NSW Government’s Rental Fairness Bill could worsen the housing crisis

The NSW Government’s proposed Rental Fairness Bill is anything but fair, according to real estate experts who fear it will only make the state’s housing crisis worse.

Pitched by the Minns Government as a way to make renting “fairer”, the bill seeks to end no grounds evictions by requiring a reason to end a lease, make it easier for tenants to have pets and establish a rental bonds transfer scheme.

Other proposals include closing a loophole that made it possible for some landlords to increase rent multiple times a year and requiring landlords to prove rent increases are not “excessive”.

But Best Nest Property Management Director Alison Hatch said the proposals would hinder, rather than help, both tenants and landlords and the State Government needed to be more creative in finding solutions for the rental crisis.

She said any proposal that capped or froze rents would hurt landlords struggling with mortgage payments and only lead to larger rent increases once an increase was allowed.

“It’s not the solution,” Ms Hatch said.

“At the end of the day, all that’s going to happen is, if people have to pause (increasing the rent), they’ll just do a bigger jump later.

“Tenants can’t plan for those bigger jumps very easily, but the little one, in small increments, they can do.

“They need to look at more creative solutions instead.”

Alison Hatch, of Best Nest Property Management.

Ms Hatch said one potential solution in the Hawkesbury area would be to make better use of second dwellings on acreage properties.

She said at the moment, people on large rural properties were not allowed to have a second dwelling unless it was attached to the first property.

This means if someone wants to build a newer home on their land they have to first tear down the existing home.

“There’s usually nothing wrong with it,” Ms Hatch said.

“They’re DA approved, it was there originally, there’s no problem, but because you can only have one house on the rural block, you have to tear it down.

“So in the Hawkesbury, there are thousands of second dwellings and properties that could be utilised.

“We’re actually tearing houses down. It’s crazy.”

Real Estate Institute of NSW (REINSW) Chief Executive Officer Tim McKibbin said the proposed changes to the Act would only lead to fewer rental properties and longer queues for renters.

“Over the past five years we have seen a decline in the growth of rental properties and now it’s going backwards,” Mr McKibbin said.

“People who invest want three things: that their assets be protected, an annual return and capital growth. 

“This is as much the case with residential property as with any other investment.

“As much as politicians attempt to portray it otherwise, people don’t invest in property to provide community housing. That’s the Government’s job. 

“The more these investment pre-requisites are threatened, the more likely people are to invest elsewhere, be it the share market, in other property assets, offshore investments or otherwise.”

REINSW Chief Executive Officer Tim McKibbin.

But Minister for Fair Trading and Better Regulation Anoulack Chanthivong said the proposed changes were about updating outdated rules that made tenants’ lives harder.

“We’re getting on with our commitment to rebalance the equation, give renters more protections and let them get on with their lives,” he said.

But Ms Hatch said ending ‘no grounds’ evictions would not just mean landlords had less control over their investment properties but that tenants could end up with a black mark on their rental history.

She said sometimes a tenancy that had previously worked for both parties would sometimes head south and ‘no grounds’ evictions were sometimes used to end a tenancy amicably.

“Sometimes a relationship, like any relationship, stops working and it could be that a home may no longer be suitable for someone, despite it previously being suitable,” Ms Hatch said.

“It could be that there’s a part of the tenancy that’s underperforming and it’s really in the tenant’s best interest to either rebudget, move into a property that’s more suitable or end a relationship that isn’t working.

“If you instead have to nominate a reason, I think I would prefer as a tenant to say, ‘No grounds’ and have 90 days to look for another home rather than, ‘You’re dirty, you don’t pay your rent or you don’t look after your yard’.

“That would make it much harder to get a property in the future.”

Ms Hatch said the portable bond scheme had merit, but it would need to be well thought out and carefully applied so that existing landlords would not lose their ability to make a claim for a bond for property damage because it has already transferred to the next property.

She said most landlords also understood a tenant’s wish to have a pet but with NSW not allowing pet bonds and very few insurers covering pet damage, most worried their properties would be damaged and they’d be left to foot the bill.

“The problem is, there’s no mitigation of risk for owners, which is why most of them say, ‘No’,” Ms Hatch said.

“If, in NSW, they looked at a way to mitigate that risk for the owners, whether it be by enforcing insurance to all cover pets or whether it be by allowing a pet bond, which is significant, because pet damage can be significant, then I believe it is fair to have more flexibility on allowance of pets.”

Leah Jay Senior Property Manager Michelle McLean said it was important to remember that, at this stage, the reforms were just proposals and not set in stone.

But she said the suggested reforms were concerning and would lead to more landlords selling their properties if they came into effect.

“It will just erode the market further and landlords will exit out,” Ms McLean said.

“They’re wanting to make changes in favour of tenants… but it’s already heavily balanced towards the tenant and until they realise that they need a landlord in order to house a tenant, we’re going to have the same problem.”

Leah Jay Senior Property Manager Michelle McLean.

Ms McLean said the key to solving the rental crisis came down to supply and the best way to boost it was to incentivise more investors into the market, not punish them.

“We need to make it attractive for owners, or worthwhile for them to invest,” she said.

“At the end of the day it’s not their job to provide social housing, or compensated housing.”

  • If you’d like to have your say on the proposed changes to NSW rental laws, you can do so here.

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Kylie Dulhunty

Kylie Dulhunty is the Editor at Elite Agent.