A watershed moment is under way in ‘s housing affordability debate.
Instead of continuing to bang the drum of “keeping the first-home ownership dream alive”, Victoria’s premier has proposed sweeping changes to the state’s tenancy laws in an attempt to improve the prospect of long-term renting.
A consolation prize, yes, but an important line in the sand for the 31 per cent of ns who rent their home. They may not be any closer to buying a house but the leader of the country’s second-most populated state is trying to throw them a bone. State governments will be watching closely, which means renters and landlords in Sydney should be, too.
Premier Daniel Andrews has announced plans to change rental laws so that tenants could not be evicted without proper cause, notice to vacate be lifted to 120 days, the introduction of a blacklist for complaints against landlords and agents, and other sweeping changes to rules against pets and making minor cosmetic changes to the property.
An unofficial bidding system, where hopeful tenants offer more than the proposed rent, will also be stamped out.
“For too long we’ve had an imbalance and things have not been as fair as they should be,” Mr Andrews told Melbourne on Sunday.
“The landlord and the agent have all the power and given how tight the market is, the tenant can’t speak out and has no voice.”
The move comes just months after the Andrews government announced Victorian first-home buyers will be granted a stamp duty tax concession for houses between $600,000 and $750,000. A helpful and well-meaning attempt to boost first-home ownership in the state, but of course the brick wall remains – a 20 per cent deposit on a $600,000 property is $120,000 cash. That’s a lot of money to stump up, especially when national wages growth is at record lows.
First home buyers, whose parents can’t help with a guarantor loan or cash, will have to wait until the market corrects, which could take a very long time.
That’s why Sunday’s move from Mr Andrews is significant – it’s an admission that renting is no longer a short-term waiting room before home ownership. And it’s not just Victoria, across renting is increasingly where people spend a large chunk of their lives – even raise their families.
Of course, any suggestion that renters be handed more power is met with quick and loud objection. But while Victoria’s peak real estate body warns “any imbalance in the market has the ability to cause a rental crisis”, few other experts seem to agree.
“Landlords who were happy to provide those rental properties will be leaving the market angry,” Real Estate Institute of Victoria chief executive Gil King said in reaction to the announcement, adding that the organisation will be looking to strike out as many of the proposed changes as possible.
“The impact is going to be rents go up because of less stock on market for tenants.”
That assessment is “economically illiterate”, according to the Grattan Institute chief executive John Daley, with the positives of throwing renters a bone expected to far outweigh the negatives.
“There’s very little truth to it,” Mr Daley told Domain.
“When a landlord walks away from a property, what happens? Either someone buys and is prepared to rent it out, or someone buys it to live in it, who would otherwise have been renting.
“The number of instances where a landlord walks away and the property is left vacant is infinitesimally small.”
It’s true that the number of rental properties may drop, home ownership may rise and rents could also lift, according to Mr Daley, but none of those are expected to occur on a meaningful, or even visible, scale.
“Overall, this package provides a lot of things that are very valuable to tenants and actually don’t cost landlords very much,” Mr Daley said.
“How much does it really cost you as a landlord to have tenants occasionally bang things into the walls? To be blunt, not that much. How much does it really cost to let them have a pet, given that they’ll have to clean up afterwards? Not that much.”
That’s not to say that property investors might not be rethinking their portfolio at the moment, just that changes like those proposed on Sunday would be unlikely to have anything to do with it.
Interest rates are tipped to start rising as soon as next year, house price gains have cooled and are expected to continue to do so, and the n Prudential Regulation Authority is busily clamping down on how much of major bank balance sheets can be dedicated to investor and interest-only lending, which has the effect of pushing mortgage rates higher.
Meanwhile federal tax rules around negative gearing and capital gains tax exemptions remain untouched and continue to be key drivers of interest in the property market.
Those are surely a much more central consideration for property investors than whether their tenants can hang up a picture, keep a pet or be protected against arbitrary eviction.
“The rental sector is changing and we all have to come to grips with that,” Professor Kath Hulse of the n Housing and Urban Research Institute at Swinburne University told Domain.
“[The Victorian government] is trying to connect two things which have been disconnected. One is residential tenancy laws and the other is housing policy – they’ve been separate worlds, really.
“We’re used to thinking about this in a terribly adversarial way. If people are going to be renting longer we need to get real about it.”