CONFRONTING THE PROBLEMS FACED BY MILLIONS OF HOUSEHOLDS

In Australia, 2.9 million households out of a total housing stock of 9.8 million dwellings are renters. That's 31% of Australian households, a significant number. Governments have worked hard to get us to own our homes, but they’ve largely ignored people who don’t. Because of this preference, almost anyone who rents will tell you they feel exposed. Very little is in place to protect renters from high rental increases, poor or no maintenance, the threat of eviction, and so forth. With interest rates on the rise, there's anecdotal evidence that renters are given two letters from their landlord — one is a rent increase, and the other is an eviction notice. The renter is given no choice other than to pick one.

The Good Party wants renters' rights firmly on the national housing affordability agenda. One option would be the promotion of five-year leases. What could be in it for the landlord offering such a long-term lease?

• no land tax on that property
• the tenant pays for all repairs and maintenance
• annual rent increases tied to whichever is the lessor, the CPI or WPI (National Wage Price Index)
• guaranteed uninterrupted income on the property
• a bond of two month’s rent

What’s the advantage for a renter on a five-year lease? Security. The property owner would only be able to break the lease subject to negotiation (with the tenant). The tenant, however, would be permitted to end the rental agreement with, say, three months’ notice. There would have to be a penalty for this to discourage it — for example, the bond goes to the homeowner.

Another advantage would be predictable rent increases, which could be offset against any agreed improvements to the property undertaken by the renter.

As for the bond, it’s about time the states paid a fair interest on this money, which they can often hold onto for years. Queensland, Victoria, Western Australia, NT, ACT and Tasmania, for example, pay no interest at all on this money. In the remaining states, the interest paid is substantially below market rates.

What’s the advantage for a renter on a five-year lease? Security. The property owner would only be able to break the lease subject to negotiation (with the tenant). The tenant, however, would be permitted to end the rental agreement with, say, three months’ notice. There would have to be a penalty for this to discourage it — for example, the bond goes to the homeowner

Getting fair interest paid on your rental bond

As for the bond, it’s about time the states paid a fair interest on this money, which they can often hold onto for years. State government bond boards in Queensland, Victoria, Western Australia, NT, ACT and Tasmania, for example, pay no interest on this money. In the other states, the interest paid is substantially below market rates. The Good Party will advocate for the interest earned on rental bonds held by state governments to be paid to bondholders when the bond is refunded. 

Increasing the housing supply

We need more houses generally and more affordable houses specifically. And that means we need more investment in housing. Given that successive governments have shown little stomach for tackling the levers that make housing an investment rather than a place to live, increasing the supply of homes generally will reduce the pressure on housing and, hence, rents.

There are two big pots of money that could build the number of homes required to end the crisis. One is the Australian Future Fund. The other is Australia's superannuation industry.

The Future Fund is Australia's sovereign wealth fund. It was created back in 2006 to "benefit future generations of Australians" and is today the nation's "single largest financial asset." There is now around $200 billion in the Fund. Why can't some of that be tapped to see an end to the crisis? Australian superannuation funds manage an Everest of money, a mountain that dwarfs the Future Fund's assets with over $3.5 trillion under management. But unlocking this vast potential will require the federal government to work with the states to adjust the way land tax is calculated and make investing in housing a more attractive proposition.

Currently, it's assessed on the combined value of the properties owned by a landlord, the rates charged progressively, and with healthy tax breaks. This works for an investor with one, two, and perhaps three properties but would heavily penalise a fund that owned a large portfolio of properties (100 properties owned by 100 individual investors attracts far less land tax than 100 properties owned by a single investor).

A super fund with many homes in a portfolio would be more willing to offer longer leases than a "mum and dad" investor while being more mindful of jumping on maintenance issues to maintain the value of the investment on behalf of its fund members. And, of course, being known as a “good landlord” would do wonders for the fund’s reputation in a market where many super funds are investing in affordable housing. There is infinitely more space than land

The Future Fund is Australia's sovereign wealth fund. It was created back in 2006 to "benefit future generations of Australians" and is today the nation's "single largest financial asset." There is now around $200 billion in the Fund. Why can't some of that be tapped to see an end to the crisis?

Land availability, or lack of it, is often cited as one of the reasons for soaring house prices. This is especially true in Sydney, which is constrained by natural borders. But, with a little lateral thinking, there's a potential solution.

We have to stop thinking about land and start thinking about space. Changing one's perspective makes many of the problems disappear. To begin with, there is the space over railway lines, literally hundreds of kilometres of it. Plenty of other cities around the world, such as Tokyo, New York and Calgary, utilise it to help solve their housing needs. We should do the same.

And while we're thinking creatively about unused space, there is also almost limitless space available beneath our cities and, in particular, the suburbs. The same equipment used to bore those vast tunnels for railroads and expressways could be employed to create the space required for under-city development. The technology required to turn this kind of space into desirable, liveable housing and community spaces has long been available.

These spaces could track existing transport links, eliminating the need to build more. They could also be built where people want to live rather than further and further away from retail and recreational hubs. So, again, why not look at utilising it?

State governments could release these creative above-and-below-city spaces, preferencing investors such as super funds seeking to build a mix of affordable rental, owner-occupied, and social housing. This could be made especially attractive to investors and builders by allowing the sale of half of the development to individuals. The other half of the development would be offered to institutional investors like super funds (assuming suitable adjustments have been made to the land tax regime - see above) on the proviso that it’s reserved for a mix of affordable rental, owner-occupied, and public housing.

Adding the weight of law to a landlord's "obligations"

As described by state departments like NSW Fair Trading, landlords have "obligations" and "responsibilities." However, without legal protections for tenants, there's no meaningful pressure on landlords to provide a property to rent that's fit to live in. Or perhaps the residence started its rental life in reasonable shape, but after a number of years of use and no repairs undertaken, the abode has become less than liveable.

There have to be legal consequences for recalcitrant landlords who refuse or stall to provide housing that's habitable by reasonable standards. Perhaps it should be a percentage of the rent paid by the tenant reimbursed and/or the property removed by law from the rental market until repairs are completed. 

All too often there are reports in the media about landlords who refuse to undertake reasonable repairs, preferring to end the lease, often on spurious grounds, because the rental crisis means there'll always be someone who'll lease the property no matter what its condition. And often for more money simply out of desperation. Enough! There have to be legal consequences for recalcitrant landlords who refuse or stall to provide housing that's habitable by reasonable standards. Perhaps it should be a percentage of the rent paid by the tenant reimbursed and/or the property removed by law from the rental market until repairs are completed. 

While these are matters for state governments, the rental crisis is national, and it deserves a whole-of-nation response. The Good Party would propose convening the national cabinet over this issue.

A Rental Ombudsman

What is clear is that there needs to be a National Rental Ombudsman who can adjudicate the issues between tenants and landlords. With the pressure on rental accommodation availability at breaking point and tempers flaring, the appointment of an ombudsman at the national level is well past due. 

The Vacant Residential Property Tax 

Also contained in the 2021 Census was the startling news that fully 10% of all dwellings in Australia are unoccupied. That's 1,043,776 homes. Meanwhile, the national rental vacancy rate is at an alarming low of just 1%. Perhaps there is a solution to the housing stock shortage in plain sight — taxing homes left vacant or untenanted for more than six months of the year. The purpose of such a tax would be to encourage owners to make their property available for purchase or rent, thereby taking some pressure off the housing and rental markets.^[5]

The imposition of a tax, especially a new tax, is never welcomed. Still, The Good Party would call for a significant vacant dwelling tax (VRPT) to be imposed nationally. Any revenue generated by a tax like this would then go toward underwriting further initiatives proven to alleviate homelessness.

Together with legal obligations for landlords, a Rental Ombudsman, and the establishment of a VRPT, renters would be far less exposed to the uncertainties of the market.