Friday, July 21, 2017

Australia's 10 million spare bedrooms

This morning The Guardian published an article using recent data released from the Australian Institute of Health and Welfare. It was a good piece, but it had a somewhat misleading headline. The Brown Couch's founder had this to say:


If the vacancy rate in public housing is only 3% what was the headline trying to say? They were measuring the use of bedrooms in public housing and noting that one in six bedrooms is "under-utilised."

As it happens, this year the Census data introduced a specific measure of "Housing Suitability" which measures whether a household has spare bedrooms, or needs extra. Let's take a look at the state of bedroom use.

Not the typical use of a bed
The data shows about 75% of our spare bedrooms are in owner occupied housing. It isn't just that a majority of Australian homes are owner-occupied - 87% of homes owned outright have at least one spare bedroom, and almost 60% have two or more. Mortgaged homes are slightly better, as only 77% of these have a spare bedroom. 41% have two spare rooms or more.

Australia wide, the story is the same. There are more than 10 million spare bedrooms in Australia. Around two thirds of our mortgaged homes have spare rooms, as do 80% of homes that are owned outright.

Social housing looks very different. Not only do less than a third of tenanted social housing properties have a spare room, there are more in this tenure type that are mildly overcrowded. 2 in every 5 social housing dwellings are in need of at least one extra bedroom.


Renters both in the private rental market and social housing are much better at utilising their bedrooms than owner-occupiers. There are different reasons for this - where private renters are pushed to efficiency by price signals and competition (ie you generally only rent as many rooms as you need, unless you're either bonkers or rich), social housing renters are pushed by the allocation strategies of their landlords. Social housing tenants who do have a "spare" bedroom do so because they need it, and are entitled to it under the policies of their provider. For example, households may be given an additional room for a live-in carer, for family members who reside with them part-time, or for cultural reasons.

Of course, the other major reason we hear of social housing tenants ending up with a spare bedroom is that their allocation is not really suited to their needs, or their needs have changed since their allocation  made. You can't really blame a household for so-called "under utilising" if they're occupying the only property that is available to them - our failure to build enough social housing properties throughout the ages means many people have nowhere to downsize to as their needs change.

Despite this, social housing tenants are clearly putting their part of the nation's housing stock to the most efficient use, relative to the rest of the population.

Well done to you all!

Thursday, July 13, 2017

Economically viable supply

Speaking at a Sydney Alliance assembly on housing affordability last night, the NSW Minister for Planning and Housing, the Hon. Anthony Roberts MP, dismissed targets for affordable housing in new residential developments as a simplistic and unrealistic housing solution. "In reality all these targets do is reduce the supply of affordable rental housing because it makes many developments economically unviable." Instead, he talked up the Government's intention to solve Sydney's housing affordability crisis by rezoning large swathes of the city and fast-tracking new supply.

Inclusionary zoning is like a box of chocolates...?
This is a curious position for a Housing Minister in the Berejiklian "housing-affordability-matters" Government to take, given the overwhelming evidence suggests a single-minded focus on new supply is a simplistic and unrealistic housing solution.

Since the beginning of 2017 - dubbed "the year of the renter" by Domain as there will soon be more renters than homeowners in Sydney - we've discussed the issue of housing affordability and supply many times on the Brown Couch.

In late January we released a Rent Tracker report, which highlighted how rents have gone up even in suburbs where large numbers of properties are being added to the rental market. In February we discussed how Sydney's new housing development is producing the wrong kind of supply, driven by the demands of investors rather than householders and home makers. In April we noted the findings of Anglicare's seventh Rental Affordability Snapshot, showing that rental affordability is as bad as it has ever been and still gets worse every year.

In May the latest Rental Affordability Index was released, confirming what Rent Tracker and the Rental Affordability Snapshot had already suggested about deteriorating rental affordability despite increasing residential development activity. We dug in a little to look at exactly what's going on, exploring how the wrong kind of supply has changed the shape of the rental market. It produces higher rents rather than improving rental affordability.

In June we joined the dots on housing affordability, looking at how the NSW Government's housing affordability package is likely to impact upon the market for supply. We suggested it might be combined with both the NSW Opposition's housing affordability package, which includes targets for affordable housing, and some of the Australian Government's Federal Budget measures, which includes a method for funding new affordable housing, to help keep residential property developers afloat while ensuring at least some new supply is delivered into the affordable rental housing sector.

Also in June we discussed the release of data from the 2016 Census, which shows that the renting population is still growing faster than the population generally, and the stress of high housing costs affects renters far more than it does homeowners.

Something we haven't yet discussed is the Australian Housing and Urban Research Institute's recent report into "Housing supply responsiveness in Australia". This report found that most of the growth in Australia's housing supply has been taking place in the mid-to-high price segments, rather than low price segments, and suggests "there seems to be structural impediments to the trickle-down of new housing supply". It also says that "targeted government intervention might be needed in order to ensure an adequate supply of affordable housing." The report hasn't received a lot of attention other than a quick report in the Guardian when it was released earlier this year. It could do with some more, so we'll take a closer look at it when we can.

In the meantime, let's get back to the Minister's words from last night. "In reality all these targets do is reduce the supply of affordable rental housing because it makes many developments economically unviable."

On the other hand, current developments are causing rental affordability to deteriorate again, and again, and again. So at what point do we stop and wonder - if we still can't afford to live in them, what is the value of an economically viable development after all?

The answer to that question might make more sense to someone who values housing as nothing more than a financial asset, rather than a place to call home.

Tuesday, July 11, 2017

Caveat Rentor 2 - Tenancy Economics

Today's post is a guest entry from our Principal Solicitor, Grant Arbuthnot. Grant has more than 20 years experience advising tenants, their advocates, and has worked for the Tribunal and community legal centres as well as the Tenants' Union. Here are his thoughts on tenants as consumers.


Economists and accountants both agree this joke stinks. 
The assumption a healthy consumer market has suppliers competing on price, quality and service for the business of consumers allows another examination of our rental market.

At present, there is a shortage of supply of affordable premises for rent. Competition between prospective tenants for available premises is understandable.

Consumers competing for the business of suppliers is not healthy. Consumer competition means that pricing favours the suppliers, and that quality and service are not significant issues.

Tenants might expect that once a tenancy has been secured the competition will cease. However, this is not the case. Sitting tenants compete with prospective tenants to retain their tenancy.

In a fixed term tenancy, tenants are aware that they can be required to leave at the end of the fixed term. Fixed terms are rarely greater than a year. In a periodic tenancy the vulnerability is present and constant.

This is because the law allows landlords to dispose of tenants without having to give a reason.

Tenants who demand contract performance by the landlord risk being replaced from the surplus of prospective tenants.

This is usually about repairs. It is the most popular breach of contract by landlords. The likelihood of receiving a termination notice (without grounds) is increased by demanding repairs.

It is not surprising that many tenants put up with expensive and substandard premises to avoid the stress, cost and inconvenience of having to move house.

Amending the Residential Tenancies Act cannot undo the problems of supply and demand. But abolishing no grounds termination can relieve sitting tenants of the constant competition with prospective tenants. They might even get some repairs done.

To find out more about how tenants are affected by unfair evictions, visit Make Renting Fair.

Wednesday, July 5, 2017

NAIDOC week 2017 - Our languages matter

This article written by the TU's Legal Officer (Aboriginal Support), Jessica Hall. Jessica works closely with the Aboriginal Tenants Advice and Advocacy Services across NSW.

It’s NAIDOC week, and once again the TU is reflecting on and recognising Aboriginal and Torres Strait Island culture, talent and resilience, and the contributions that Indigenous Australians make to our country and our society.

This year’s theme is Our Languages Matter. The 2017 theme aims to “celebrate the essential role that Indigenous languages play in both cultural identity, linking people to their land and water, and in the transmission of Aboriginal and Torres Strait Islander history, spirituality and rites, through story and song”.


From the earliest days of European contact there was often an assumption that Indigenous Australian languages were of less value than English and this view soon hardened into government policy, reinforced through education and employment practices. Aboriginal and Torres Strait Islander people were discouraged from speaking their languages, so that many children had little or no knowledge of their traditional languages.

This year’s NAIDOC week theme comes at a time of important discussion and proposed NSW legislation to review treatment of, and to recognise and protect, Indigenous Australian languages, with NSW to become the first state to pass a law protecting Indigenous languages. The recently released draft Aboriginal Languages Bill 2017 seeks to implement measures to protect and revive NSW Aboriginal languages by a focused and sustained effort, including a Strategic Plan and a new Centre for Aboriginal Languages of NSW.

Aboriginal languages also became available as a HSC subject for the first time in 2016. Prior to this, students were only able to take Aboriginal language courses from kindergarten to year 10. The moves towards education reform will aid Aboriginal young people to become the future custodians and caretakers of their languages. This renewed focus to support and maintain Aboriginal Languages is a step in the right direction.

Dhubany by Millmullian, 2015
Indigenous languages and oral storytelling are integral for linking Aboriginal people to their lands, and maintaining cultural identity through the passing of stories through generations. Historically, colonial relocation was a significant contribution to the disruption of Indigenous language and storytelling. According to the Australian Institute of Aboriginal and Torres Strait Islander Studies, over 250 Indigenous Australian language groups covered the continent at the time of European settlement in 1788. Today only around 120 of those languages are still spoken.

This historic relocation and the effect it had on Indigenous languages is being echoed today by a continued forced relocation of Aboriginal people - by the use of no grounds notices, which force Aboriginal tenants from their homes without reasonable cause. The Aboriginal Tenants Advice and Advocacy Services across NSW are now consistently quoting no-grounds evictions as one of the major issues facing Aboriginal tenants, both in social housing and private tenancies. There should be legislation in place that allows the Tribunal to refuse such notice by taking into account an Aboriginal tenant’s cultural connection to country. The movement from dispossession and displacement to eviction without grounds draws worrying contrasts.

With reflection on the clear lessons that Indigenous languages must be recognised in Australia, we hope that the government will also move towards bettering Aboriginal and Torres Strait Islander rights in all areas, including Aboriginal housing. Here at the TU, we will celebrate NAIDOC week at a number of events, including a stall in association with CLCNSW at WEAVE’s annual NAIDOC Woolloomooloo festival on Saturday 8 July.

Happy NAIDOC week!

Monday, July 3, 2017

How will your tenancy end?

There are over two-dozen ways your legal interest in property - aka your tenancy - could end if you're renting in New South Wales; even more if you're in social housing.


In most cases, your tenancy doesn't end without you relinquishing the property to the landlord. In all cases, a trigger of some kind is required. A tenancy doesn't end simply because the fixed-term period concludes - after the fixed period your tenancy continues as a "periodic agreement" under the same conditions as before.

Some triggers for termination are less common than others. For instance, your tenancy might end if your landlord's interests become vested in you - perhaps if you were to marry, or form some other legal union under which all your property interests merge. Or it might end if a person with superior title, such as a mortgagee, becomes entitled to exclusive possession of your home. Similarly, your tenancy might end if a person succeeding title, such as the beneficiary of a reversion of your landlord's property rights, becomes entitled to the property at the exclusion of others.

Your interest in a tenancy ends if a final apprehended violence order that excludes you from the premises is ordered against you.

Your tenancy could end if you die.

Your tenancy could end if your home becomes unlivable through no fault of your own or the landlord's - for example a severe storm taking out part of the property.

Your tenancy could end by returning the property to the landlord by prior agreement. For that matter, it could end by returning the property to the landlord without prior agreement - although that method will generally always cost you something.

You could end your interest in a co-tenancy by giving notice and moving out. You could end your co-tenant's interest by taking them to the Tribunal and getting an order, in exceptional cases.

You could trigger the end of your tenancy by obtaining a Tribunal order for termination on hardship grounds. Your landlord could do the same.

You could end your tenancy because the landlord isn't keeping their part of the bargain. If you're not meeting your own obligations, your landlord could do the same.

Your landlord could apply to the Tribunal to end your tenancy if you've been using the place for an illegal purpose. They could also do that if you've threatened, abused, intimidated or harassed them, or if you've caused serious damage to the place or injury to them or a neighbour. They'd have to prove it, though...

You could end your tenancy if the landlord decides to sell. Your landlord could end your tenancy if they do sell, and the buyer wants to move in - but only if you're in a periodic tenancy.

You could end your tenancy if you need to move into an aged-care facility, or are offered a place with a social housing landlord.

If you're a social housing tenant, your tenancy could end if you become ineligible for social housing, or if your landlord wants to move you to another place and you decline. Strict procedures are to be followed in either of these scenarios.

You could end your tenancy because the rent is increased, if you're in a fixed-term agreement of two years or more (but hardly anybody is...)

You could end your tenancy without a reason, at the end of a fixed term or during a periodic agreement. Your landlord could do the same.

But there is always a reason to end a tenancy.

As a tenant, being able to end a tenancy "without a reason" is appropriate, as it allows you the basic freedom to relocate as your housing needs change. In general, there is no reason to justify those needs to your landlord, or explain to them how your circumstances have changed such that you now wish to move house. Your landlord should have no concern beyond knowing when the property will become available to them again, so that the comparatively simple process of finding a new tenant can be commenced.

On the other hand, landlords being able to end tenancies "without a reason" is bad public policy. It undermines tenants' abilities to establish their homes with any certainty. As we see it, landlords tend to use the "no reason" option in one of three circumstances: where they have a good reason that the law does not accommodate, where they have a good reason but would rather not be put to the trouble of proving it, or where they have a questionable reason that they'd rather not go into.

A fairer renting law would give landlords a couple of additional reasonable grounds, and remove their ability to end tenancies without a good reason. With this in mind the Tenants' Union of NSW, along with more than 40 allies and supporters, are calling on the Government to Make Renting Fair. Visit rentingfair.org.au to find out more.

Tuesday, June 27, 2017

2016 Census confirms housing unaffordability is for renters

Population and housing data from the 2016 Census has been released today, which means it's time to get your nerd on.


There are three critical things it tells us about housing in New South Wales.

First - there's been an increase in the number of households living in our state over the last five years, up from 2,471,305 in 2011 to 2,604,320 in 2016. The number of unoccupied dwellings has also increased, from 265,338 to 284,741. In percentage terms, unoccupied dwellings have risen from 9.7% to 9.9% of all dwellings. The idea of a sustained influx of foreign investors who leave properties empty is looking a little shaky on these numbers, but even so we're going backwards. It's clear we should be doing more to encourage property owners to put those empty dwellings to use, like taxing the unimproved value of land rather than transactions and transfers.

Click for full size!

Next - there's been a significant increase in the number of people renting in New South Wales. There were 826,922 renter households at the 2016 Census, which was 83,870 more than there were in 2011. To put this into context, that's almost double the increase we saw between 2006 and 2011. It also means our renting population has gone up in percentage terms since 2011, too - from 30.1% to 31.8% in 2016. There are more owner-occupiers, too, but as a percentage they've gone backwards. Households who own outright have gone from 33.2% to 32.2% of the population, while households who own with a mortgage have gone from 33.4% to 32.3%. That means home ownership across New South Wales has declined overall since 2011, from 66.6% to 64.5%. It also means that more people are renting for longer.

Finally - it will come as no surprise that making the rent is a growing struggle. The median rent across New South Wales has risen from $300/week in 2011 to $380/week in 2016. More telling is the number of renters whose rent takes up more than 30% of their income - that's gone up from 11.6% to 12.9% of the renter population. On the other hand, the number of home owners with a mortgage who find themselves in similar financial circumstances, paying more than 30% of their income towards their loan, has decreased from 10.5% to 7.4%. In case it wasn't already clear, low interest rates are great for those who already own a home, but they're not so good for anyone hoping to join their ranks in the foreseeable future. As much as they might appreciate grants and stamp duty discounts, what prospective homeowners need most is to be able to save.

So, here's our take-home message for policy makers at all levels: there can be no housing affordability without fixing the rent.

Monday, June 19, 2017

Joining the dots on affordability

This week is Budget Week for New South Wales. There's still time for the Berejiklian Government to announce the forgotten part of their housing affordability package - the one that tackles Sydney's high rents. So far they've covered tweaking taxes and grants in favour of first home buyers over investors, and fast-tracking supply. But they've left off any policy that would directly affect the rent.


As we've noted before, the shift of incentives from investors to first home buyers is designed to have the strongest impact in the market for newly built properties. We've also previously noted that while the majority of investors do not purchase newly built properties, there has been a significant increase in investor driven demand lately for off-the-plan units. It is worth considering how this change will impact demand for new dwellings over the next few years.

Understanding your standard first home buyer is no easy task. We can go back to the ABS Feature Article from 2012, First Home Buyers in Australia, which tells us that just prior to the height of Australia's post-GFC first home buyer boom there were about 430,000 of them over the three years to 2010. Driven by stamp duty concessions and the Rudd Government's First Home Owner Boost that put either $14,000 and $21,000 into their hands depending on whether they bought an established or new home, slightly less than one-fifth of them bought a newly built property during that time. In the three years prior to that, when the grants were not quite so generous, there were around 320,00 of them with less than one-tenth buying off-the-plan.

This tells us that first home buyers do seem to respond to stamp duty concessions and direct grants, but just like their investor counterparts they are much more inclined to buy established properties than newly built ones. Of course, this is based on how they behaved in the bad old days when property prices were merely exorbitant, but the latest Digital Finance Analytics' Property Imperative Survey suggests these numbers remain in the ballpark - they've identified 330,000 first time buyers in their March report, noting that 80% are buying or intending to buy an established dwelling. But we must note here that an increasing proportion of these first timers identified by Digital Finance Analytics are investors, so they are buying another person's home rather than their own.

Now that prices are scandalous, it remains to be seen if anything much will change after the tweaking of stamp duties and grants. It is possible that 100% of Sydney's first time buyers will rush to the new apartment market to see what they can afford, since the houses they'd evidently prefer to buy are still likely to cost too much. But it's just as likely many will continue to rent the homes they want (or can afford) to live in. Either way, the removal of incentives for investors to buy off-the-plan is likely to see them withdraw from the new apartment market, and this wont be completely offset by any increased demand from first home buyers. Construction activity may well start to fall away in response. If that happens, no amount of rezoning to fast-track supply will save us from the plague of rising rents - assuming it ever could.

This brings us back to the forgotten part of the NSW Government's housing affordability package. Given the recent Federal Budget foreshadows a new Affordable Housing and Homelessness Agreement requiring the states to consider affordable housing targets, along with an Affordable Housing Finance and Investment Corporation that will provide a funding mechanism for the supply of new sub-market dwellings, the Berejiklian Government would do well to adopt planning and zoning reforms along similar lines to those announced by the NSW Opposition a couple of weeks ago. In the face of their own affordability package that might otherwise reduce demand for their services, this could be just the tonic our developers will need - to say nothing of our neighbourhoods and communities who are already crying out for some downward pressure on rents.