Property Sector in Political Crosshairs Again

September 27, 2024 Edward Dever

Rent controls, National Renters Protection Authority and negative gearing changes.

In the lead up to the 2024 Qld State election, Ch 9 News is reporting that the Qld Government is considering ACT style inflation-linked rent controls.

Sounds like a pre-election thought bubble. Any move towards greater rent controls in Qld runs contrary to the position of the Government's own Department of Housing, Local Government, Planning and Public Works

In May 2024, the Department stated that it believed forms of rent control are generally ineffective.

The ALP risks losing several seats to The Greens at the October election so it is not surprising that they may make election promises that seek to limit voter bleed to The Greens.

Meanwhile, The Greens want to implement a National Renters Protection Authority.

Costing $200m per annum and staffed by 1,000 public servants, the NRPA would investigate rental breaches as well as offering advocacy, advice and education to renters around Australia.

The NRPA would deal with tenancy disputes and enforce the minimum standards the Greens want, including rent freezes, ventilation, heating, cool and insulation standards. The NRPA is part of a wider $2.5b Greens Plan to convince the States to enact rent freezes.

How the NRPA would work in practice is unclear. There seems significant overlap with the role of State Government Departments.

Victoria, as an example, is planning to implement far reaching housing standards to include heating, cooling and insulation.

Qld's latest round of rental changes come into force on 30 September 2024. These include new standards for re-letting costs, methods for paying rent, timelines for utility bill payments, and supporting evidence for bond claims.

NSW is also moving towards tightening the rules for no-default evictions.

And just to top it off, media reports indicate that the Federal Government has asked Treasury to look at the implications of changing negative gearing rules.

Lots of political obfuscation peppered with some denials by Government members.

Similar to the Government's superannuation changes which targeted the higher end of superannuation balances, it wouldn't be surprising to see the Government target negative gearing changes, for example, at the 5% of landlords who own 6 plus properties.

Any uncertainty over rent controls and negative gearing just reinforces nervousness amongst investors at a time when Australia needs greater investment in rental housing.

Ch 9 News - Rent Controls

Report No. 7, 57th Parliament Housing, Big Build and Manufacturing Committee, May 2024

National Renters Protection Authority Plan

Negative Gearing Changes

September 2024

The content of this publication is intended to provide a general overview on matters which may be of interest. It is not intended to be comprehensive. It does not constitute advice in relation to particular circumstances nor does it constitute the provision of legal services, legal advice or financial product advice.

Gold Coast City Council Taxes Views

August 4, 2024 Edward Dever

In a move reminiscent of the window tax applied in England between 1696 and 1851 (as well as similar taxes in France and Scotland), Gold Coast City Council has introduced higher rates charges for owner occupied apartments on higher floors.

Dubbed the 'view tax', owner occupied apartments will be levied higher rates depending on the floor level.

Apartments above the 5th floor will be subject to a rates surcharge starting at 10-20% between floors 5-10 up to 40-50% for those above the 40th floor.

Council justifies the increased charges on the basis of charging owners fairly based on the effect that unit size and floor level has on a property’s value.

In simple terms, Council is implementing a wealth tax - taxing those residents it deems able to afford higher rates. This is similar to the window tax. It was designed to reflect a property owner's wealth as glass was apparently considered a luxury. It led to owners bricking up their windows to minimise the tax. Of course, as it is based on the floor level and not the view, Gold Coast residents will find it harder to avoid the rate increase.

Gold Coast high-rise apartment owners hit with 'view tax' as council raises rates

August 2024

United States Plans Nationwide Rent Controls - With A Catch

July 17, 2024 Edward Dever

US President Joe Biden has announced a plan ahead of the 2024 US Election to cap rent increases across the nation at five per cent per annum.

On 16 July 2024, the Biden-Harris Administration called on Congress to pass legislation giving corporate landlords a choice to either cap rent increases on existing units at five per cent or risk losing current valuable federal tax breaks.

The proposal would apply during 2024 and the following two years but would only apply to corporate landlords who own at least 50 units of housing stock. Over 20 million units of rental housing would be affected by the proposal. An exception would apply to new construction and substantial renovation or rehabilitation.

Failure to comply would see these landlords unable to take advantage of faster depreciation write-offs available to owners of rental housing.

It seems unlikely Congress will get on board with the rent control proposal, particularly in the run up to the 2024 Election in November. (As an aside, former President Trump's son-in-law Jared Kushner's somewhat controversial family group controls 20,000 multi-family apartments and would be caught by President Biden's proposal.)

The Australian Greens will no doubt pick up on this proposal. Their plans to date have not included a minimum rental housing ownership threshold before their controls kick in. Their plan also has no sunset date - two years of rent freezes followed by a maximum two per cent increase every two years thereafter. The Federal government has repeatedly distanced itself from the Greens proposal. The Queensland government has also shut the door on rent controls - for now.

President Biden Announces Major New Actions to Lower Housing Costs by Limiting Rent Increases and Building More Homes

July 2024

Queensland Government Shuts The Door On Rent Controls - For Now

May 20, 2024 Edward Dever

On 10 May 2024, the Housing, Big Build and Manufacturing Committee released its report on the Residential Tenancies and Rooming Accommodation and Other Legislation Amendment Bill 2024.

One of the more interesting matters in the Report is a statement that the Department of Housing, Local Government, Planning and Public Works believes forms of rent control are generally ineffective.

The Report (on page 20) states:

"the department noted that economic research has identified that rent price controls, such as restricting or limiting the amount rent can be increased by, are generally ineffective at improving rental affordability and can have other negative effects, such as reducing the quality of rental stock and reducing renter mobility. They noted that the best way to address rental affordability is by increasing housing supply."

The Greens continue to press the Federal Government to introduce a form of rent freeze followed by rent caps.

As recent as 16 May, Greens MP Max Chandler-Mather, commenting on Twitter/X about PM Albanese's move to evict his tenant ahead of a likely property sale, stated that "[i]f the Prime Minister wanted to treat renters fairly, he would coordinate a freeze and cap on rent increases". The Greens are unlikely to drop rent controls as part of their platform ahead of the next Federal election.

The Committee concluded that the Government's Bill should be passed although it noted a number of areas where the Department needed to do more homework.

These include:

- the time frame for the retention of tenant records

- wider consultation on a portable bond scheme

- the documentation needed for utility bills payable by tenants

- the prohibition of accepting more than four weeks rent in advance, and

- disclosure in leases of the last rent increase as it applies to newly purchased properties.

The Bill, when enacted, will restrict residential property rent increases to once every 12 months and apply the restriction to the property rather than the lease.

It will also legislate that a landlord cannot act unreasonably in refusing a tenant’s request to attach a fixture or make structural changes to the premises either relating to safety, security and accessibility, or for personalisation purposes. Tenants may seek recourse through QCAT if denied approval. This also applies to modifications related to strata common property with strict timeframes for strata approval.

Over time, we will see if some of these provisions act as a further disincentive to residential rental property investment in Queensland.

UPDATE - The Residential Tenancies and Rooming Accommodation and Other Legislation Amendment Bill 2024 was passed by Parliament on 23 May 2024.

Report No. 7, 57th Parliament Housing, Big Build and Manufacturing Committee May 2024

May 2024

Queensland Government Shelves Plans To Amend Property Valuation Laws

May 9, 2024 Edward Dever

Last week, the Queensland Government shelved proposed land valuation amendments under the Land Valuation Amendment Bill 2023.

Resources Minister Scott Stewart pulled the proposed amendments for further consultation and revision, a process which should push out any progress beyond the October 2024 State election. It is not clear whether a future LNP Government (if elected) will proceed with the amendments.

Much of the stakeholder feedback on the Bill centred on the introduction of binding Valuer-General guidelines for valuations with concern raised that there would be no prior consultation and future guidelines could enhance property values resulting in higher land taxes and Council rates.

Also of concern was the proposal to remove the $750,000 threshold which requires a person objecting to a valuation to advise the Valuer-General of the valuation sought. This would require all landowners to state the valuation sought in their objection and would increase the costs of lodging an objection.

Changes to the definition of “unencumbered” were also considered controversial, resulting in uncertainty over how land is to be valued.

Qld land valuation laws shelved by government following input from property industry

May 2024

The Lithium-ion Battery Condundrum Facing Landlords

January 12, 2024 Edward Dever

The increased use of lithium-ion powered devices such as e-scooters presents a conundrum for landlords and strata committees.

A rise in the number of lithium-ion linked fires in homes is occurring amid a vacuum of government standards for dealing with these risks.

"Research by the organisation EV Fire Safe found that if a battery goes into thermal runaway inside a home, there is a 64% chance of being injured and requiring hospitalisation, and a 7.8% chance of death."

While there are some fire extinguishers available to suppress lithium-ion fires, in the absence of government standards, some fire safety consultants are currently reluctant to make specific recommendations in relation to lithium-ion fires.

In the linked article, Professor Christensen advises that lithium-ion devices should only be charged outside.

The Owners Corporation Network, an independent body representing apartment owners, has now made a similar recommendation.

But how practical is this suggestion in the context of apartment living? And are landlords and strata committees really aware of the number of devices currently used in their properties? (OCN has suggested that strata management maintain e-scooter and e-bike registers.)

Given the number of devices in properties across Australia, the risk seems relatively small at present but experts warn the risk increases where people use cheaper mismatched chargers or engage in unsafe charging practices.

Fire blankets commonly available are inadequate for dealing with lithium-ion related fires. Fire blankets capable of suppressing lithium-ion fires are coming to market but are generally not of an appropriate size or realistically priced for home use. Over time, this should change.

The insurance sector appears silent on the issue. But there is a risk of fires from lithium-ion batteries forming an exclusion from future policy coverage or at least a reluctance on the part of insurance companies to honour coverage if (as yet undefined) appropriate charging practices are not followed.

In the meantime, landlords and strata committees await the development of appropriate government standards for charging lithium-ion devices and dealing with related fires.

The ‘ticking time bombs’ inside Aussie homes sparking a rising number of fires

Owners Corporation Network proposes new e-bike, e-scooter rules

January 2024

Greens Target Brisbane LGA Rent Freeze

November 8, 2023 Edward Dever

To date, The Greens have tried and failed twice to implement a rent freeze in Queensland and once at the Federal level. In this latest attempt, 2024 Greens Lord Mayoral candidate Jonathan Sriranganathan plans to implement a two-year rent freeze on residential properties in the Brisbane local government area, backdated to January 2023. This assumes The Greens control Brisbane City Council after the election in March 2024.

To implement their plan, The Greens propose to control rents via penalty rates applied to any investor who raises rents above January 2023 levels. Rental properties where rent has increased would be "reclassified into the new ‘Uncapped rental home’ rating category."

The penalty is an additional 650% of the current rates bill so the total rates bill would be 750% higher following The Greens' market intervention. Using The Greens' example of a unit rented for $750 per week with a rates bill of $1,500 per year, any rent increase would result in an extra rates bill of $9,750, with a total rates bill of $11,250.

Any landlord who has increased rent with the tenant's agreement between January 2023 and the Council election in March 2024 would be penalised, whether that rent increase was less than 1% or 30%.

The Greens' plan is to apply the rent freeze to the property rather than the tenancy and to use median suburb rents for any new build or substantial renovation.

Penalty rates are claimed to be revenue neutral as the Greens contend that landlords will not put up rents. However this ignores the fact that many landlords will have raised rents over the 15 month period prior to the 2024 Council election.

Landlords in Brisbane (and elsewhere in Queensland) are currently subject to an effective 12 month rent freeze following the State Government's amendments to the Residential Tenancies and Rooming Accommodation Act preventing landlords from increasing the rent within a 12 month period.

Rent controls in other jurisdictions (such as Ireland and San Francisco) have resulted in reduced residential rental supply as landlords change use to avoid the controls or sell out of the market. It also acts as a disincentive for new investment builds. (Note that The Greens plan to increase rates for Airbnb-style properties by 1,000%.)

Any developer who views The Greens as potentially controlling Brisbane City Council post-March 2024 is likely to look more favourable at projects outside the Brisbane LGA (e.g. Redcliffe, Logan, Ipswich) rather than risk the imposition of a two-year rent freeze on their projects.

Similar to the Queensland government's proposed (then scrapped) land tax changes, the prospect of a rent freeze throughout Brisbane is likely to alter investors' decisions well ahead of any actual imposition of a freeze.

Lord Mayoral candidate Jonathan Sriranganathan proposes two-year rent freeze in Brisbane

Freeze Rents in Brisbane: No more unlimited rent increases

November 2023

Historical Flaws in Malaysia's Torrens System?

October 24, 2023 Edward Dever

There are plenty of issues in Australia with poorly completed strata residential apartments. Owners are left saddled with huge defect repair bills after the developer has been liquidated or otherwise managed to avoid liability.

But imagine losing access to your apartment because the developer retained ownership of the common property and subsequently sold it to a third party.

That is the case in Malaysia with the saga of Sea Park Apartments where, due to the laws at the time, the developer was able to separately strata title six blocks of apartments while retaining ownership of the common area land, including the car parks and essential services such as sewerage and fire hydrants.

Crucial building plans which may have assisted apartment owners in their court battle mysteriously disappeared from the local Council and the Land Office.

The Sea Park Apartments saga has gone on for almost 20 years. In hindsight, the strata owners probably should have closed the transaction at the time the developer offered to sell the common areas to them in order to make the best of a bad situation. However, as the strata owners always thought they collectively owned the common areas (and only received their freehold titles a few years prior to the offer), one could understand any reluctance. Apparently, the main issue was the vehicle to be used for common property ownership.

For residents who live there, some for over 40 years, there seems no end in sight for this dispute.

The Apartments With No Entrance

October 2023

Ineffective Strata Minority Cram Down Rule Creates Problems

October 4, 2023 Edward Dever

The Queensland Government may wish to cast an eye towards NSW before finalising amendments to its strata legislation which will permit 75% of owners to terminate uneconomic community title schemes.

On 24 August 2023, the Body Corporate and Community Management and Other Legislation Amendment Bill 2023 was introduced into the Queensland Parliament. The Bill was referred to the Legal Affairs and Safety Committee for detailed consideration. The closing date for written submissions was a mere nine days later on 2 September. The Qld Law Society raised concerns in their submission regarding the short timeframe.

Under the proposed Queensland amendments, minority unit owners may be forced to sell their units in circumstances where there are economic reasons for terminating the scheme supported by 75% of the scheme owners.

This reform was described as "deliver[ing] a key action of the 2022 Queensland Housing Summit by reforming the BCCM Act to allow for termination of uneconomic community titles schemes to facilitate renewal and redevelopment."

The Bill's Explanatory Notes specifically refer to "having regard to the New South Wales approach."

The only problem is that terminating schemes in NSW has not been that simple with only a handful of schemes apparently managing to negotiate a sale. Developers are now saying they "aren't interested in buying older buildings unless there’s 100 per cent agreement from owners to sell."

Designed to protect the elderly owner from unscrupulous developers, at least in one instance in NSW, the reverse seems to have occurred - protecting a rival developer from the building's elderly owners. The NSW amendments have not prevented strategic blocking attempts by competing developers.

The NSW Minister for Better Regulation and Fair Trading has vowed to fix the glitches. “The NSW government is committed to updating and reforming this system, including fixing the loopholes that have made it out of date."

Perhaps the Queensland Government will revisit its amendments before passing a Bill with baked-in glitches, at least based on the NSW experience.

The Legal Affairs and Safety Committee is due to hand down its Report on 6 October.

This law was meant to solve Sydney’s housing crisis. It’s left owners devastated

Legal Affairs And Safety Committee - Body Corporate and Community Management and Other Legislation Amendment Bill 2023

October 2023

Minimum Housing Standards Commence in Queensland

September 20, 2023 Edward Dever

From 1 September 2023, any new residential lease in Queensland or lease renewal is subject to the new minimum housing standards requirements. All remaining leases will be subject to the requirements from 1 September 2024.

Some of the requirements such as adequate plumbing and drainage, connected water supply and a functioning toilet seem obvious to most landlords.

However, these requirements, together with items such as functioning latches or locks on external doors and windows, effectively place an onus on the agent and owner to confirm compliance prior to any new lease or lease renewal.

There are already examples of agents advising owners they will not lease properties that, in their view, do not comply with the minimum housing standards.

Tenants have a variety of remedies where a residential rental property does not meet the minimum housing standards.

These include ending the tenancy within seven days of occupying the property, requesting emergency repairs, or applying to QCAT for a repair or termination order.

Minimum housing standards fact sheet – general tenancies

September 2023