By Laura Valenti, Founder and Managing Director of Solutions Property Management and REIQ Board Director.
As we perch on the cusp of a new decade, with the proposed rental reforms on the verge of being made law, we find ourselves caught in a struggle where the Queensland Government has pitted owner against tenant, tenant against agent.
For those who have been living under a rock for the past year, or you just don’t think these new laws will affect you, I urge you to take 5 minutes to read this article. If you own a rental property, if you are a tenant, if you work in the property industry, or if your children or grandchildren hope to become tenants one day – this will affect you.
I have worked in the property management industry for almost 20 years. I have represented thousands of property owners and overseen thousands of tenancies. I have encountered many arrogant owners who do not want to spend a cent on their properties, many lazy useless property managers who don’t understand their job, and many difficult tenants who have cost owners thousands of dollars in unpaid rent and damages.
But these are the minority of cases, as most people strive to do the right thing. Owners are incentivised to keep their properties in good repair to maintain their value, and to keep their tenants happy to encourage long stable tenancies. Tenants are motivated to take care of their homes and pay their rent to keep a roof over their heads. Central to the discussion is the fact that both parties need each other, and their unified goal is to maintain long stable tenancies.
This is what I call a working equilibrium – both sides are motivated to achieve the same goal.
So, what is the role of government in the private housing sector? On a fundamental level, it is to relieve the pressure on public housing by providing an economic environment where landlords are incentivised to offer safe and amenable rental accommodation to a large portion of the Queensland population (about one-third). This is accomplished through the creation of fair and balanced laws which outlines responsibilities and provides protection for both parties.
If you listen to owners and tenants, both parties will tell you that they believe the laws are not balanced and they don’t have rights. This is certainly a reason to look at the laws, to tweak them, to ensure they are in sync with modern values. At this point, it is worth mentioning two areas of reform that definitely have merit:
- The creation of minimum standards for rental housing. Most property managers will tell you that our biggest daily challenge is trying to convince owners to spend money on repairs, and we welcome laws that will clearly define an owner’s responsibility in maintaining their property. Our concern here is that we have not been provided with any details beyond a basic idealistic concept of what constitutes a ‘safe, amenable property’.
- More rights for domestic and family violence victims. This proposed law follows what many property managers have advised owners for many years – a victim of DFV should be allowed to end their lease agreement without penalty. No argument here.
The concern that most industry professionals hold is for the remaining three areas of reform, in that they go too far in eroding landlords’ rights, changing the environment so that the balance swings dramatically in the tenants’ favour.
- Removal of the owner’s right to refuse pets. This is an emotive issue, because most of us consider our pets as part of the family. The reality is that every tenancy and property is different, and in some cases, pets can cause extensive damage that cannot be covered by the bond money. The financial risk falls with the owner, and we believe that the owner should have the right to decide if animals should reside at their property.
- Removal of tenants’ requirement to seek approval for ‘minor modifications’. This will allow tenants to make any changes to the property that (a) can be reversed and (b) are not structural. Again, this has the potential to affect owners financially as they carry all the risk if something goes wrong.
- Removal of an owner’s right to not renew a tenancy at the end of a contract. This is the reform that most concerns us because it places full control of how a tenancy ends in one party’s hands. There has been a lot of talk from tenancy advocates about how this law will stop ‘retaliatory evictions’ but there are two indisputable facts that fly in the face of this argument. (a) Owners will do anything to keep good tenants at their properties for as long as possible; and (b) A change of tenancy costs the owner financially.
The average tenant will look at the three reforms above and feel satisfied that they will finally have more control over their tenancy. In fact, they will have a disproportionate amount of control over an asset for which they carry no financial risk. And herein lies the problem: If the property owner’s rights are diminished to the point where the investment ceases to be viable, two things will happen. Investors will sell off, and rents will climb to balance the extra costs for the ones who remain. Furthermore, less supply of rental properties will tighten vacancy rates which will push rental prices up even further.
But it doesn’t stop there. Removing the owners’ option to move tenants on at the end of the lease will push owners into a corner if the tenancy goes wrong. There will be more QCAT cases and more tenants evicted mid-lease as opposed to the current option which is to give 2 months’ notice and allow the tenants to leave quietly. And here’s the clincher – where will these evicted tenants now go? With a black mark against them and only weeks to find another property, these tenants will be placed in a very vulnerable position. They now pose an unacceptably high risk to owners who will have a diminished control once the tenants move into their property.
Finally, let’s think about the first-time renters. Our children. Our grandchildren. I hold seminars in schools across Brisbane teaching first-time renters how to break into the rental market, because it can be difficult to convince an owner to take a chance on a tenant with no rental history. Many times, an owner may be happy to ‘give them a go’ for a short-term lease and if everything goes well, renew the lease. Kind of like P-Plates for renters. So what will happen to first-time renters if the new laws come in? We will see greater scrutiny of rental applications and more being declined as the potential risk becomes too great for the owners.
In trying to make renting fairer for tenants, the government is removing basic rights from owners and upsetting the equilibrium. Unfortunately, this will only serve to back owners into a corner from where they will come out fighting in an act of self-preservation.
As property professionals, my colleagues and I are very concerned. Not for our jobs or our livelihood. After an initial workload to adjust our procedures, these new laws will actually benefit us in the long term through higher rents/higher fees and more owners requiring professional representation.
And we are not overly concerned for our owner clients – they will see how these new laws affect them and try to counteract extra costs by raising rents and/or saving on non-essential expenses such as upgrading fixtures. And if this doesn’t work, they will sell and invest in something else.
We are concerned about the end user – the tenants. With government housing in crisis, Queensland’s population growing, and a probable drop in property investment, where will the increasing number of tenants live?
I encourage everyone to read the Regulatory Impact Statement contained in the website link below, as this covers the proposed changes in more detail. Then please fill out the surveys and have your say.
Don’t be fooled by the sensationalist headlines raised by vocal groups with clear agendas and little substance or expertise. Listen to the facts and make an informed decision. The health of our rental property industry is under attack, and the losers will be the tenants.
The consultation closes on 28th December 2019.