Speak now, owners, or waive your rights goodbye

How to reduce rental supply and increase rents in three easy steps. First, have the Federal Government bake negative gearing to a cinder and sandwich the ashes between a new capital gains framework that makes every dollar paid in rent far more valuable. Then, slater on a thick layer of tenancy law reform that further erodes owners’ fair rights. And there you have it – fewer rentals and higher prices.

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At arguably the worst possible time, the State Government is opening the Residential Tenancy Act 1997 for ‘modernisation’, which is translates to removing more fair rights from owners. As part of the consultation dance, they’re seeking feedback on a swathe of potential changes only months after the Liberals recently removed an owner’s right to decide whether they take on the extra risk of animals at their property after promising for years that they would not.

One of the options named up in the State Government’s discussion paper that would have a dramatic impact on an owner’s willingness to offer their property for rent is the removal of fixed-term leases. It is no surprise that most owners do not support this change as the practical unfairness and increased risk is obvious.

If fixed-term leases are abolished, an owner could no longer offer their property for 12 months or whatever period they decide, knowing that once that period expires that the property is back in their possession. Instead, once a lease starts, the owner is at the tenant’s mercy as they have an indefinite lease and the owner’s options for getting their property back are heavily restricted.

Another tired idea getting rehashed is rent capping, despite evidence showing that, while it might make some people feel empowered, overall, it increases rents and reduces mobility. The logic is here isn’t complex – if you remove someone’s ability to change the price of their product, they will set the price at the highest possible point the market will tolerate, knowing that one rental only needs one buyer.  

Also on the table is expanding a tenant’s ability to modify a property. This proposal raises an uncomfortable truth that cannot be ignored; owning and renting are two very different things. A tenant cannot expect to have the ability to do all that an owner can because, while it’s hard to hear, they do not own the property. 

Understandably, most owners strongly reject expanding a tenant’s right to modify a property without their consent. A tenant’s black bedroom, questionable wallpapering and dodgy tiling might be their dream, but it’s an expensive nightmare for the owner and promises to ‘make good’ often fail. The key here is communication. If a tenant wants to make changes, talk to the owner and get your agreement in writing.

Then there is adding more costs to an already expensive product through energy efficiency mandates. When rents are high and climbing and negative gearing is withdrawing, the worst thing you could do is add more regulation in the form of energy efficiency minimums. We need to accept reality; our housing stock is old, and most owners themselves don’t live in multi-star energy efficient homes. Instead of adding to the burden, the Government can offer carrots by reopening its Energy Saver Loan Scheme and promote it to owners.

On the flip side, there are concessions some owners do support, such as increased flexibility around ending tenancies when there is domestic violence supported by police or court documentation, and others are open to a standardised rental application form.  

When it comes to tenancy laws, what is fair for tenants and owners must be balanced. It is immoral and plain lazy to punish owners by removing their fair rights because all levels of government have failed to plan for population growth and to ensure there is the housing available to match.

Ultimately, the government must remember that residential tenancies are contracts, and the fundamental principles of contract formation should apply, including that each party should have the right to negotiate their agreement, including price and duration. This concept should not be foreign to a Liberal government which is meant to respect and uphold freedoms.

We can hear the socialist cries already. Good, greedy landlords, sell! Now let’s think that through. Many tenants can simply not afford to buy and must rent given the mismatch between earnings and property prices. Making rental ownership so unattractive that it pushes owners from the market is senseless. Trying to protect tenants by making rental ownership more unattractive only hurts those you are trying to protect more.

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