

The Audit mentions the Henry Review in support of the case for extending Rent Assistance and market rents to social housing; it does not mention, however, that the Henry Review also recommended an additional payment for 'high needs clients' of social housing.

And that's it. Because it doesn't really look at taxes, and certainly not tax expenditures, the Audit misses the really big housing subsidies: the $30 billion pa benefit for owner-occupiers effected by not taxing their capital gains, imputed rents or land values; and the $7 billion pa benefit for landlords effected by not taxing income spent on the costs of speculation (negative gearing) and only half-taxing the gains of speculation.

These benefits have encouraged households with money (or credit) to spare to spend it on their own housing, or on speculating on rental housing, driving up prices and limiting the effectiveness of the Government's own spending on social housing and affordable housing and homelessness alleviation.

The Audit has missed the real problem in housing policy, and the opportunity of offering real solutions.

Thursday, May 1, 2014

How landlords lost nearly $1.2billion in a single year

The Australian Taxation Office has just released its tax statistics for the 2011-12 financial year. The headline figure is that the 806,890 taxpayers who declared income from a rental property in New South Wales accrued a collective loss of almost $1.198billion.

That's an average loss, across the year, of almost $1500 for each landlord. Now, we have to take that number with a bit of a grain of salt, because some landlords will have an interest in more than one property, and some landlords will have only a partial interest, perhaps sharing their property with a partner, sibling or friend. But an average loss of $1500 per landlord is not insignificant. After all, it's the cost of a modest kitchen upgrade, or perhaps some much needed structural work, or new guttering and drains. Even spread out over two or three properties, that kind of money should be making quite a difference to tenants' comfort and amenity. We shouldn't get our noses out of joint about these losses, should we? Surely we should be saying 'thank you, dear landlord, for all the money you spend!'

Well, let's not get carried away...

The tax stats include a handy breakdown of rental property expenses claimed over the year. So - for your quick reference, here are the top five costs of being a landlord in New South Wales:

1. Interest on loans: a deduction claimed by about 73% of NSW's landlords, at a cost of just over $7.29billion.

2. Body Corporate fees: claimed by almost 40% of NSW's landlords. This comes in a very distant second, at around $718million.

3. Council rates: claimed by nearly 94% NSW's landlords, at a collective cost of $673million.

4. Repairs and maintenance: claimed by 74% of NSW's landlords, at a little under $647million.

5. Property agent fees/commissions: claimed by nearly 72% of NSW's landlords, at a cost of $623million.

Clearly, it costs a lot of money to be a landlord in New South Wales.

But, because they can offset rental losses against their own taxable incomes, while holding out for capital gains, we expect they're not too worried...

Not as long as they've got a tenant, that is.

Tenants were very good to their landlords in 2011-12, generating about $11.5billion in rental income. Without this rental income, landlords would have sunk.

It's a shame more of that rent wasn't put back into the properties we've been paying the mortgage on.

And, with an estimated 92% of landlords' borrowed money going towards the purchase of established dwellings, rather than new construction, those rent funded mortgages aren't contributing to a whole lot of new supply, either.