Rent Freeze Proposal Gets Frozen Out At National Cabinet

August 24, 2023 Edward Dever

Landlords could be forgiven for feeling a little confused, particularly those with investment properties in different States.

Last week, National Cabinet ruled out imposing any form of rent freeze as demanded by The Greens.

The Greens proposal involves a nationwide two year rent freeze followed by a maximum 2% increase every two years thereafter with no end date.

Then it gets a little confusing.

For example, in Queensland, the Greens Residential Tenancies and Rooming Accommodation (Rent Freeze) Amendment Bill provides for rents to be frozen as at 1 August 2022. Qld Parliament's Community Support and Services Committee has recommended against passing the Bill.

The Greens NSW Rent Freeze Bill specifies 30 June 2023 as the relevant date. The NSW Bill is silent on what happens after the initial two year rent freeze.

The Greens Federal Freeze on Rent and Rate Increases Bill stipulates that rents will be frozen as at 1 January 2023.

Instead of a nationwide rent freeze or rent caps, National Cabinet prefers a nationally consistent policy on renters’ rights including reasonable grounds for eviction, minimum rental standards, and limiting rent rises to once every 12 months.

Many of these outcomes have already been implemented in Queensland. New minimum housing standards rules come into effect in Queensland for new tenancies on 1 September 2023.

Meanwhile, The Greens are softening their stance, with their chief spokesperson on the issue moving away from a strict rent freeze to some form of rent cap.

Even The Greens-promoted polling from The Australia Institute shows only minority support for a rent freeze among voters from all parties, including The Greens.

Some landlords may take comfort from the statements following National Cabinet, thinking the rent freeze saga is at an end.

Others may continue to raise rents disproportionately on the basis that, while the issue may be dead, it is not buried and some form of rent freeze may still be forthcoming.

Meanwhile, The Greens will continue to campaign on the issue of rents and the Prime Minister is no closer to passing his housing bill.

Stories of rogue agents and massive rent increases at the current hearings of the Federal housing inquiry will keep the issue in the headlines.

From public holidays to rental freeze and housing supply, National Cabinet showed there are limits to Anthony Albanese's power

August 2023

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.

Pressure Builds For Further Residential Rental Reform

August 10, 2023 Edward Dever

National Cabinet meets in Brisbane on 16 August and one of the key topics will be residential rental reform.

The Greens continue to block the passage of the Government's housing reform package in the Senate and use social media and other media to demand a two year rent freeze throughout Australia.

As recently as 9 August, the Prime Minister explained that "the Commonwealth does not control rents" and "does not have the capacity, either, to abolish the private rental market." In his view, "the key to fixing up these issues is supply".

ABC News is of the view that, National Cabinet, as a whole, won't be agreeing to an Australia-wide rent freeze or cap with NSW Premier Chris Minns, for one, already ruling that out.

However, it seems possible that at least one State, perhaps Victoria, may embark on a rent freeze experiment. (In 2021, Qld Parliament rejected the Greens 2021 Rent Freeze Bill. Qld Parliament's Community Support and Services Committee has recommended against passing the Greens 2022 Rent Freeze Bill.)

Overseas experience in places such as Ireland and USA suggests rent controls distort residential rental housing supply as investors take steps to avoid rent control measures or exit the sector. Rent controls also act as a disincentive to new investment housing builds.

It is worth noting that ACT currently has a form of rent cap in place. Landlords are restricted to an increase equal to 110% of the percentage increase in CPI for rents. Approval can be sought from ACAT for an increase above that limit.

The Greens often use the Covid period as an example of rent freezes being enacted in places like Victoria. However, they fail to mention the various rates and land tax concessions which accompanied these measures.

With property expenses such as rates, land tax, insurance, strata levies and interest rates all increasing, often well above CPI, it is hard to see how the imposition of a two-year rent freeze (plus rent increases limited to 2% every two years thereafter, as demanded by The Greens) will not simply exacerbate the rental crisis.

The Greens claim that their policy includes funding an increase in public housing but it is not clear whether there will be sufficient funding available to deal with the current deficit in public housing and the likely deficit created by a reduction in new private rental housing.

Separately, the Federal Senate Community Affairs References Committee invites submissions on the worsening rental crisis in Australia. The deadline for submissions is 1 September 2023.

Inquiry - The Worsening Rental Crisis In Australia

Renters are an increasingly influential voting block

August 2023

Potential Reform to Qld's Annual Rent Increase Frequency Limit

July 17, 2023 Edward Dever

In April 2023, the Queensland Government amended the Residential Tenancies and Rooming Accommodation Act 2008, with effect from 1 July 2023, to prevent landlords increasing rent more than once in each 12 month period. The reform was enacted with little industry consultation and bypassed Parliamentary Committee review.

One apparent consequence of this reform has been the eviction of tenants by some landlords so that rents can be increased with greater frequency. This is despite no fault evictions being heavily restricted under previous reform amendments in October 2022.

The Government now proposes that the rent increase restriction apply to the property rather than the tenancy agreement.

It is not clear how widespread the practice of no fault evictions to circumvent the rent increase restriction has become and whether it is limited to the period up to 1 July 2023, the reform's effective date. As the Qld government points out, in other States, the rent increase restriction generally applies to leases not the property. This does not appear to be a widespread issue in those States.

The deadline for feedback on the latest rent reform proposal is 11 August 2023.

Discussion Paper - Ensuring the annual rent increase frequency limit is effective

July 2023

Stage 2 Rental Law Reform - Have Your Say

April 28, 2023 Edward Dever

The Queensland Government has released its Options Paper for 5 priority areas under the Stage 2 rental law reform.

The priorities identified for Stage 2 are:

- installing modifications

- making minor personalisation changes

- balancing privacy and access

- improving the rental bond process

- fairer fees and charges.

The deadline for feedback on the Options Paper is 29 May 2023.

Stage 2 rental law reform

Meanwhile, the Queensland Government has bypassed Parliamentary Committee review of its proposals to limit rent increases to once in each 12 month period, by apparently attaching amendments to the Local Government Electoral and Other Legislation (Expenditure Caps) Amendment Bill and passing the amendments on 18 April 2023.

Under the amendments to the Residential Tenancies and Rooming Accommodation Act 2008, with effect from 1 July 2023, any rent increase after that date will only be valid if it has been 12 months since the previous rent increase.

More frequent rent increases written into tenancy agreements prior to 1 July 2023 will not apply. The restriction applies to all new and existing tenancies.

Once in effect, rent may only be increased within a 12-month period if there is a new tenancy agreement and none of the tenants are the same as those on the previous agreement. The 12 month minimum period continues to apply regardless of a change to the rental property owner or manager.

Changes to rent increases to give Queenslanders who rent a fair go

April 2023

Queensland Government Opts For Low Impact Rental Reform

March 30, 2023 Edward Dever

In a move which brings Queensland in line with States such as Victoria and South Australia, Queensland landlords are to be limited to varying rent on a residential rental property once in each 12 month period.

The reforms are low impact as many landlords use 12 month leases and do not elect to include a rent increase provision in the lease. For any such landlords, the reforms should have no impact.

For landlords who have generally increased rents on a six monthly basis, they will now only be entitled to do so once per year. The reforms should therefore slow the rate of rent increases on these properties.

Limiting rent increases in this manner falls far short of the Greens' Rent Freeze Bill currently before Queensland Parliament. That Bill seeks to impose a two-year rent freeze on residential property rents throughout Queensland (with effect from 1 August 2022) followed by maximum rent increases of two per cent each two-year period thereafter. Queensland Parliament's Community Support and Services Committee has recommended against passing this Bill.

After floating the prospect of some form of rent cap, the Queensland Premier has walked back on this suggestion, preferring for the moment to merely restrict the timing of rent increases.

Further details of these changes are still to be released. It also remains to be seen if there will be any unintended consequences of the reforms.

Rent stabilisation to give Queenslanders who rent a fair go

March 2023

Queensland's Land Tax Changes Shelved - For Now

September 30, 2022 Edward Dever

In a backflip worthy of a competitor at the 2032 Olympic Games in Brisbane, Qld Premier Annastacia Palaszczuk has now ditched the 2023 land tax changes which sought to assess land tax based on land holdings throughout Australia.

Shelved at least for now but perhaps not forgotten.

Earlier this week, the Qld Treasurer Cameron Dick was adamant the changes would proceed.

"It is understood Ms Palaszczuk made the decision on Thursday night to shelve the scheme after speaking to her interstate counterparts."

NSW, NT and Tasmania were not particularly keen to co-operate.

The Qld Treasurer claimed the tax was to close a loophole used by people in Sydney to flip properties in Qld. However, this side stepped the fact that it applied equally to people in Qld who owned an interstate property. The Government's own example of "Lena" on its website related to a person who owned a property in Qld who then buys a property in Victoria.

The Qld Treasurer also claimed that investors use the tax-free thresholds in each State to avoid paying land tax. While this may be the case, he offered no details on how widespread this practice is.

He also stated that rents in Qld would not be affected by the land tax changes. It seems reasonable that any landlord impacted by the land tax changes would have tried to pass at least some of that cost onto their tenants. The timing of the land tax changes, in the midst of a rental crisis, was unfortunate.

The now scrapped changes would have resulted in a person already paying land tax in another State being assessed on that property again by the Qld government. No credit was to be given for the land tax already paid in that other State.

It would be interesting to see the Qld government's evidence that investors use the tax-free thresholds in each State to avoid paying land tax. I would be surprised if land tax avoidance is the primary broad-based reason for interstate investment property decisions. But, if that is the case, perhaps something can be (better) tailored to deal with it.

Qld shelves controversial land tax plan

September 2022

Qld's 2023 Land Tax Changes - Industry Response

September 9, 2022 Edward Dever

In the past week, much has been said and written about the Qld Government's 2023 land tax changes which will calculate land tax based on the total value of all Australian land (not just Qld land) held by a land owner.

Here is a sample:

Antonia Mercorella, CEO, REIQ - “It is irreconcilable that the Treasury expects to legitimately raise tax on the basis of value of property held outside of Queensland for the purpose of funding infrastructure within Queensland,”

Leisa Rafter, Chair of the Tax Institute’s Queensland committee - “The changes to land tax are likely to increase the compliance costs for taxpayers as well as the administration costs for the Queensland revenue office – there is a potential for the combined compliance and administrative costs to outweigh the revenue collected.”

Hayden Groves, President, Real Estate Institute of Australia - “It’s a dangerous move and if other states see Queensland pulling in revenue from around the country they could follow it. It has never been done before and for good reason.”

"The REIQ has called for repeal of the ‘illogical’ new land tax regime, while the Tax Institute has also warned that the ‘increase in compliance costs may disproportionately impact individual and smaller taxpayers, especially those who reside in other states and now find themselves liable to land tax in Queensland’.”

Qld Parliament resumes next week with the State Opposition calling on the Government to release its modelling on the new tax. The Government is under further pressure from the State Opposition and the Murdoch media to hold an emergency housing crisis summit.

Queensland’s property levy scheme could backfire

September 2022

Will Qld's 2023 Land Tax Changes Drive Away Interstate Investors?

September 7, 2022 Edward Dever

Only time will tell. However, it seems reasonable that a residential property investor with multiple interstate properties and only one or two Queensland-based properties will sell them to avoid the reach of the Qld Revenue Office. (Equally, an investor with predominantly Qld-based properties may sell off an interstate property to avoid a land tax hike.)

If Qld properties are retained, investors are likely to want to increase rents to try to recover some or all of the additional Qld land tax.

Either way, it is likely to exacerbate the already difficult rental climate in Qld. (Not forgetting the Greens plans for nationwide residential rent controls.)

Under the 2023 Qld land tax changes, Qld land tax will be calculated based on:

1. the total of your taxable land located in Queensland. and 2. the statutory value of your interstate land.

Qld land tax is calculated based on the taxable value of Australian land which is then applied to the Qld portion of the land holdings.

The Qld Revenue Office's example has the fictional Lena's Qld land tax bill increasing from $1,950.00 to $8,422.37.

There is no credit given for land tax payable in another State.

It is surprising that it has taken this long for the issue to be picked up by the media and many investors will be unaware of these changes. However, for the moment, the Qld Government is holding firm. Also, once implemented in Qld, how long until other States follow suit?

Fears over land tax changes to include interstate investors’ holdings outside of Queensland

September 2022

Rent Control - Failed in Queensland, Try Canberra

August 29, 2022 Edward Dever

Federal Greens MP for Griffith Max Chandler-Mather has announced a proposal to freeze residential property rents for a two year period followed by a maximum 2% increase each two year period thereafter until wages catch up to rents.

The proposed national rent control measures are to be backdated to 1 August 2022. Any residential properties not rented at that time (including new builds) can only be rented at the suburb's median rent. Rent stays frozen even if a landlord renovates the property between tenancies.

The Greens propose that the Federal government force each State and Territory government to impose these rent control measures while at the same time ending negative gearing and CGT concessions for residential property and calling on the Reserve Bank to halt interest rate rises.

Missing from the proposal was any discussion of a corresponding freeze and subsequent caps on government charges such as council rates, water rates and land tax. No comments either on whether (somehow) a freeze should be enacted on insurance, strata levies and maintenance costs.

Also missing was any comment that a similar proposal was made in Qld in 2021 by Greens MP for South Brisbane Amy MacMahon as a Private Members Bill. One of the provisions of the Residential Tenancies and Rooming Accommodation (Tenants’ Rights) and Other Legislation Amendment Bill 2021 stated that rent increases be limited to CPI increases.

This proposal was rejected by the Qld Parliament and the Bill was discharged on 14 October 2021.

The Greens claim Victoria froze rents for six months during the Covid-19 pandemic and this justifies their rent freeze proposal.

However, the pandemic rent freeze in Victoria was accompanied by cost related measures such as deferrals and interest waivers on costs such as council rates and water rates. Similarly, Qld residential property investors were able to access discounts, deferrals and reductions on costs such as council rates and land tax. The Greens propose no such equivalent measures.

The Greens proposal seems to have a few hurdles. As PM Anthony Albanese said recently - "It's not clear to me short of nationalising property how that could be achieved and I haven't seen any proposal."

It is not clear whether the PM will seek to impose the Greens rent control measures on the State and Territory governments.

Update - Meanwhile, Greens MP for South Brisbane Amy MacMahon plans to resurrect her failed Bill, update it for the proposed more restrictive rent control measures and submit it to Qld Parliament for consideration.

Proposal for rent control put forward

Report No. 8, 57th Parliament - Residential Tenancies And Rooming Accommodation (Tenants' Rights) And Other Legislation Amendment Bill 2021

Greens Push To Freeze Qld Rents

August 2022