Updated: Aug 7, 2020
My grandmother in Germany has been renting all her life. She never considered buying a place. Even on her widow pension, she can comfortably pay the rent each months. The building where she lives in a small apartment is owned by the same entity and managed by professional property managers.
It’s not flash, don’t get me wrong, but she has no fear of being kicked out every six months or facing a rental increase like a renter would be in Sydney in a comparable situation.
Rental insecurity leads to homelessness
Renting in the private sector means fending for yourself. The laws protect the rights of the owners, and tenants face constant housing insecurity, even temporary homelessness, when forced to move out with family within 2 weeks notice and unable to secure a new lease. There are families with children forced to coach surf despite being on two incomes.
The current system seems to be deliberately designed that way to create an incentive for people to move into home ownership. After all, a quarter of Australia’s economy depends directly or indirectly on the property market.
Levels of home ownership in decline
The reality is that owning home is out of reach for an increasing number of young Australians. This translates to more people renting long term. In my opinion, this is not all bad, it also translates to more choice.
Renting allows you to be flexible and move around a big city to be closer to work.
It means being able to upsize and downsize when your life situation changes (kids coming along, a family member moving in/out).
Renters need more rights and protections
If we want to make renting a viable option for people living in Sydney, tenants need to be allowed to feel at home. Tenancy unions have been calling for more rights for renters for a long time.
The key issues to address:
Contracts with long-term leases instead of the usual 6 or 12 months;
a right to make small modifications to the property (e.g. hang a picture or shelf),
a right to own a pet,
longer notice periods to ensure people have a chance to find another place to live if they have to move out
abolish no-ground evictions
Mum and Dad investors are part of the problem
We need institutional investors (e.g. superfunds) to own apartment blocks rather than mum-and-dad investors who have not factored maintenance cost into their personal wealth creation plan. Mum-and-dad investors, despite being good people for sure, make terrible landlords. They leave tenants exposed to changes in their financial situation and enter the investment game for the wrong reasons (tax incentives, capital gains).
Lack of energy efficiency leaves renters exposed to climate change and higher energy bills
There are also the issue of energy efficiency. Home owners have the opportunity to install solar panels, retrofit insulation and energy efficient lights (government subsidized). Investors hardly do the same for their investment properties. This translates to poorer thermal comfort for tenants and significantly higher energy bills.
In western Sydney, summers are getting hotter due to climate change, with 50 degree days already a regular occurrence in the Penrith area and now increasingly seen in the Campbelltown council area as well. In winter, temperatures drop below zero in the Blue Mountains. In Victoria, including energy efficiency standards is being discussed for rental properties.
What we can learn from places like Germany
In Germany, half of the population is renting, many all their lives. People often stay in their rental homes for 20 years and longer. They enjoy strong protections from the law and don’t feel disadvantaged or left behind. Can we look and learn from other jurisdictions to introduce better protections for renters in Sydney? Or are we moving towards an increasingly hostile set up where the interests of the asset poor are pitched against the asset rich at the expense of social cohesion?
Update: In an 'Australian-first', the NSW Government announces tax breaks for developers investing in 'build-to-rent' housing developments: NSW to cut land tax for 20 years in ambitious build-to-rent scheme, SMH