Monday, May 22, 2017

Ever the forgotten people

It's been some time since we marked an anniversary on the Brown Couch, and clearly this won't do. We can remedy this today, as it is the seventy-fifth anniversary of Sir Robert Menzies' delivery of the Forgotten People speech. On 22 May 1942 Robert Menzies broadcast his speech over the wireless, as part of a series of "fireside chats".

The speech remains an important touchstone for Australia's political and cultural narrative, because of the role it played in establishing the dominance of the two major parties in our parliamentary system. It preceded the formation of the Liberal Party of Australia that Menzies himself would lead, and it summarised the political philosophy that has more or less captured the centre of Australian politics ever since. At its heart was a forgotten middle class - "those people who are constantly in danger of being ground between the upper and the nether millstones of the false [class] war; the middle class who, properly regarded represent the backbone of this country."

Menzies' and the Liberal Party would go on to win government in 1949. He remained the Prime Minister of Australia until 1966, making him the country's longest serving leader. Those who seek to reach similar heights within the Liberal Party often pay tribute to his rhetoric, as Joe Hockey did when he referenced "lifters and leaners" in the 2014 Federal Budget; or his legacy, as Julie Bishop did when she joined Prime Minister Turnbull in challenging Tony Abbott for the party's leadership in 2015. But perhaps more importantly Menzies' rhetoric of the "forgotten middle class" continues to set the tone for politicians, journalists and commentators who wish to occupy and define the politically fertile middle ground. "John Howard's battlers" and even "Tony's tradies" come straight out of the Forgotten Peoples' playbook, while the Australian Labor Party puts its focus on "values" and the dignity of work, rather than its origins in late nineteenth century class consciousness and historical links to organised labour, as it strives for middle-ground appeal.

The Brown Couch took an in-depth look at the Forgotten People speech back in 2012. We discussed how the text of the speech - particularly as it concerns the notion of "home" - might be interpreted through a housing policy lens. We saw how Menzies' conception of "homes material" was a precursor to the 1956 Commonwealth State Housing Agreement, under which fewer public housing dwellings would be built or retained and more funds were provided to building societies and state banks to aide "the habits of frugality and saving "for a home of our own."" In this way, the post-war experiment of public housing for Australia's returned soldiers and working families began its drawn-out end. Australian homes would no longer be built by governments but by the forgotten middle class.

We explored Menzies' notion of "homes human", in which the home is construed not by its four walls and hollow rooms but by the people and relationships emerging from within. Noting that Menzies seems to have excluded renter households from his ideal here, we examined the history of Australian home-ownership, and the policies and economic conditions that have supported it over a number of generations. In particular we saw how the continuing political interest in supporting home-ownership gradually morphed into support for homeowners. We might now say this has shifted further still to support home values, given so much of the nation's economic wellbeing is tied up in our homes' worth as financial assets. Whether or not they are owned by the people who make them their home should now seem immaterial to this idea.

Finally, we looked in on Menzies' "homes spiritual", where one's sacrifice, frugality and saving to make a home is the very expression of a "fierce independence of spirit". Here we noted that, as far as housing is concerned, saving and frugality had long since given way to borrowing with the expectation of accelerated capital gains. We might now also say that drawing on said gains to fund high levels of consumption not only ensures a home-owner's independence is spiritually rewarding, but financially so as well. And not just for the individual - it could prop up an entire economy if everything else falls apart.

All the more concerning, then, is the exclusion of long-term renters in Menzies' conception of the middle class - those forgotten people he implores us still to forget. The steady decline of first home-buyers and the rise of second, third, fourth and fifth home-buyers must be eroding the very soul of this nation of once fiercely independent folk. More concerning still, from an economic point of view, is the likely concentration of wealth into fewer and fewer sets of hands, and the loss of a key driver of confidence and consumption, if current housing trends continue.

When we looked at the Forgotten People speech five years ago, the Australian property market was going through something of a wobble. It appeared at the time that house prices might have started to peak, and a correction about to begin, so we questioned the very idea that purchasing homes for capital gains amounted to savings. We all know how that turned out. But in our conclusion, we proposed that those with the best claim to live in Menzies' "home spiritual" of responsibility, savings and frugality are tenants. Capital gains in housing may not since have fallen away, but we're inclined to stand by this conclusion. For tenants, that fierce independence of spirit comes from scrimping and saving each week to make the rent, from constructing the best possible home even though it could all come to an end with a simple notice in the mail. From living a full life while making do, staying under the radar to keep that roof over one's head, and moving on with good grace when the time sadly does come.

Whether or not you're in a well paid job - or any job at all - there is deep satisfaction in knowing your home is something you work hard for. Homeowners must feel this, too. No doubt they feel it even as they pass the point where their home's value starts spitting out two or three times more than what goes into it each week, or as prices start to gain more in a year than one can earn doing most ordinary jobs. Sure, there's risk in borrowing against the family home, but as long as you can service the debt and the property's value keeps going up it will more pay for itself in the end. Who wouldn't be satisfied by that?

But taking some of that hard-earned free money and investing it in more housing, where it can work towards the accumulation of more free money? That's not hard work. That's just skimming off someone else's hard work, which is why we don't think Menzies had landlords in mind any more than he did tenants when making his point about "homes spiritual".

Here we might stop to mark some other important anniversaries. It is precisely 219 days since Bernard Salt had a short article published in the Weekend Australian, in which he lamented that young people are eating too much smashed avocado on toast in expensive cafes when they should be putting their money towards home loan deposits instead. And it is now eight days since Tim Gurton said on 60 Minutes that he didn't turn his inheritance into a rich property portfolio by spending $40 a day on smashed avocados and coffee, and not working.

As we have seen, the idea that a home is built on sacrifice is a theme that runs deep throughout Australia, but the reaction to this characterisation of stupid and improvident youngsters not doing enough to get on the housing ladder suggests that, at least in its current form, its time might soon be up. Menzies' forgotten people could put nice things on hold in order to save and acquire a first home; so too their children and many of their grandchildren. Millenials suspect that when it comes to housing they've already missed out. Their future already sacrificed, they're having nice things instead. They needn't give up on "homes spiritual" or "homes human" in the meantime.

Far from spurring the hapless youngsters of Australia on, comments like Salt's and Gurton's may be just what's needed to galvanise another emerging class - that of the long-term renter. This takes us right back to the opening passages of Menzies' speech, and the idea of a forgotten middle class that occupies a space between opponents in a fictional class war. Perhaps its time this middle class was redefined, its challenges reassessed? As we reflect upon this anniversary of the Forgotten People who continue to influence our nation, it's worth asking - who among our political leaders would be brave enough to do that today?

Wednesday, May 17, 2017

Rental affordability deteriorates, again

Hot on the heels of the Anglicare Rental Affordability Snapshot for 2017, the SGS Economics and Planning, Community Sector Banking and National Shelter Rental Affordability Index for December 2016 reveals what most Sydney-siders and New South Welsh-folk already know: the squeeze on rents is getting tighter.

Picture by thepurpah
The headline finding is that Sydney's rental affordability is as bad as ever, having plunged to a record low towards the end of last year. The average household now pays around 29% of their income on rent - meaning that renters with even reasonable wages are heading towards a form of housing stress, if they're not already there.

Unsurprisingly, the least affordable suburbs are harbour-side. They include Elizabeth Bay, Rushcutters Bay, Potts Point, Woolloomooloo, Double Bay, Milsons Point, Kirribilli, Darling Point, Point Piper, Edgecliff and Woollahra. For a dual income household with kids, bringing in $140,000 a year, a three bedroom home in any of these iconic suburbs would be unaffordable (30%-38% of income) or severely unaffordable (38%-60% of income), according to the index. For a single working parent earning around $70,000 per year, a 2 bedroom home in most of these suburbs would come in at the unaffordable range. Rent for an unemployed person looking for a single bedroom unit would be extremely unaffordable (60% or more of income) in all of these suburbs.

There's still some hope for working families. The dual income couple with kids might find a three bedroom home with an acceptable rent (20%-25% of income) around places like Hornsby, Epping, Lidcombe, Lakemba, Earlwood, Kogarah or Miranda. A single working parent might pay an acceptable rent for a two-bedder around Liverpool or Penrith.

But there's no such hope for the single unemployed person. Rents for one bedroom homes remain in the extremely unaffordable range for this cohort, throughout the entire Greater Sydney area. Even if three or four unemployed folk decided to pool resources and go in together for a sharehouse, rents for suitable properties remain extremely unaffordable until about Blacktown, Liverpool or Engadine. Further out they become severely unaffordable, but that's as far is it goes across the remaining suburbs.

Things improve for dual income households with kids once you get past the limits of Sydney, with the rest of New South Wales showing rents for three bedroom homes as generally acceptable, affordable (20%-25% of income), or very affordable (less than 20% of income). Of course, that's based on an annual household income of $140,000, which might be harder to come by in some of the further flung parts of the state, so take that with a grain of salt.

Single working parents will also do better outside of Sydney, subject to the same caveat: two bedroom homes for a household with an income of $70,000 per year will be acceptable, affordable or very affordable in most parts of New South Wales. Wollongong, central Newcastle and Byron Bay are the exceptions.

Where available, single bedroom homes remain severely unaffordable or extremely unaffordable to an unemployed person receiving an income support payment, right across the state. For those prepared to share, a two bedroom place might be moderately unaffordable for anyone on an unemployment benefit (25%-30% of income) around Wellington, Parkes or Cobar. If you can find a third person, rent for a three bedroom home might be acceptable in Cobar. Of course, your income payments might take a bit of a hit if you leave Sydney for one of these towns, as your chances of finding paid work will be somewhat diminished. You'll probably have your payments cut for up to 26 weeks after moving to an area with lower work prospects so don't forget to factor that in...

Why is this happening?
Conventional wisdom is that prices go up when supply doesn't keep up with demand, but there are a number of indicators telling us things are a little more complicated when it comes to rents. For a start, contemporary discussion around housing affordability tends to focus on the supply and demand of housing as a financial asset, rather than for its purpose of providing shelter. "Housing demand" has become something of a proxy for "mortgage demand", and "housing supply" is geared towards meeting the needs of mortgagors rather than home-makers - even if at the micro level these are often the same thing.

A quick look at where the current demand for residential property finance is coming from reveals a whole lot of it is going to investors.

Aust. property lending monthly ('000), investment (red) v owner occupation (blue), Jun 2001 - Feb 2017. Source: ABS
Evidently there's been more money pulled into the rental market than for owner-occupation over the last little while. In other words, the rental market is currently enjoying the lion's share of supply. But we can't assume this puts us on a path to affordability because the vast majority of supply into the rental market is coming from investors purchasing established dwellings rather than new builds.

NSW property investment lending monthly ('000), June 2001 - Feb 2017, established (red) v new (blue) dwellings. Source: ABS
Much of the increase in rental market supply comes at the expense of supply for owner-occupiers. Potential first home-buyers are particularly impacted by this, and they're remaining in the rental market for longer. Increasing rental market supply is absorbed by a more-or-less corresponding increase in demand for rental housing. But as we can see from the blue line above, investors have been putting larger amounts of mortgage finance towards new construction over the last little while. New construction delivers supply to meet "mortgage demand" - not just the demand for shelter - which should be putting downward pressure on rents. But, as the index shows, it's not.

Our latest Rent Tracker report shows this as well, indicating that rents have gone up in Sydney even where large amounts of new supply has been brought into the rental market. Based on the number of new rental bonds lodged, Rent Tracker doesn't distinguish between new rental supply coming from construction compared to that which comes from increased investment in established dwellings. But checking this against data from the NSW Department of Planning & Environment we can see that a great many new dwelling completions across Sydney are in the form of new apartments. These are most likely being purchased by investors.

New dwelling completions, Sydney. Source: NSW Dept L&E
With a high proportion of one and two bedroom units turning up for rent over the last few months, despite families with children making up the highest chunk of demand for rental housing, it's evident that this kind of investment is not being driven by what households really need. Rental supply is not being driven by renter demand, because housing supply is being driven by mortgage demand.

That's the story with new construction, but it's also the story with increased rental market supply in general. Investors aren't pulling established dwellings away from owner-occupiers because they want to provide housing for people who can't afford to buy, but because they hope to grow their wealth. The allure of wealth, after all, is what is driving demand for mortgages. Aided by tax settings that expedite the debt-to-wealth strategy - negative gearing and capital gains tax discounts - investors are encouraged to buy property based on prospects for profit rather than any measured demand from renter households. They're buying more expensive property as higher price tags come with faster and bigger gains. They're leaving the cheap stuff to developers who can turn it into more expensive property in order to meet investor demand...

Over time, this has changed the shape of the rental market. Affordable rents are a thing of the past.

Volume and rents ($/2011) of Australian rental properties over time. Source: AHURI
For that matter, we don't measure demand for rental housing like we used to. Back in the olden days the National Housing Supply Council - now defunct - used to report on the affordability and availability of rental housing. Then, as now, there was a shortage of properties available for rent to households on the very lowest incomes, for much the same reasons that we can see today. But it's easy to imagine that if this work had continued with appropriate levels of government support, we'd have a much clearer understanding of our rental affordability challenges and how to tackle them once and for all. Instead we've allowed things to get much worse.

Last week's Federal Budget has pinned a lot of hope on measures to increase supply. This includes the renewal of the National Affordable Housing Agreement, to be renamed the National Housing and Homelessness Agreement (NHHA). Under the NHHA the Australian Government will work with the states and territories to increase the supply of (mortgage driven) private rental housing through measures such as planning and zoning reforms. With the latest Rental Affordability Index in mind, we'll take a closer look at these Budget measures in a later post. In the meantime, parties to a new National Housing and Homelessness Agreement would do well to consider monitoring both rents and demand for private rental housing across the income spectrum, to ensure this Budget's impacts are being properly accounted for down the track.

Thursday, May 11, 2017

The Landlords' Budget

It's been dubbed the Budget that forgot the renters, but chances are your landlord is pretty happy with he 2017 Federal Budget's housing affordability measures. With first home buyer incentives that will push prices higher, and new rewards for speculative investment, this should be the stuff of landlords' dreams.

Let's take a quick look. We'll see what Lenny the Landlord - pictured below - thinks of the Budget's headline measures.

ABC TV's The Checkout presents: the landlord. Let's call him Lenny.
First up - unlocking supply. The Turnbull Government says it will ease restrictions that are holding back housing supply by sorting out some of the planning and zoning issues that make it hard for developers to build enough properties for landlords to invest in. They'll throw some money towards infrastructure upgrades to make sure developers don't have to worry too much about installing water supply pipes and sewerage systems, and so that future residents of new developments don't get too bogged down in traffic jams on their way to work every morning. They'll even tip in a bit of surplus land to help kick things off.

Lenny the Landlord says he quite likes these ideas. "Anything that gets me off the hook on housing affordability, I'm all for it," he grins. "As long as my high mortgage costs can continue to keep my tax bills down, I'm one happy chappie". A brief shadow of doubt creeps over him as he wonders whether all this fast-tracked supply could affect his longer term capital gains. His delight is palpable when he realises the measures would almost certainly result in higher land values where applied. "Forget the accountant," he chortles, "I'm heading straight to see my mortgage broker. Gotta get in on the ground floor, right?"

Next - creating the right incentives. The Turnbull Government says it is taking "prudent steps" to provide the right incentives for home-owners by allowing first home-buyers to make voluntary contributions to their super fund in the hope of saving for a deposit, and allowing older home-owners to top-up their super funds with the proceeds of sale. They'll also try to limit foreign investment by requiring half of all new supply to be sold to domestic buyers, and they'll prevent foreign investors from sneaking off without paying capital gains tax. What's more, they'll sting foreign investors with a levy unless they rent their places out for at least six months of every year.

Lenny the Landlord says he's a little worried about the impact of reducing foreign investment, but on balance he's still a fan of these measures. "Look, I'll be honest with you, this first home-buyer thing is a bit of a worry," he says. "There's not enough of them around, which makes it harder for investors to get the very best price when it does come time to sell. Thankfully we've got a steady stream of internationals coming in to stem the flow - capping the number of properties we make available to them could hurt. And who else can afford Australian property? I guess we might just have to settle for selling to other landlords in the long-run, so it's a good thing we've still got our tax perks."

When asked about a possible return of first home-buyer activity on the back of this Budget, Lenny laughs. "Yeah, please, that'd be great. Obviously this super fund thing is only going to help those who are already pretty much ready to buy - making sure they've got a bit of extra cash on hand to bid up prices is no skin off my nose." He thinks for a moment, and his eyes light up. "Actually, they might be able to bid up my property when it's time to cash out. That'd be, well... super!"

What does he think of the incentives for empty nesters? "Well, assuming some of them actually do it, I reckon it'd be good for those of us looking to pick up an extra investment property. More good homes on the market means more gains coming through hefty mortgages, makes it easier to ensure steady losses see, so you can get all the tax breaks and make it worth your while." He pulls out his mobile phone, but quickly puts it back in his pocket. "I must remember to make that call to my broker..."

The levy on empty houses? "Well, that's an interesting one," says Lenny. "I like the thought of foreigners having to rent their places out for six months at a time - that takes the pressure off me a bit. I can take my time between tenancies if I need to, keep the place vacant for a couple of months and still get my tax breaks. Bonus for me - with foreign investors evicting tenants every six months or so, there'll be plenty of competition for my place when I do put it back into the rental market. There'll be no trouble getting a little bit more rent here and there, so keeping my property empty every now and then could totally be worth it in the end!"

Lastly - improving outcomes for those most in need. The Turnbull Government says it will improve outcomes in social housing and homelessness by continuing to fund social housing landlords and homelessness services, encouraging "social impact investment", giving more tax breaks to landlords and creating a bond aggregator that will encourage private and institutional investment in new affordable housing products.

Lenny the Landlord says he's not really fussed with all this government housing business. "That's really not my concern," he mumbles. "I'm not running a charity here. I think the government should do that, so it's good they're doing that I guess".

When asked if the bond aggregator might prompt him to diversify his investment portfolio, he appears a little confused. "Diversify?" he asks. "What do you mean?" We briefly explain the proposed Affordable Housing Finance and Investment Corporation and how it could allow him to invest in other companies that would put money into the affordable housing sector. Perhaps he could even make a direct investment himself? He remains unsure. "Look, that all sounds interesting but I think I'll stick with what I know. I'm not sure investing in something other than the place I've got is a good idea. I mean what if some of this affordable whatchamacallit is built nearby, and my property ends up going down in value?"

"No, no," he says, reassuring himself. "We invest in property because we know prices always go up. Let me have another look at these new tax breaks you mentioned, they sound promising..." His mood picks up again. "You mean I can get an extra 10% off my capital gains tax if I give my place to one of these community housing dooverlackies for a few years to rent out at a smidge or two below the market? Sign me up! Heck, that means I could even sell the place a year or two earlier than I was thinking! I can start the ball rolling on buying the next one... and the next one... and the one after that..."

With that, Lenny the Landlord pulls out his mobile phone and walks off with a spring in his step.

Tuesday, May 9, 2017

Evictions begin at Millers Point

Words and pictures from John Dunn, Friends of Millers Point

This morning the NSW Government is taking action against public housing tenants in Millers Point.


At Sirius the assets branch of the NSW Government is erecting a cyclone wire fence around the site. Family and Community Services (FACS) has informed residents that the fence is being installed to improve public safety.
The fence around Sirius appears to be poorly located for protecting public safety but it is well located if it is in preparation for demolishing of Sirius and its ground-floor courtyards. In the meantime it alienates more of the common areas of Sirius from its residents. Effectively, the government is evicting the remaining tenants of Sirius an inch at a time.

All of the interior common areas have been locked away from the tenants of Sirius. Recently, senior FACS officers cancelled Myra's booking of the Phillip Room which had been booked for a studio session in which people were to draw her. The Phillip Room was subsequently covered in black plastic so that it could no longer be used. Myra's drawing studio sessions were moved to the courtyards of Sirius and proceeded with great success and without incident. Similarly, Myra has had guests for Friday Night Sirius, a barbecue event in the courtyard. Myra has been looking forward to the next Friday Night Sirius barbecue on 2 June. Also during the past few months, the Sirius Foundation has conducted dozens of tours of Sirius which have been booked by more than 1000 people and are conducted by Tao Gofers, the leading architect of Sirius. Initially tours were allowed inside Sirius, but as their success has grown, the areas they are allowed into have contracted.
Watching the fence being erected at Sirius one is reminded of the Berlin Wall going up. If Sirius represents the Heart of Sydney, the NSW Government appears determined to destroy it.


This morning the sheriff was scheduled to evict Peter Muller from 32 High Street, Millers Point. Currently he remains in his home, surrounded by residents and supporters. The staff from the assets branch of the NSW Government were keeping a close eye on proceedings from a safe distance.

Monday, May 1, 2017

Caveat Rentor - Tenants as consumers Part 1

Last month Jessica Irvine, senior economics writer for The Age and the Sydney Morning Herald, delivered the Ruby Hutchinson Memorial lecture hosted by the ACCC and Choice. It is worth listening to the whole speech as Irvine addresses the need for changes in housing, childcare and disability care. Today however, we'd like to extend and explore one of the most important lines of Irvine's speech.

"Renters are consumers too. They're consuming a service and they're getting a very poor one in many cases"

Jessica Irvine is absolutely correct - renters are consumers. However, a large part of the problem with our renting laws is that they consider renters to be just like other consumers. This means the legislation makes assumptions about relationships between landlords and tenants - as service providers and consumers - that lead to really unfair situations.

Part of the reason renting isn't like other consumer transactions is the scarcity of the service being offered. If you need some food, or some clothes, or white goods, you have many alternatives and probably a range of products to choose from. It is a rare grocer who only has one banana on the shelf, but tax data tells us about 70% of landlords only own one property, and 90% own two or less.

You might say "but there are over a million landlords, which means there must be over a million properties in the rental market - how can that lead to scarcity?" Even if we take all the properties as a whole, they are not all in the same place, of the same configuration, or the same quality. Remember the last place you rented? There is only one property like that property in the world. Whereas you could go to a competitor of your nearest white goods store and find another fridge just like the last one you looked at, you can't do that with a home.

The other factor is the importance of the service. It's much easier to make do when some of the food in your fridge goes bad, or you get a really bad rip in a pair of jeans, than it is getting by without a home. For instance, you have the right to a refund for a fridge if it's faulty. The shop or manufacturer might give you a new one (just like the old one), or the cash value of the entire purchase price so that you can go and buy a new one. This is true regardless of whether you bought it last week or 6 months ago. If your rented property is faulty you don't get an exchange or a full refund, because the landlord knows two things. First, there isn't another home in the warehouse for them to simply hand over. It will be significant effort on your part to find a new home. And second, you would generally rather stay in the faulty home than sleep on the street.

In many ways this is why our tenancy laws are so inadequate. Assumptions are made about the way parties interact which assumes a regular consumer - business relationship, and that all is required of the law is to "balance the interests" of these parties. But landlords are not like other businesses. They generally only own one or two rental properties, so they are not transacting with their "consumers" with much regularity. If they're really churning through tenancies they might be transacting on average once every six months or so, but given most tenancies last for at least couple of years it's likely to be far less frequent than that. They have no concern for branding, or public relations because they have so few interactions. They are not concerned about moving product because they don't really have much of it to move. They know their "consumers" need it so they don't even really need to promote themselves as a "business". Even their agents - who do provide a service but not for tenants - are more concerned about how landlords perceive them because of the low number of interactions compared to potential "customers".

Added to this, consumers in the private rental sector don't even have the same ability as other consumers to enforce their rights.  Imagine going to fast food restaurant, like McDougall's and they refused you service because one time you took their competitor, Starving Jill's, to the Tribunal for serving a mouldy burger. Bizarre yes? But this is exactly what tenants face:

Ultimately, we need tenancy laws that recognise that tenants are consumers, but at the same time that renting your home is a special kind of consumer service. Renters are consumers, but at the same time, they are families, workers, and community members. The inadequacy of the service is in large part due to the failure to recognise this dual role - which doesn't exist when you buy a new fridge or choose to eat a different type of apple. Changing this will mean having the courage to stand against the claim that the property owner's investment decision is more important than the tenants' home.

We also need to rethink the assumption that a landlord is not "in business" for the purpose of the Australian Consumer Law. There is need for a bit of guts to stand against the sad puppy-dog eyes of investors who are only too happy to receive the benefits of negative gearing (a tax deduction for making investment in your business), but not submit themselves to the consumer protection that should come along with it.

Thursday, April 27, 2017

Rental affordability - are we there yet?

Today's release of Anglicare's latest annual Rental Affordability Snapshot tells us nothing new - rents are climbing, and the hard slog continues for low income households across Sydney and New South Wales. For poor people, simply trying to get on with it, there is no end in sight.

Low income renters are sacrificing food, medical treatment, social interactions and any number of things just to keep a roof over their heads. For some even that can't be sustained - as rent arrears mount up the prospect of life without a home looms large.

We know why this is, and we know how to make it stop. But we don't.

For seven long years Anglicare has run its rental affordability snapshot - checking rental listings over a single weekend and counting how many homes would be affordable for a low income household. That is, how many properties are available for a person in the lowest two-fifths of Australia's income scale to rent at a cost of less than a third of their income. For seven long years the answer has been "next to nothing", and it's gotten worse every time.

In the meantime, house prices have soared. We've looked on in awe as the value of our housing has increased more in a given year than many would earn on even a decent Sydney wage. As first homebuyers are excluded from the market, and more and more debt fuelled investors pile in, we're constantly looking for solutions to this crisis that won't diminish the prospect of capital gains.

We devise new ways to drag people across the widening divide between rich and poor, where they can land in relative comfort on the good side. That's the side with all the nice picket fences, and perhaps room for a pool out the back, where everyone can enjoy the richness and fullness of life. Nobody should ever have to go without. But that gap just keeps getting wider, and wider, and wider, and wider...

We know why this is, and we know how to make it stop. But we don't.

For now, it's just a sheer numbers game. Most of us are already on the side where hope lives, and we're doing our best to stay there. For those less fortunate, the ability to drag yourself across that divide, over that line - by the bootstraps, if it comes to that - has always seemed possible. Indeed, that's why most of us are already there. Work hard, save harder, get your foot on that ladder. Sacrifice will pay off and soon enough you can make a place your own, just how you like it. Knock out a wall, put in a new kitchen, upgrade, whatever you like.

But this is not working anymore. Not for everyone.

The divide keeps getting wider. The line keeps moving. It gets harder to reach out and pull yourself across. And if you do find yourself on the good side of this shifting line it gets harder and harder to stay there. You've got to be able to move with it or you'll fall. We don't want people to fall, so we devise new ways, and new ways again, to help people stay on the good side of the line. Every time we do, that line moves, just a little bit further. The divide gets wider. It becomes just a little bit harder to get across that line.

It's true, at some point we've accepted that not everyone can make it. Our income support system is built on the assumption that most of us will have crossed the line by the time we retire, so we've had to dig deeper. We've tinkered and tampered with social housing until it's become a system of welfare housing - an option of last resort for those who can never make it across the divide. We've held onto a belief that this is only for the poor few, as most of us will get there if only we try. Many have failed to notice, from that side of the divide, how many are falling into the deep, dark hole in the middle... how easy it is to become lost in there, how hard to be seen. For those in the hole it's difficult to find solid ground, as the line continues to pull away. It's hard enough to hold your ground, let alone climb out on the other side.

We know why this is, and we know how to make it stop, but we don't. Sooner or later, we're going to have to. Adding to the supply of "welfare housing" - which is pretty much what we're expecting in the Federal Budget - sounds like some kind of solution. If done right, it could even start to shift the line on the poor side of the divide, and that would be a good thing. But if there's nothing putting the brakes on the line at the other side, all we can ever do is play catch up.

If we are serious about tackling housing affordability - and affordable rental housing in particular - we need to do more. We need to close the divide. Bringing the line back to the middle from both sides of the divide will take more than just "supply side" solutions - it will take a comprehensive rethink about the way our housing system works. Otherwise more and more of us will find ourselves stuck in that hole forever, where rental stress is chronic and getting worse every year.

Friday, April 21, 2017

Public housing amnesty - income, assets and unauthorised occupants

Yes, it's amnesty time again. If you are a public housing or Aboriginal Housing Office tenant this amnesty will cover you.  The amnesty will run from 8am Monday morning (24 April) through until midnight on Sunday 11 June and covers undisclosed income and assets, as well as unauthorised occupants.

The amnesty means if you haven't yet had the chance to update FACS Housing about a change in your income or assets or to tell them that someone has moved in, you can let them know during the amnesty without worrying about having to pay back rent or facing prosecution.

FACS Housing will use the information you disclose about your household income to recalculate your rent and water payments, and you'll be expected to pay this recalculated (likely higher) rent going forward.  They won't, however, raise a debt, prosecute or take action to evict you on the basis of the rent increase.

Providing information about about someone who is living with you that FACS doesn't know about (an "unauthorised occupant") will be treated as an application to approve an additional occupant.  If approved (see FACS policy on this) your rent will be reassessed from the date you provided the new info - again not backdated. If you're trying to figure out when FACS considers someone to be an 'additional occupant' rather than a visitor, this is generally when the person has been or will be staying longer than 28 days in a row (but again see FACS policy for more information).

All public housing and Aboriginal housing tenants will receive some information directly from FACS about the amnesty encouraging them to self disclose.  But it will also be open to members of the public to call in and make 'allegations' about tenants (and unfortunately given past experience we can expect there to be a bit of 'dob your neighbour in' messaging running through mainstream media reports about the amnesty).  Where an allegation is made FACS Housing will provide a tenant with an opportunity to respond to an allegation. If the tenant accepts the allegation at that point they will be protected by the amnesty.  If they challenge the allegation they forfeit protection under the amnesty and FACS will continue to investigate following 'standard business procedures'.

If you are a public housing or AHO tenant and know that FACS has incorrect information about your household's income and assets, or you haven't yet made an application for an 'additional occupant' and someone's already moved in this might be a good opportunity to let FACS know.  Outside of an amnesty FACS Housing will normally vary or cancel a tenant's rebate, raise a debt for rent arrears (sometimes a very significant debt), and then move to terminate on the basis of that debt. So you could be saving yourself a whole lot of hassle ... and perhaps your tenancy.

Some extra detail to consider:
  • If you are a tenant of a Community Housing Provider or an Aboriginal Community Housing Provider you are not covered by the amnesty. Any information you provide, or any information provided as an allegation by someone else, will not be passed on by FACS Housing to your relevant provider. Tenants will be encouraged to contact their provider, but will not be protected from any debts or evictions by the amnesty.
  • If an investigation around income and assets, or about an unauthorised occupant has already commenced and you have received a letter informing you of this (a 'Natural Justice' letter) you will not be given any protection under the amnesty.
  • If you disclose or are found to own/part own property that makes you ineligible for housing assistance, FACS Housing states you will be "required to surrender your tenancy at a time that is agreed"
  • Only disclosures about income & assets and unauthorised occupants will come under protection during the amnesty.  FACS notes "tenants who make declarations that don't fall under the protected amnesty categories will be assessed on a case by case basis and may face prosecution".
If you are thinking about calling up during the amnesty but have any concerns or questions you should first get in touch with your local Tenants Advice and Advocacy Service for free advice.

If you have any extra questions about the amnesty, send them through ... we might be able to help answer them or ask FACS Housing to respond.

The original version of this post included information provided by FACS that any allegation or self-disclosures made about Community Housing tenants would be passed on by FACS to the provider. This information was incorrect and the post has been edited accordingly.

Thursday, April 20, 2017

Where do our landlords live?

Last week's release of tax data from the Australian taxation Office has renewed discussions about who benefits from negative gearing and whether the perk could be better spent. However, the data also produced some insights about where our landlords live. That is, the post-codes of people who declare rental income to the tax office are now recorded. Now isn't that interesting?

We've previously discussed how tenure breakdown is becoming an increasingly important electoral factor, and why all politicians should support tenants' rights. The growing number of households who are long-term renters could begin to have an impact in elections for marginal seats. It's clear from the new tax data that landlords are concentrated in particular regions, and continue to outnumber tenants in a relatively large number of spots where a high rate of owner-occupation remains the norm. However, as the demographics of New South Wales change, this will also change, potentially bringing more and more votes into play as members of the community allow their votes to be influenced by housing policy and promises.

Particularly those for whom current tax settings and regulatory frameworks do not work and are in fact harmful - namely tenants - this data should be of interest. We've made three maps exploring this data with one question in mind: where do our landlords call home? Although it is important to note that this data only records where a person reports their income - the rental income may come from an entirely different state. They might actually be someone else's landlord.

The interactive maps here can be explored by click and dragging, and zooming in and out with the + or - buttons on the screen.

First, we looked at just the raw numbers of people who declared some rental income in the 2014-15 year. Baulkham Hills (postcode 2153) was the clear leader here - 7,709 taxpayers from that area declared some rental income. Two other Western Sydney areas featured highly in this count - postcode 2145, to the west of Parramatta and postcode 2170 located around Liverpool.

The picture starts to colour in a little when we look at landlords as a percentage of all people declaring income of any form. It's important to note that even though almost all adults or near adults pay tax (for instance, through GST) not all people lodge tax returns. Tax data should be treated with some caution on account of this, but it can give us a reasonably clear picture. On this map, blue signifies where more than the national average number of landlords per tax declarant reside, and green shows where there are less than the average. The North Shore's relatively high number of landlords comes through, but Sydney's south and south west also feature strongly. In fact the two areas with the highest proportions of landlords per tax declarant are Orchard Hills and Horsley Park in the south west.
This high proportion is partly due to the relatively low numbers of people in the areas, but it could also suggest some things about how housing investment works. These areas were developed not so long ago, and new homes may have been purchased by households who already had a foothold in the property market; or they may have been purchased by first homebuyers who have since tapped into rising house prices, borrowed up and bought some more... Getting to the bottom of that would make for an interesting research project.

Finally, we looked at the number of landlords in an area compared to the number of bonds lodged with the Rental Bond Board. This gives a clearer indication of areas where landlords live compared to where they invest. Green indicates less than a 1:1 ration of landlords to tenants, which is what you would expect since there are fewer landlords than then there are tenants. Blue indicates there are more landlords than tenants in an area - indicating that these are the areas where housing is not being brought into the private rental market. In Sydney, the postcodes 2156 (Annangrove) and 2125 (West Pennant Hills) are noticible as centres for landlords, joining Orchard Hills and Horsley Park. We haven't tried to account for "rentvestors" of course who will contribute to both counts.

However across New South Wales there are a number of areas which have very high numbers but can be explained by very low numbers of both tenants and landlords - for instance postcode 2898 (Lord Howe Island) has the highest ratio of landlords to tenants in the state - at least partly because there are only 3 bonds lodged. It is still interesting to see the locations where landlords outnumber tenants, sometimes by quite a margin - and of course, this doesn't account for landlords who are also tenants themselves.

Bonus: National versions of the first two maps are available.
The number of landlords in each Australia postcode
The percentage of landlords of tax declarants in each Australian postcode

Thursday, April 13, 2017

IPART review of social housing rents, etc

As part of the Future Directions for Social Housing strategy, former NSW Premier Mike Baird tasked the Independent Pricing and Regulatory Tribunal (IPART) with a review of social and affordable housing rent models. Earlier in the week IPART released its draft report, along with a number of draft recommendations and a call for further comments by early May 2017.

Now, it's important to keep in mind that this is merely a draft of the report, and even when finalised it will simply be making recommendations to Government... and who knows how all that will eventually play out? But there are four significant proposals in there that are likely to shape the development of social housing policy and practice in New South Wales.

1. Income related rents are the go, but tenants should pay more
First, there's the recommendation that social housing rents should continue to be calculated as a percentage of a tenant's income, rather than set against market rents or calculated in some other way. IPART found that housing affordability is declining across the board, as both house prices and private market rents are rising faster than incomes. In order to ensure affordability is protected within social housing it recommends its rents stay linked to tenants' incomes.

From IPART's draft report, page 14
IPART found no strong link between income-related rents and work disincentives for tenants, noting that a range of other factors contribute to tenants' abilities and incentives to take on paid work. It recommends continuing to set rents based on a 25%-30% scale, so that tenants on higher incomes pay proportionally more of their income as rent. This may also mean retaining the problem of higher effective marginal tax rates for income earners in social housing, as the scale does not increase progressively. Rather than a higher income earner's rent being based on 25% on the first chunk of their income, sliding up to 30% as each threshold is passed until reaching the market cap, the proportion is simply adjusted to reflect the rate payable at the relevant level of income. IPART hasn't specifically weighed in on this issue, and its modelling suggests members haven't turned their minds to it, but this is where any real work disincentive is currently built into social housing rents. It's not the most significant work disincentive for social housing tenants, though, and IPART's draft report does have a bit to say on policies around tenants' eligibility and renewal of tenancies with this in mind. We'll come to that in a moment.

Still on rents, though, and the draft report recommends some types of income that are currently excluded from rent calculations, or are calculated at a lower rate, should be included and/or brought up to the 25%-30% rate. This would bring a larger proportion of a tenant's Family Tax Benefit payments into their rent calculations, as well as previously untapped income such as the Pension Supplement. For some tenants rents would go up by around $8-$12 per week - netting social housing landlords an estimated $40million p.a. - and the draft report recommends limiting these increases to no more than $10 per week in any given year.

2. Back to the future on eligibility and reviewable fixed-term tenancies

The second significant thing is a draft recommendation to stop using fixed term tenancy agreements for social housing tenancies - that is, we should go back to using "continuous leases" and periodically review tenants' needs rather than their eligibility for assistance. The use of fixed term tenancy agreements that trigger reviews of tenants' eligibility is where the real work disincentive exist within our social housing system, as tenants who move into a higher income bracket are not only faced with increasing rents and higher effective marginal tax rates, they could actually lose their home if they earn too much.

IPART's draft recommendation includes "continuous leases to be reviewed at least every three years to assess whether the dwelling continues to be suitable for the tenant's needs and characteristics". While this leaves some wriggle room as to what exactly would happen if a review came back suggesting that a dwelling is no longer suited to a particular tenants needs, other parts of IPARTs report suggest this would result in relocation rather than eviction. Certainly an increase in a tenant's income would no longer be a factor, as the draft report suggests tenants who earn too much, and do not want to move into the private rental market - even with one-off assistance and a limited right of return - should pay an additional 5% above market rent for the privilege of a tenancy that offers greater security of tenure than can be achieved in the private rental market.

This is an interesting but unwelcome proposition. It plays into similar conversations happening in other parts of the rental housing sector advancing the idea of charging tenants a premium for a more secure tenancy. Of course we'd rather see tenancies made more secure across the board, by making some changes to our renting laws to remove landlords' rights to evict tenants without grounds - and we certainly think that would go much further as an incentive for working tenants to move out of the social housing system. But on this, the notion that social housing tenancies are more secure than the private rental market is a nice idea, but is probably not as true as we'd like it to be. There's a definite trend towards social housing landlords using no-grounds notices of termination when all else is deemed likely to fail. Curiously, IPART's draft report has made no reference to the Residential Tenancies Act in its recommendations or deliberations concerning the transition from fixed terms to continuous leases.

3. Choice based letting
Third on our list is the elusive notion of "matching households to the best housing for their needs", which is code for sorting out this apparent problem of "under-occupancy" within the social housing portfolio. Currently this is addressed through measures such as the vacant bedroom charge, which is applied to any tenant who declines to move to a smaller dwelling when asked to, and limiting additional occupants' rights to be recognised as a tenant if the original tenant goes to prison, or into rehab, or passes on.

IPART's draft report recommends a new approach - making it clear that eligibility for social housing is not tied to any particular dwelling, but to "a dwelling that meets their household's needs". Thus, social housing tenants whose household complements and needs change over time would expect to be moved around to make sure the portfolio can be put to maximum, efficient use. This would be coupled with a choice-based letting system as a way of softening the blow.

Choice based letting has been used in a couple of other places - IPART refers to a Canadian experiment but also notes it has been widely used in parts of Europe - but our experience of it in New South Wales is limited to relocations from Millers Point, Dawes Point and The Rocks. In those instances, some tenants referred to it as the "housing lottery" indicating that it can indeed be seen as something other than an exercise in agency and choice, particularly for those who apply for available properties and miss out.

Nevertheless, IPART's draft report provides quite a bit of detail about how a choice based letting system might work, and we'll spend some time looking over it. Significantly, it suggests tenants awaiting a transfer should be given priority over people on the waiting list, which would be a fair departure from the status quo. Presumably that would apply to tenants who have initiated a transfer as much as those who have been approached to relocate, provided the tenant's "eligibility" review has determined that their housing needs have changed, but this has not been made clear.

What's also not clear is how tenants who have been approached to relocate but decline to participate in the choice based letting scheme would be treated. Here again IPART has made no reference to the Residential Tenancies Act and gives us no indication of how tenancies will end - whether in the case of a tenant who doesn't comply with a request to move, or one who does.

4. Social housing isn't going to pay for itself
Last but not least is IPART's draft recommendation that the New South Wales Government implement a sustainable funding model for social housing providers, noting a current shortfall of close to $1billion. The draft suggests this should be paid to housing providers as an explicit subsidy, rather than an implicit subsidy as is currently the case. This is incredibly significant in the context of a national discussion in which the value of the National Affordable Housing Agreement is being called into question.

From IPART's draft report, page 34

The draft report also calls for the development and publication of a Social Housing Strategy, to be updated annually, outlining how, where and why new dwellings are to be added to the portfolio. It makes a further push for the management of social housing to be handled by community housing landlords, suggesting the role for government is to oversee construction of dwellings and set the policies under which social housing should be managed.

Interestingly, IPART's draft report suggests that the New South Wales Government should steer away from affordable housing programs, focusing on using its available resources to assist those with the greatest need instead. Given discussions at the national level around the development of an Affordable Housing Bond Aggregator, and the potential for Inclusionary Zoning policies to be introduced through a range of planning reforms, it may soon be possible for community housing landlords to pursue growth of their affordable housing portfolios without the direct involvement of a NSW State Government program. In any case, we're inclined to agree that if faced with a choice between growing affordable housing or social housing portfolios, it's social housing that should get the nod.

IPART is calling for written responses to its draft report by 12 May 2017. They will hold a public hearing in Dubbo on 2 May 2017, and another in Sydney on 9 May 2017. For more information and details on how to contribute your own feedback, visit their website at this link here.

Australia, the land of indefinite, insecure tenancies

There's been a lot of talk lately about the insecurity of renting in Australia, and how things would be better if we can somehow get everyone onto longer leases. There's a perception that Australian tenancies are notoriously short, with the majority of leases lasting around 6 or 12 months.

We're often asked how long leases ought to be in order to give renters the security they need. Take, for example, this recent interview Leo did with ABC 24's Breakfast program, where he is asked (at 1:50) "what length of tenancies would you like to see become available for people?"

And Su-Lin Tan's latest piece in the Australian Financial Review - Renting in Australia is generally 'miserable' but doesn't have to be - wades into similar territory. Tan notes the growing number of Australians "not interested in buying a home" and adds:
But one of the biggest obstacles is the lack of long-term leases, a stumbling block for people who have kids in school, long-term job commitments or simply want a settled life.
Referring to data and commentary from the recent Unsettled report, Tan also notes that the Netherlands, Germany and Denmark offer "infinite leases".

For a more comprehensive look at how European tenancies work, there's the recent publication of the International Union of Tenants report from members to its 20th congress, Rent Regulation and Security of Tenure in the Private Rental Sector. Or, for a quicker grab, there's UK Shelter's map of renters rights in Europe. These tell us that for the majority of European countries tenancies are "protected" with fixed terms of three years, if indeed they are not "permanent" and can only be ended with legal grounds.

And what of Australia? In all jurisdictions tenancies tend to begin with a fixed-term agreement. It is for the parties to decide the length of that term, and it is a matter of convention rather than law that most tenancies begin with a term of 6 or 12 months. If a tenancy agreement is not formally terminated following the processes set out in our renting laws, or a new fixed term created, it carries over and becomes a periodic or continuing agreement once the fixed term expires. It does not end simply because the fixed term expires. These are essentially permanent agreements similar to what we see in parts of Europe, where tenants' have some of the strongest protections against eviction and unreasonable rent increases in the world.

So what makes Australia different? What's missing from our laws, that operates in those parts of Europe that we look to for inspiration, is the part about not being able to end tenancies without legal grounds. Or rather, in all of the Australian states and territories it is lawful to end a tenancy without a reason, so the legal ground becomes "no grounds". In New South Wales this can happen at the end of a fixed term agreement with 30 days notice to the tenant, or at any time during a periodic agreement with 90 days notice to the tenant.

When issued with a valid notice of termination without grounds, there is generally nothing a tenant can do to save their tenancy but beg. The rationale for this is that "landlords should be able to deal with their property as they see fit". While in Europe, landlords presumably still manage to deal with their property as they see fit, but they must do so within structures that protect tenants from unfair or unreasonable evictions.

A tenancy cannot be terminated without grounds during a fixed term, which is why it's often suggested that longer fixed terms would be a good thing. It might also explain why some tenants enter into new short fixed terms at the expiry of their term, although this might also be because landlords and real estate agents often insist - threatening termination without grounds if a "new agreement" isn't signed. And while longer fixed terms may suit some people, we can't help but notice that tenants frequently ask for advice on how to end a fixed-term agreement early. Some might be encouraged by the use of longer fixed terms, but they are not the catch-all solution we're after. Indeed, long fixed term agreements might present unacceptable risks to many tenants, if the means by which they are encouraged is the erosion of tenants' rights.

How long are Australian tenancies then? The Unsettled report doesn't give us much detail on this, focusing instead on the length of fixed terms for Australian renters. Unsurprisingly, it found that 83% of Australian renters have no fixed term agreement, or are on an agreement of 12 months or less. It also found that half of Australian renters have moved three times or more, including 19% who have been renting for less than five years, and 42% of those under the age of 35.

For tenancies in New South Wales, tenants' bonds lodged with the Rental Bond Board reveal a little more. From data released under a freedom of information request in 2016 and made available as part of the NSW Government's open data portal, it is clear that only a small proportion of tenancies end within 12 months or less. The majority continue into a second year and a significant amount go on for a third year after that. Slightly more than one in ten rental bonds have been held by the Board for more than three years.

Bonds lodged with the NSW Rental Bond Board, by duration
Whether they are (or were) attached to agreements with a fixed term of 6, 12 or any number of months, these tenancies are indefinite. They are insecure because they can be brought to an end without grounds. If predictability and stability for long-term renters is what we're after, we should focus less on encouraging longer fixed terms, and more on getting reasonable grounds for termination into our renting laws. As long as their home remains available to rent, and they continue to meet their commitments under the agreement, tenants should not be asked to leave without a good reason.

Tuesday, April 11, 2017

Federal Budget Watch - priming the pumps

There have been a few developments since we last looked in on expectations for housing affordability measures in the coming Federal Budget. For instance there's the establishment of an affordable housing taskforce to come up with a UK style affordable housing bond aggregator that will suit local conditions, as well as intensifying speculation that first home buyers could be allowed to raid their superannuation funds in order to come up with a deposit before applying for a loan. In his address to the Australian Housing and Urban Research Institute yesterday, Treasurer Scott Morrison all but confirmed he will pursue these policies, which he believes will deliver housing affordability while ensuring house prices continue to soar.

It was an interesting speech, full of all the usual stuff about supply not keeping up with demand. It made a point of noting the majority of investors in the private rental market are small time speculators, holding only a single rental property with a low yield while hoping it will rise in value and deliver a solid capital gain. It suggested that any change to negative gearing would come at a cost to renters (although it didn't go into any detail about what that might be). And it had yet another go at the National Affordable Housing Agreement, suggesting its $1.3billion-ish annual spend is not producing the right outcomes because the effects of unaffordable housing are still being felt by low-income households.

What it didn't do was seriously consider the key drivers of unaffordability in our housing system. It steered clear of the capital gains tax exemptions that encourage home-owners to shovel excess income into their housing rather than other, higher taxed investments. It made no reference to the impact that small-time investors who trade in the same housing market - buying and selling mostly established dwellings - are having on the shape of the private rental market. It didn't even come close to considering what's recently been described as the financialisation of housing - the notion that a dwelling is is not a basic necessity but a means of accumulating wealth - is what's driving up the cost.

Or rather, it didn't consider these things to be a problem. In fact, in focusing on new ways to entice private investment into residential property - through the development of an affordable housing bond aggregator on the one hand, and providing incentives to stimulate home-ownership on the other - it goes so far as to suggest that further financialisation of housing will be the solution.

It's easy enough to see how allowing first home-buyers to dip into their superannuation will put upward pressure on prices. The more people have to spend, and the more competition there is in the market, the higher they'll be able to go. Without curbing existing tax breaks investors will continue to ride on the coat-tails of owner-occupiers, trading in the same market and pushing prices even higher. No doubt this will be to every buyer's satisfaction, once they become an owner, but for those who remain unable to buy despite their (potentially) increased access to debt it will simply exacerbate all the existing problems of relying on rental housing as the only long-term option.

Presumably this is where the bond aggregator and the development of new affordable housing portfolios comes in. According to the Treasurer in his speech yesterday, "the bond aggregator would issue bonds to the market, and on-lend these funds to community housing providers - allowing them to access cheaper and longer term finance". He also said "the goal is for affordable housing to be conceived not so much as a real estate investment, but a longer term fixed interest investment that can comfortably sit within institutional investment portfolios".

Perhaps the Treasurer has missed a point here. While financiers may be able to distinguish between affordable housing and real estate investment, community housing providers will not. They'll be buying, selling and renting into the same rising markets as everybody else. And while ever land values and housing costs continue to rise, so too will the need for "cheaper and longer term finance" for those who would deliver affordable housing to those markets. Community housing landlords may be accustomed to pushing against strong headwinds, but to date they've not had the full weight of Australia's affordable rental housing policies foisted upon them as they do. If we are to expect them to succeed, we may have to offer them more than just cheap debt. Taking some of the heat out of Australia's housing markets might also have to be on the table, and this means reforming negative gearing and capital gains tax concessions.

There's a final point to be made following the Treasurer's remarks yesterday. He concluded, correctly, that "there are no single solutions and the payback is achieved in some cases over a generation - not an electoral or budget cycle". With this in mind, let's acknowledge that whatever measures are proposed on budget night next month will be small consolation to many of the growing number of Australians who currently rent their home. Affordability is one thing, but knowing you can be evicted without a good reason is something else entirely. It's well beyond time to bring our renting laws up to scratch.

Thursday, April 6, 2017

Airbnb and the rent in Sydney

Today we released our report into the impact of Airbnb on the rent in Sydney. You can check out the full report here: Let's have a closer look at some of the findings.

One of the interesting numbers we've examined is the number of Airbnb listings that are actually active in any given month. While it's true that people keep creating more and more listings on Airbnb, that doesn't always tell us the really important number - how many are active, and therefore what impact these listings are having on the rental market.

We really can't explore some of these issues due to the lack of data around housing in Australia. We don't know which properties are rented homes or owner-occupied, and this makes it difficult to read a lot into the numbers.

We can be clear that simply being listed on Airbnb does not mean a property has been removed from the rental market and there are two clear examples we can imagine to illustrate the point. Imagine a 2 bedroom unit in Bondi. The occupant lists the place on Airbnb for the week between Christmas and New Year's while they go away and visit family. If the occupant was an owner-occupier then this property wasn't available for rent, and Airbnb hasn't changed anything about that. If the occupant was a renter, then this property has also have not been removed from the rental sector - it is still in it.

The Greater Sydney area 
Whether it is owned or rented, what is more relevant is how often a property is booked. This chart covering the whole of Sydney from August 2014-August 2016 illustrates that there actually is a large number of listings on Airbnb which don't even receive one booked night in any given month. This suggests a large number of people have listed their property in the lead up to summer, booked it perhaps for a few nights over summer, and have no intention of listing the place again.

We can clearly see the summer bump both in December 2014 and December 2015 - far more activity then, than for the rest of the year. What is interesting though, is that the numbers of listings with 8 or more nights booked in a single month (or roughly 100 nights in a year) is much more constant throughout the year. This effect is very clear in our three hotspots with really large summer bumps in beach-side Bondi and Manly, and a still sizable but reduced bump in inner city Darlinghurst.

All of this leads us to think that for the majority of users, Airbnb activity is sporadic. However more commercial operators of course act differently, and are looking to maximise their occupancy all year round, leading to a more consistent level of activity. Regulation of short term lets should look to effectively control commercial operators, and ensure that their activity in short term lets does not produce harmful effects on residential tenants.

For the full report, including interactive maps - check out

Friday, March 31, 2017

What's wrong with keeping a sneaky pet?

Kirsten Robb penned an interesting piece for Domain this week, outlining how real estate agents know when you're keeping a sneaky pet.

Thing is, we know you know, and we know you know we know. We also know that because you know, and because we know you know, you've probably given implied consent for us to keep the pet. It's now just a matter of evidence - and the system works!

Actually, no, it's broken, and Robb's article points us to two key problems that could do with a fix. While discussing how to easily evict a tenant for keeping a sneaky pet, by giving them a termination notice without grounds because keeping a pet is often not actually a breach of a tenancy agreement, Sam Nokes of the Real Estate Institute of Victoria's property management chapter says:
I can’t tell you how many times I’ve had owners that would have said yes to a pet, but because the tenants lied and hid it from them, they’ve said no — the dishonestly reflects a general dishonesty.
The first problem is easy enough to spot - landlords using "no grounds" eviction notices to end tenancies after forming a negative view of a tenant. Landlords should always be required to give a reason - one that they are prepared to stand by - when requiring a tenant to leave. The law should provide landlords with some additional grounds for termination, such as "the property is no longer available for rent." They should no longer be able to mask their bad reasons, such as "I have formed the view that the tenant is dishonest", by ending tenancies without grounds.

The idea that tenants have to ask the landlord for permission to keep a pet is the second problem. It encourages dishonesty, and facilitates mistrust, in situations where a landlord might otherwise take a reasonable approach to the matter. Renting laws would be better served by taking any requirement for consent to keep pets out of the equation, by prohibiting the use of "no pets" clauses in tenancy agreements. As we said not long ago, there are some good reasons why landlords should get behind this. Perhaps we can add "because honesty is important" to the list.

Thursday, March 16, 2017

Third anniversary of the announcement to sell all public housing properties in Millers Point

(To Jack Mundey Place … photo from website of Property NSW)
This Sunday, 19 March 2017, is the 3rd anniversary of the announcement by Minister Pru Goward, currently Minister for Social Housing, of the sale of all the public housing properties in Millers Point. There's a march to celebrate those who have stayed and to commemorate a lost community. For details of the march, visit the 'Save Our Public Housing' website here. If you miss the march or it rains, come to the sausage sizzle on the Village Green or the Harry Jensen Community Centre across the road at 17 Argyle Street.

Millers Point enjoys ‘an iconic location in the heart of Sydney Harbour’. These are the words of the website of Property NSW. Here, you will find the NSW Government flogging the 'exclusive High Street ... an exceptional opportunity'. So far in 2017, McGrath Real Estate, on behalf of the NSW Government, has listed 6 High Street blocks, each comprising 4 units that provide a selection of 2 and 3 bedrooms, and four other properties elsewhere in Millers Point. Included is the former infamous 'Hit or Miss Hotel' which was licensed from 1852 until 1923 and remodelled into five apartments in the 1930s, and two terraces to be sold in one line. Ray White also is selling a pair of adjoining terraces currently configured as seven one-bedroom apartments. Price tags range from a mere $2 million to $5.5 million.

Millers Point is fast becoming an enclave of the rich. Yet, not so many years ago, Housing NSW produced a wonderful publication on the Millers Point community. It is called 'Millers Point Oral History Project: Summary Report', 2007 and was written by Frank Heimans for Housing NSW. It reads (page 6, 7, 19):
Millers Point … has a very integrated community who love living there and have a sense of belonging and allegiance to the place. … The residents have a rich reservoir of memories of living at the Point, going, in some cases, as far back as six generations. They were born, worked, lived and died in the houses at Millers Point. They also have a strong sense of history and heritage. It’s a community within a community where everyone knew each other through work and place of living.
Just a few years later, the NSW Government decided to evict them all ...

At 21 March 2017, 143 properties have been sold for $374.06M, with a median sale price of $2.41M and sales in the range $1.54M and $12.30M. This represents 130 sales, with the top price being for a block of 12 one-bedroom apartments covering 7 properties sold in one line. Based upon sales to date, an estimate of funds to be received from these sales is $681.23M. This is far in excess of the Government's target of $500 million.

But at what cost? At the beginning of the process 579 tenant and household members (in 399 tenancies) were to be relocated. At 15 March 2017, 548 tenant and household members (in 378 tenancies) have either vacated or are committed to moving, with a further 31 (in 21 tenancies) still uncommitted to moving. Three 'Notices of intention to issue a Notice of Termination' have been served on remaining tenants. You will find information about this process here. 'Brutal' is how residents described the actions of Housing NSW in Millers Point. Professor Alan Morris of University of Technology Sydney documented the experiences of residents in a report called 'A contemporary forced urban removal: The displacement of public housing residents from Millers Point, Dawes Point and the Sirius Building by the New South Wales Government'. Shelter NSW and Tenants' Union of NSW held a forum in October 2016 to discuss Professor Morris's findings.

By the second half of 2016 the NSW Government was pitting residents who remained against Sydney's homeless population. It implied that the Millers Point residents were selfish and prejudicing homeless people getting housing. In a media release, then Minister Brad Hazzard said: ‘I thank the Millers Point residents who have moved for understanding the need to provide more social housing for the 60,000 vulnerable people on the waiting list.’ No mention of the trauma endured by residents of Millers Point being forced out. Indeed, the then Social Housing Minister is quoted as saying: '... sometimes I have to ask people to come on that journey with us.' It poses the question, if portfolios such as health and education are not funded by cannibalising themselves, then why must social housing be funded this way?

Across 2015 and 2017 the Tenants' Union of NSW made submissions to Elder Abuse Inquiries of both the NSW Legislative Council and the Australian Law Reform Commission (ALRC) here and here. We argued that a government policy, in itself, may constitute a form of elder abuse. We submitted that the NSW Government’s decision to relocate all the social housing tenants in the suburb of Millers Point is an example of systemic elder abuse. See, for instance, the story of Flo Seckold, who moved out in February of this year.

A win for the residents over the last year was the Sirius Building becoming subject to a green ban. This followed a loss for residents when the NSW Government refused to accept the unanimous recommendation of the Heritage Council of NSW for it being given heritage status. The Land and Environment Court will consider this matter on 6 April 2017. At this hearing, residents will argue that such a rejection by the Minister for Planning did not comply with the relevant law. You can read more about this process in news reports here and here. Note the Sirius Building was not included in the original social impact assessment for Millers Point and The Rocks.

What does this all mean? A recent blog of Martin North of Digital Finance Analytic may hold part of the answer. His blog is called 'Property Investment and the Financialization of Housing'. The financialization of housing has its origins in the rise of neo-liberalism. C.W. Chun ('Exploring neoliberal language, discourses and identities' in S. Preece, ed. The Routledge Handbook of Language and Identity, London: Routledge, 2016, p. 560) argues that in a neo-liberal world 'nothing will remain untouched by the drive to monetise every imaginable and imagined private and public domain constituting and constitutive of our everyday lives'.

Martin North refers to a report of the Special Rapporteur to the Human Rights Council of the United Nations. At Paragraph 6, it reads:
In many countries in the global South ... the impact of financialization is experienced differently, but with a common theme — the subversion of housing and land as social goods in favour of their value as commodities for the accumulation of wealth, resulting in widespread evictions and displacement.
Sounds like Millers Point, Sydney, Australia ... even though we're a so-called first world country. (For more commentary on the report of the Special Rapporteur, visit here.)

For more on Millers Point over the past three years, visit the Tenants' Union of NSW previous blogs here and here. We have said on many occasions: 'Come on NSW Government, allow the remaining older residents a real choice'. This may be ageing-in-place in their current homes and, an alternative that is supported by the residents, retain some of the units within the Sirius Building and some of the workers cottages for a semblance of a social mix. It's not too late! A win-win situation! You'll make your money and older residents still there can stay.

[Sales data updated on 21 March 2017]