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Greens push for better standards in rental properties

By johnboy - 6 April 2011 23

Greens Energy Spokesperson Shane Rattenbury has announced that he’s tabling an exposure draft of a Bill he plans to introduce to force landlords to offer better minimum standards of security, energy, and water efficiency:

“Canberra rents are very high, due to high demand, but some people don’t get what they pay for, and are stung with huge energy bills after winter because their house is so poorly insulated,” Mr Rattenbury said.

“Most landlords do the right thing, but some rental properties are substandard in terms of energy or water efficiency, or basic security, and tenants are often the ones left to foot the bill.“Landlords will be able to take advantage of government programs to assist with the cost of increasing the energy efficiency of their properties.

“The three key standards addressed by the bill are:

— Energy efficiency – EER 2 by January 2013, and EER 3 by January 2015. These are not high EERs, but changing a house from and EER of 0 to 3 can halve your electricity bill
— Water efficiency – can be met by fitting low flow shower heads and taps, and installing a dual flush toilet
— Security – the provision of deadlocks on external doors as well as locks on other external openings

If this gets up we can be certain sure this is going to see rents shooting up, and leases terminated to allow for higher rents to be imposed.

Is that short term pain worth the long term gain?

UPDATE: The exposure draft is now available online.

What’s Your opinion?


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23 Responses to
Greens push for better standards in rental properties
georgesgenitals 7:24 pm 06 Apr 11

arescarti42 said :

georgesgenitals said :

I also disagree with urchin’s post, in that I, as an investor, own a number of properties in Canberra purely for the reliable long term yield. I know others who do the same. That said, we’ve had the debate before, so it won’t be worth rehashing it all again.

The thing you have to remember GG is that although there are people like you out there who do take a positively geared, yield based investment focus, you are a minority in Australia. In the 07-08 period, a little over 70% of property investors were claiming rental losses. Those are all people who are pissing their money down the drain in the hope that future capital gains will make up for it.

I personally don’t think much of the Green’s plan, they’d be better off investigating how to make the rental market function better. If renters can tell the difference between an energy efficient house and a energy inefficient house, then people should be able to chose whether they want to pay more to rent an efficient house whilst paying less for heating, or rent an inefficient house for less and pay more for heating.

That’s a fair point.

I-filed 7:19 pm 06 Apr 11

I’m reminded of the Seinfeld episode where a black market in proper shower heads suddenly burgeoned after a similar “landlord water efficiency” exercise …

arescarti42 5:20 pm 06 Apr 11

georgesgenitals said :

I also disagree with urchin’s post, in that I, as an investor, own a number of properties in Canberra purely for the reliable long term yield. I know others who do the same. That said, we’ve had the debate before, so it won’t be worth rehashing it all again.

The thing you have to remember GG is that although there are people like you out there who do take a positively geared, yield based investment focus, you are a minority in Australia. In the 07-08 period, a little over 70% of property investors were claiming rental losses. Those are all people who are pissing their money down the drain in the hope that future capital gains will make up for it.

I personally don’t think much of the Green’s plan, they’d be better off investigating how to make the rental market function better. If renters can tell the difference between an energy efficient house and a energy inefficient house, then people should be able to chose whether they want to pay more to rent an efficient house whilst paying less for heating, or rent an inefficient house for less and pay more for heating.

Grrrr 4:24 pm 06 Apr 11

urchin said :

if people think they are just going to give their tenants 4 weeks notice and give them the boot they need to reread the RTA.

Why not? If the lease has reverted to periodical (or was always so) and the owners can substantiate a claim that they, their family or friends intend to move in, it’s 4 weeks.

From the RTA/standard tenancy agreement:

96. (1) Where there is a periodic tenancy, the lessor may serve on the tenant a notice to vacate
for the following periods on the following grounds:
(a)notice of 4 weeks where a lessor or a lessor’s immediate relative intends to reside in the premises;
(b)notice of 4 weeks where a person not being an immediate relative who has a close family or personal relationship with the lessor and who has a reasonable expectation arising out of that relationship that the lessor would provide accommodation for that person intends to reside in the premises;

georgesgenitals said :

The issue is that this legislation gives landlords the excuse they need to issue the 12 weeks notice, because it provides a great opportunity to do other works at the same time.

But landlords don’t need an excuse. Anytime they feel like it, they can claim they’re about to renovate/repair and issue the 12 weeks notice.

(d)notice of 12 weeks where lessor has a bona fide intention to reconstruct, renovate or make major repairs to the premises which activities cannot reasonably be carried out with the tenant in residence.

georgesgenitals 3:51 pm 06 Apr 11

The market will set the rents, regardless of EER, condition, whatever. These things contribute to desirability of a given property, but ultimately it’s worth what someone will pay.

The HUGE problem is that people forget that ‘market rent’ is not what many people pay. If you’ve been renting a property for more than 2 years, you probably aren’t paying market rent. This, in itself, isn’t the problem. The problem is that when everyone moves house to give landlords the opportunity to do work to rectify (and improve) their properties, they all get re-let at ‘market rent’, meaning a shedload of people pay a lot more money than they were.

dtc 3:41 pm 06 Apr 11

Does the ‘no rent increase’ assume that, at the moment, low EER houses rent for about the same as higher EER houses – thus, if you increase the low EER it doesnt make it worth more on the rental market?

But presumably most low EER houses are older, more run down etc; therefore they are likely to be cheaper than a comparably sized/located newer/renovated house which will generally be the ones that happen to have higher EERs.

I guess what I am saying is that the lower end of the rental market will have a higher minimum because all houses will now be of a higher standard.

Its not necessarily that cheap to change a house from EER 0 to EER 3. For example, if the house is fibro or monocrete; if it is not facing north etc. Its not just a matter of shoving in some batts or putting in thick curtains.

beejay76 3:35 pm 06 Apr 11

Slumlord said :

Your comments reflect the typical entitlement mentality of tenants. If you want a house with nice paintwork, work harder and buy yourself one.

Actually, there are two things wrong with your statement. Firstly, most of these sorts of things didn’t affect my use of the property. I brought them to the owner’s attention simply because they were things that decreased the value of *their* property. If they’re too stupid to maintain their investment, it’s not my problem. I informed them out of politeness.

Secondly, I have bought a house. I rented for many years before I did, from 17 until 34. Don’t assume you know who I am. It just makes you look like a prat.

georgesgenitals 2:59 pm 06 Apr 11

urchin said :

well it’s not like it stands a chance of passing anyway… apparently people are only interested in green initiatives that give free money to the middle and upper classes. (solar rebate etc.). Anything that might actually cost money is apparently not worth the bother. especially if the cost comes from the landlords. i don’t doubt that people will TRY to raise the rent. whether or not they will actually be able to get it is a different story. just because it costs a LL an extra $20 a week to maintain the s***box they are renting it out doesn’t mean people are willing to pay an extra $20/week to rent it.

True the landlord can end the lease–with 26 weeks notice or 12 weeks notice if the landlord plans on making renovations/repairs that cannot reasonably be undertaken with someone living there. but if people think they are just going to give their tenants 4 weeks notice and give them the boot they need to reread the RTA.

The issue is that this legislation gives landlords the excuse they need to issue the 12 weeks notice, because it provides a great opportunity to do other works at the same time. Because of the 1.2 x CPI rule, many tenants (including some of mine) are paying below market rent. When the property is finished renovations, it goes back to market at increased rent. This means that for a lot of people there will be a game of musical chairs, with everyone swapping houses and paying a lot more in rent. This is not a good thing for tenants.

Personally, I don’t mind having tenants paying a bit below market, because I have good ones who look after the properties. In return, I make sure anything that needs fixing gets fixed quickly, so it’s a win/win. But if I have to do a bunch of work anyway, why would I not use the opportunity to do my ten yearly paint / new carpet / new curtains / freshen the wet areas, etc? It has to get done sometime, so when you’re doing other works is the ideal time.

I think there will be some far reaching consequences to this. Unfortunately there is no easy solution.

urchin 2:42 pm 06 Apr 11

well it’s not like it stands a chance of passing anyway… apparently people are only interested in green initiatives that give free money to the middle and upper classes. (solar rebate etc.). Anything that might actually cost money is apparently not worth the bother. especially if the cost comes from the landlords. i don’t doubt that people will TRY to raise the rent. whether or not they will actually be able to get it is a different story. just because it costs a LL an extra $20 a week to maintain the s***box they are renting it out doesn’t mean people are willing to pay an extra $20/week to rent it.

True the landlord can end the lease–with 26 weeks notice or 12 weeks notice if the landlord plans on making renovations/repairs that cannot reasonably be undertaken with someone living there. but if people think they are just going to give their tenants 4 weeks notice and give them the boot they need to reread the RTA.

Slumlord 2:20 pm 06 Apr 11

beejay76 said :

urchin said :

“If this gets up we can be certain sure this is going to see rents shooting up, and leases terminated to allow for higher rents to be imposed.”

Landlords already typically raise their rents by the maximum allowed each year (1.2X the increase in CPI for the period in question–if your landlord tries to raise rent more than that without having significantly improved the property, fight it). Costs have little bearing on it. Did your rent go down when interest rates were slashed? Didn’t think so.

Leases cannot be legally terminated without cause. Even month-to-month leases cannot be terminated unless for a specific and valid reason (the landlord or his/her family is going to move in, there is going to be a major renovation that requires the tenant to move out, the building is going to be sold).

In any event property investment in canberra is not based on revenue streams. If people wanted a good revenue stream why would you settle for an investment that, if you are lucky, will provide you with 4% gross return on your investment (before repairs, taxes, insurance, property management, interest paid on the 500k mortgage, etc., etc..) . You can get 6.5% in a deposit account and have immediate access to the funds whenever you need it. If revenue was the goal everyone would sell their houses now and put the funds in to TDs.

The “investors” are in it for the capital gains, not the revenue. 5k is a drop in the bucket considering how much money they are pouring down the negative gearing drain. Making housing a less friendly vehicle for financial speculation is a laudable goal, I think. Speculate on tulips instead–they aren’t a basic necessity for life.

As far as this making housing more scarce–that’s a red herring if ever there was one. The percentage of rental properties that are new builds is miniscule. Most property investors do nothing to increase supply nor do they do anything to improve the quality of the dwelling.

If speculative investors left the market all we would see is a substantial drop in house prices. This, in turn, would enable people who want to buy to buy and it would increase the rental yield for property investors, making it a viable investment opportunity without having to rely on such rorts as negative gearing.

I agree, except for one thing. Most landlords seem to be too thick to understand that their investment return is in the capital gain of the property. This is evidenced by the fact that most won’t undertake minor repairs that will prevent future major repairs. One of my landlords, for example wouldn’t repair a holed gutter that was allowing water into the eave. Dick. Also, most don’t do any basic maintenance whatsoever. My most recent landlord wouldn’t paint the outside of the house leaving it with increasingly peeling paint and the “Cuban” look. I could go on forever. These actions are pretty basic prerequisites for maximising the capital gain of a property. Every landlord I’ve every rented with (and that’s quite a few) think that maximising rent and minimising outlay are the way to make money. Bunch of muppets.

So all-in-all, yes: it will increase rents.

Your comments reflect the typical entitlement mentality of tenants. If you want a house with nice paintwork, work harder and buy yourself one.

Sean 2:19 pm 06 Apr 11

Some decent energy efficiency standards would reduce power bills for tenants, actually offsetting some of the rapidly rising rents we already face.

I’ve lived in some shockers with seemingly no insulation at all, been forced to rack up huge heating bills. I can only imagine how it is for older people on fixed incomes who spend a lot of time at home in winter.

georgesgenitals 1:27 pm 06 Apr 11

This will definitely increase rents.

I also disagree with urchin’s post, in that I, as an investor, own a number of properties in Canberra purely for the reliable long term yield. I know others who do the same. That said, we’ve had the debate before, so it won’t be worth rehashing it all again.

The unintended side effect of this legislation will be landlords who after years of increasing rent at only 1.2 x CPI will decide to request the tenants vacate the property so they can do the work required to comply with the new rules. This will also be a good time to renovate. Then, the property can go back onto the market for far higher rent. This will drive rents up markedly, especially in inner areas. The landlord then gets to depreciate the costs of the works against their tax, and tenants are hit with higher rents, as well as having to move.

Frankly, I think the idea is crazy. I recognise that there are landlords who don’t maintain properties well, and this won’t change any of that.

beejay76 12:59 pm 06 Apr 11

urchin said :

“If this gets up we can be certain sure this is going to see rents shooting up, and leases terminated to allow for higher rents to be imposed.”

Landlords already typically raise their rents by the maximum allowed each year (1.2X the increase in CPI for the period in question–if your landlord tries to raise rent more than that without having significantly improved the property, fight it). Costs have little bearing on it. Did your rent go down when interest rates were slashed? Didn’t think so.

Leases cannot be legally terminated without cause. Even month-to-month leases cannot be terminated unless for a specific and valid reason (the landlord or his/her family is going to move in, there is going to be a major renovation that requires the tenant to move out, the building is going to be sold).

In any event property investment in canberra is not based on revenue streams. If people wanted a good revenue stream why would you settle for an investment that, if you are lucky, will provide you with 4% gross return on your investment (before repairs, taxes, insurance, property management, interest paid on the 500k mortgage, etc., etc..) . You can get 6.5% in a deposit account and have immediate access to the funds whenever you need it. If revenue was the goal everyone would sell their houses now and put the funds in to TDs.

The “investors” are in it for the capital gains, not the revenue. 5k is a drop in the bucket considering how much money they are pouring down the negative gearing drain. Making housing a less friendly vehicle for financial speculation is a laudable goal, I think. Speculate on tulips instead–they aren’t a basic necessity for life.

As far as this making housing more scarce–that’s a red herring if ever there was one. The percentage of rental properties that are new builds is miniscule. Most property investors do nothing to increase supply nor do they do anything to improve the quality of the dwelling.

If speculative investors left the market all we would see is a substantial drop in house prices. This, in turn, would enable people who want to buy to buy and it would increase the rental yield for property investors, making it a viable investment opportunity without having to rely on such rorts as negative gearing.

I agree, except for one thing. Most landlords seem to be too thick to understand that their investment return is in the capital gain of the property. This is evidenced by the fact that most won’t undertake minor repairs that will prevent future major repairs. One of my landlords, for example wouldn’t repair a holed gutter that was allowing water into the eave. Dick. Also, most don’t do any basic maintenance whatsoever. My most recent landlord wouldn’t paint the outside of the house leaving it with increasingly peeling paint and the “Cuban” look. I could go on forever. These actions are pretty basic prerequisites for maximising the capital gain of a property. Every landlord I’ve every rented with (and that’s quite a few) think that maximising rent and minimising outlay are the way to make money. Bunch of muppets.

So all-in-all, yes: it will increase rents.

johnboy 12:49 pm 06 Apr 11

Lease comes to an end, decline to renew it and issue notice to vacate tow months beforehand.

Pretty simple.

Then make mandated improvements, and up the rent to cover the cost. Or just sell the property and let someone else worry about it.

urchin 12:46 pm 06 Apr 11

“If this gets up we can be certain sure this is going to see rents shooting up, and leases terminated to allow for higher rents to be imposed.”

Landlords already typically raise their rents by the maximum allowed each year (1.2X the increase in CPI for the period in question–if your landlord tries to raise rent more than that without having significantly improved the property, fight it). Costs have little bearing on it. Did your rent go down when interest rates were slashed? Didn’t think so.

Leases cannot be legally terminated without cause. Even month-to-month leases cannot be terminated unless for a specific and valid reason (the landlord or his/her family is going to move in, there is going to be a major renovation that requires the tenant to move out, the building is going to be sold).

In any event property investment in canberra is not based on revenue streams. If people wanted a good revenue stream why would you settle for an investment that, if you are lucky, will provide you with 4% gross return on your investment (before repairs, taxes, insurance, property management, interest paid on the 500k mortgage, etc., etc..) . You can get 6.5% in a deposit account and have immediate access to the funds whenever you need it. If revenue was the goal everyone would sell their houses now and put the funds in to TDs.

The “investors” are in it for the capital gains, not the revenue. 5k is a drop in the bucket considering how much money they are pouring down the negative gearing drain. Making housing a less friendly vehicle for financial speculation is a laudable goal, I think. Speculate on tulips instead–they aren’t a basic necessity for life.

As far as this making housing more scarce–that’s a red herring if ever there was one. The percentage of rental properties that are new builds is miniscule. Most property investors do nothing to increase supply nor do they do anything to improve the quality of the dwelling.

If speculative investors left the market all we would see is a substantial drop in house prices. This, in turn, would enable people who want to buy to buy and it would increase the rental yield for property investors, making it a viable investment opportunity without having to rely on such rorts as negative gearing.

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