With rampant rent inflation triggering crisis conditions for many low-income renters across Australia, numerous tenancy horror stories are circulating in media right now. And with 800,000 home-owners facing steep mortgage increases as they exit fixed-rate deals this year, prospects for many home-owners are also dire.
With a NSW election looming, housing policy has become a battleground for the major parties.
But what kind of short-term and long-term pledges should we demand from the rival contenders if they are serious about confronting the housing and rental crisis?
1. Emergency packages and regulatory relief
Many renters are struggling right now and there are regulatory options available to state and federal governments to provide immediate relief in the short-term. These include legislating a limit or control on rental increases, which was done quickly by some states during COVID.
Significantly increasing Rent Assistance would be another quickly deliverable way to provide relief, pending the implementation of longer-term solutions. Recognising that decades of inadequate up-rating have drastically devalued the payment, such a boost is backed by voices as diverse as the Grattan Institute, the Australian Council of Social Service and the Productivity Commission. While formally beyond the power of state governments to deliver, the NSW party leaders should be committing their support for this campaign.
Better regulating Airbnb is another policy option that costs no money to the government to implement.
“In some parts of NSW and the rest of the country, perfectly good long-term rentals are becoming Airbnbs - causing more strain on the housing and rental market,” says Prof. Pawson.
2. Widen land tax reform
A broad-based land tax, including on owner-occupied housing, is a key reform for improved housing affordability and economic productivity in NSW, according to Prof. Pawson and Dr Martin.
“Widening land tax would bring more under-utilised land to market, improve housing supply, and discourage speculative hoarding,” says Dr Martin.
It also captures, for the public, some of the land value gains that result from public investment in infrastructure. Land tax can be designed to avoid hardship to low-income owner-occupiers, by allowing tax liabilities to be deferred until a property is finally sold or inherited.
“The Coalition took the big step of committing to land tax reform but came close to flubbing it with a badly compromised policy which is that first home buyers can opt in and avoid stamp duty,” says Dr Martin.
“Its election promise to allow other owner-occupiers to opt in, while keeping stamp duty for multiple property owners, would go some way to getting this reform back on track.
“NSW Labor on the other hand is opposing land tax reform in this election, which is disappointing. Phased introduction of a broad-based land tax is a pro-affordability, pro-productivity, pro-fairness policy they should endorse.”
Recent City Futures research found strong support among economists for shifting to a broad-based land tax, both to reduce wealth inequality and enhance productivity.
3. Enhance tenants' rights
As more people are renting longer or expect to rent indefinitely, a range of law reforms are needed to help them make a rental into a long-term home.
The essential step is prohibiting landlords from terminating tenancies without grounds – especially because, at the moment, tenants' advice services are reporting many more no-grounds terminations, as landlords push up rents.
“No-grounds terminations are unfair, give cover for bad reasons for termination – such as discrimination or retaliation – and undermine tenants’ legal rights to get repairs done and challenge rent increases,” explains Dr Martin.
Labor has promised law reform to require ‘reasons for evictions’. The Coalition has lately promised to get rid of no-grounds terminations for periodic tenancies, but would still allow no-grounds terminations at the end of a fixed term.
Under the Coalition’s proposal, tenants could be on a string of fixed terms and still experience the insecurity of no-grounds termination hanging over them. The ACT is proposing to abolish no-grounds terminations altogether – this is the approach NSW should take too, Dr Martin and Prof. Pawson say.
“Reformed tenancy laws must also ensure that the tribunal has discretion to decline termination, considering the circumstances of the parties and the balance of hardship. Termination of a tenancy should never be mandatory,” Dr Martin says.
Recent City Futures research for AHURI put concerns about law reform and ‘disinvestment’ to the test, and found previous rounds of tenancy law reform have not caused landlords to disinvest.
But, says Dr Martin, it would be no bad thing if stronger laws prompted substandard landlords to leave the market.
“That would create more space for first home buyers, and for a better sort of landlord – one that delivers higher standard housing services and doesn’t sell out whenever it suits them,” he says.
The research also shows gaps and problems across a range of tenancy legal topics, and sets out a detailed reform agenda.
4. Scale up investment into social housing
Social housing stock has barely increased in NSW in the last 25 years. While official figures show apparent growth in the past decade, that is mainly due to a 2016 state government statistical re-definition. As a proportion of all housing, the state’s stock of public and community properties has in fact continued to dwindle.
Meanwhile, a recent City Futures report shows that 144,000 households around NSW are currently experiencing unmet need for social housing.
“This election, looking at the platforms of both major parties, we see a glaring absence of any pledge to confront the mounting problem of unmet housing need – or even to stabilize social housing representation within the overall property market,” says Prof. Pawson.
“Unlike Victoria and Queensland, NSW also resisted calls for a state-funded social housing program as part of post-pandemic economic recovery plans in 2020 and 2021.
“NSW could expand the existing Social and Affordable Housing Fund, enabling it to underpin an additional cohort of newly developed homes - emulating Queensland which recently doubled its own housing future fund by pledging another $1 billion to its stake.”
5. Mandatory developer contributions to affordable housing
In line with standard practice in many other countries, Australia’s planning systems could mandate the routine inclusion of affordable housing within private residential developments. Alternatively, emulating the system that has operated successfully in the City of Sydney for 25 years, developer financial contributions to affordable housing could be managed through the scheme approval process.
The UNSW experts say it’s time to consider a Sydney-wide scheme of the same sort where, for instance, it’s required that five to 10 per cent of floorspace of private developments are dedicated to social or affordable housing.
“This was proposed by the Greater Sydney Commission as long ago as 2016, but never actioned by the Coalition Government,” says Prof Pawson. “Properly implemented, the cost of such a measure will be borne by landowners, not builders or consumers. It’s no substitute for government-funded social housing subsidies.
"But when you consider that it could enable affordable housing provision to be hard-wired into market housing development at no cost to government, surely this is a no-brainer that has been largely ignored in Australia for far too long”.