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Proposed minimum standards could have dire impact on rental ecosystem

The Real Estate Institute of Victoria (REIV) has called on the State Government to phase in new minimum rental standards and offer landlords financial incentives to avoid destabilising an already strained rental market.

The call comes after the Victorian Government last month announced a consultation process for proposed new minimum rental standards designed to drive down renters’ power bills and keep them warmer in winter and cooler in summer.

The measures include requirements for ceiling insulation, draught proofing, hot water and cooling efficiency.

REIV President, Jacob Caine, said the institute had consulted with, and made a submission to, the government on the issue, in a bid to minimise the potential negative impact on the rental market.

“The REIV broadly supports the ambition of the government’s proposed changes to the rental minimum standards,” he said.

“That’s principally because it aligns with one of our ambitions, that of the Institute and our membership more broadly, and that is to make the Victorian rental experience the best rental experience anywhere in the world. 

“We know that energy efficient houses are more comfortable, they’re healthier and cheaper to run and, for owners, they’re also worth more.

“The submission we’ve made to the government highlights some of our concerns around the timing and the cost of implementing these changes.”

Mr Caine said the changes need to happen, but the timing of introducing them “couldn’t be worse”.

The proposed standards are expected to be introduced in October 2024 and come into full effect from October 2025 onwards. 

“We find ourselves in the midst of a cost of living crisis, which is impacting rental providers and renters alike,” Mr Caine said.

“The cost of actually making some of these upgrades will, more than likely, right at this moment, translate into rental providers exiting the system.

“When we look downstream, we always have to look downstream, to what the end result of that is – more pressure on renters, less affordability for renters and less access to safe and comfortable homes.”

In its submission, the REIV has outlined five key recommendations for helping the Victorian Government realise its objectives while minimising the negative impact on the rental market.

  1. Financial assistance for rental providers – given significant costs associated with meeting the standards, the government must introduce financial assistance such as land tax rebates for property owners. Additional energy upgrade costs must be viewed in the context of overall costs of maintaining a property, as further financial strain will force more rental providers out of the market – making it harder for renters to secure affordable rental homes.
  1. Longer timeframes, transitional periods and prioritisation of standards – considering high costs, qualified tradespeople shortages and logistics, the REIV recommends 36 months lead time for full implementation and compliance. Consider a lag or transitional period for compliance and prioritising standards where the most impactful standards take priority over the timeframe.
  1. Compliance training – structural reform on how compliance should be applied to minimum standards in the rental market. The government should introduce clear documentation, forms and communication across all minimum standards to establish an educated workforce and avoid exacerbating current issues around non-compliance. This training should precede the implementation of new standards to prepare all stakeholders for a smooth transition.
  1. Clearer details around exemptions— the REIV seeks specificity about “exemptions” to allow for an unambiguous understanding of contextual requirements and to limit the opportunity to exploit loopholes.
  1. Sector education – together with Consumer Affairs Victoria, the government must implement significant education around all new standards to ensure RRPs and renters are clear on obligations.

“Private investors remain the backbone of the rental market, and any legislation that triggers additional costs must consider their financial capacity to meet the new standards,” Mr Caine said.

“We are concerned that rushing to implement these new standards without a strategic plan and clear, unambiguous guidelines might, in practice, lead to delays or outcomes contrary to the intent of the legislation. 

“We strongly urge the government to extend the timelines for this rollout, especially for complex works where a property is already broadly compliant.”

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Kylie Dulhunty

Kylie Dulhunty is the Editor at Elite Agent.