Submitted to newspapers
I have written the following article and submitted to numerous newspapers, let's see if it is published:
With further announcements by the Victorian government proposing further changes to the residential rental market under the guise of fairer renting for renters it is time we took a serious look at what this governments policies have really done for and to the residential rental market.
Many factors of government policy affect the residential rental market and it is fair to say that the changes to these policy settings over the past five years or so have in no way been investor friendly. As a result we have seen many investors leaving the residential investment market which is now seeing a very weak property sales market develop in Victoria which will have an end result of reducing the total wealth Victorians. Whilst the government has been publicly stating that they want to see cheaper rents and more properties available for renters their policies are having the opposite effect, meaning less cash in renters pockets despite the government often stating these changes will mean more cash in the pockets of renters.
Government statistics indicate approximately 30% of Victorians households rent, and until now their policies have affected (negatively, I might add) renters and investors, combined a minority of voters, however we have now reached the point that these policies of higher taxes and increased compliance requirements these policy settings are now also negatively affecting the wealth of owner occupiers through decreasing prices due to increased supply of properties for sale.
So now in addition to the 30% that rent, the investors which are a mixture of owner occupiers and renters, yes that's right not all investors are owner occupiers, now the balance of Victorians being owner occupiers that do not also own investment properties are also being adversely affected in their hip pocket by the governments ill advised and poorly thought through attack on property investors.
So how has the Victorian government managed to adversely affect all Victorians, oh and don't think reduced property prices means renters are buying homes, no many renters do not have the required deposit funds to be able to purchase, so many of these sales will go to first home buyers moving out of home, and immigrants given Australia's high immigration intake. Back in 2018 the Victorian government passed the Residential Tenancies Amendment Act, this was promoted as providing over 130 renter friendly amendments, the reality is that many of these amendments, in fact probably the majority were inconsequential, changing the terminology to remove the terms landlords and tenants, yes the governing legislation's name remains unchanged as the Residential TENANCIES Act, incorporating aspects of anti discrimination legislation, aspects that were already covered by the Australian Consumer Law and other legislation, the 130 plus reforms when taking into account the inconsequential changes provides a realistic number that is vastly less than 130. However, the introduction of minimum standards, mandatory disclosures, compulsory electricity, gas and smoke alarm safety checks have all added substantial expense and red tape to owning and managing an investment property. Add to the cost and red tape, think about the loss of affordable properties due to properties purchased by developers which often do not meet the now minimum standards but previously would have been rented out for 1, 2, or more years whilst developers developed plans, applied for permits etc, why can't these properties be exempt from minimum standards so long as they are safe and leased at a % discount to market for a period of upto 3 years, this exemption provision would increase available rental stock of affordable properties. I don't think anyone disagrees that properties should be safe, but inflicting standards on investors that our not applied to the owner occupier market is both unfair and discriminatory.
Now let's look to the biggest issue with the amendments from the 2018 Act, these amendments took effect in the middle of COVID at the end of March 2021. I believe the biggest issue, the major concern with these amendments is Section 330A of the Residential Tenancies Act, more commonly referred to as the reasonable and proportionate test. As an example, previously if an owner wanted to move into their own property they would issue the tenant with a 60 day notice to vacate for the owner to move in, so long as the notice was valid and correctly identified the purpose of asking the tenant to vacate an owner was granted possession so they could live in their own property. Now using the same type of notice, the owner has to jump numerous hurdles to prove that they are more deserving of living in their own property that the renter. Another example is if you want to sell with vacant possession you need to jump various hurdles to prove why you should be allowed to market without a renter in the property, even Prime Minister Albanese said of his own investment property, it's my property and if I want to sell with vacant possession it is my right, a pity his state counterparts in the ALP don't understand that concept. These kind of difficulties getting vacant possession of your own property are huge contributors to the exodus of investors from the Victorian market. Many investors and property managers make the mistake of blaming VCAT for their inability to gain vacant possession of their properties, but it isn't VCAT to blame, they are doing their job and following the law, the law created by an out of control government that lacks the ability to think through the consequences of its decisions.
Now these changes were introduced to coincide with the rise of airBNB and other short term rental services so now we have additional taxes on these properties, many being properties that owners only want to rent out short term as they are holiday homes that they use on weekend and for a number of weeks throughout the year, the tax also then adds compliance costs so they choose to leave them vacant as government has made it to difficult to rent short term, what's next, the vacant properties tax applied when the property is vacant for what the government mandates as too long a period, more sell up as a result.
The government now has a taste for tax and control of the sector, so let's increase land tax. The result, more sell up, and less properties to rent.
Next step, let's place more requirements on investors, we are waiting on the final regulations but the draft amendments to regulations make further minimum standards, one of which as an example is mandatory cooling, many of these investors don't even have cooling in their own home, they can't afford it, but they will have to supply cooling to their investment properties. This will lead to more sales, removal of all gas is also an announcement made, still awaiting confirmation that it will eventuate, but as we all know this government doesn't consult, the decision in is made, we are just waiting for it to be formalised.
You must be thinking they can't attack investors and the property market anymore, Victoria already the worst performing state for property values is recent years, they can't attack the property market anymore. Well, you are wrong, the latest announcement will be for many that have been able to weather the storm, this will be the final straw. Loss of ability to remove a renter at the end of the fixed term tenancy for all but a few reasons, this has been a property owners only option to remove a renter that causes a difficult stressful relationship and now that is to go, but worse, restrictions on what can be recouped from a renter if they break their lease and leave mid fixed term, the government t is trashing the common law principles that have been in place for hundreds of years, the principal that an aggrieved party should be returned to the position they would otherwise have been in if the contract was not broken, what is the point of a fixed term lease. What will the affect of this be, fixed term leases will be a thing of the past. What benefit is their for a property owner to offer a fixed term, even initial leases will likely now only be periodic basis. Oh, you guessed it, more investors will flee the Victorian residential market.
For a government that claims to be pursuing a fairer rental market for renters they have pushed the balance so far out of balance that in the end the biggest sufferers will be the renters they claim to be helping.
One final thought, with all these investors fleeing the market will that result in less self funded retirees and therefore increased taxes to support more pensions. To the Victorian government think, think about what the hell you are doing, think about the consequences of your seriously flawed policies.
David Woolfall
Director
Woolfall & Stone