The following section presents some more background and analysis about rental housing and residential tenancies law.
As a tenant in New South Wales, you are in good company: more than 743 000 households – that’s 30 per cent of all households – live in rental housing (Australian Bureau of Statistics (2012), ‘2011 Census QuickStats – New South Wales’).
Most renter households (about 84 per cent; so about 25 per cent of all households) live in private rental housing. Of these households, most rent through a real estate agent (75 per cent); the rest deal directly with their landlords. About 15 per cent of renter households (so, about four per cent of all households) live in public housing: in New South Wales, the public housing authority is NSW Department of Family and Community Services (FACS) Housing. A small but growing number of households rent from other social housing landlords, such as community housing organisations and Aboriginal housing organisations (Australian Bureau of Statistics (2012) ‘2011 Census Basic Community Profile – New South Wales’).
Tenants come from all walks of life. Most renter households (about 62 per cent) are families, and most of these families (66 per cent) include dependent children. About 28 per cent of renter households comprise just one person on their own; about 8 per cent are group households (Australian Bureau of Statistics (2012) ‘2011 Census Expanded Community Profile – New South Wales’).
The median income for households in the private rental market is $1210 per week, slightly lower than the median income for all households ($1320 per week). In social housing, the median household income is much lower: $484 per week. The median amount of wealth held by renter households is much lower: $66 011 for private rental households, and $19 537 for social housing households, compared with $425 502 for all households (Australian Bureau of Statistics (2011) ‘household Income and Distribution, Australia, 2009-10’ Figures are for Australia, rather than New South Wales).
We can say something about landlords too. First, there are a lot of them: roughly one in seven Australian taxpayers declares rental income. Most (73 per cent) own only one rental property. Most landlords (81 per cent) are in debt, and most (63 per cent) operate at a loss. Total net rental income for New South Wales properties in 2009-10 was negative $813 million. (All figures relating to landlords are from Australian Tax Office (2012) ‘Taxation Statistics: 2009-10’. Except as indicated, figures are for Australia, rather than New South Wales).
These landlords, in other words, are negatively geared (in the Australian tax system, deductions for negative gearing are treated very generously), and are hoping to make money from capital gains – that is, rising property values – rather than rental income (in the Australian tax system, capital gains are taxed lightly compared to income from work, rent or savings). It is not going too far to say, then, that most landlords are amateurs and speculators.
The imbalance in the landlord-tenant relationship
Even if we leave aside considerations of relative income and wealth, there is a basic economic imbalance in the private landlord-tenant relationship, to the advantage of landlords and the disadvantage of tenants. This is because of the different nature of the things for which each party contracts with the other: landlords contract to receive rent; tenants contract for a home. Compared with other consumers, tenants are at a special disadvantage. This can be seen in two respects – if you’ve rented, they will be familiar to you.
First, before the start of a tenancy, a prospective tenant will typically have a more urgent need for housing than a landlord has need of a tenant. Because of this imbalance, it is always tenants who make applications and prove their credentials (showing payslips, offering references, submitting to checks against residential tenancy databases), and it is always landlords who decide if they will grant a tenancy and on what terms.
Secondly, during a tenancy, a tenant cannot readily take their business elsewhere, because of the large financial, logistical and emotional costs of moving out and finding another home. This means your landlord will probably feel little pressure to compete to keep your custom. If you are a good tenant who pays rent regularly, your rent will probably increase at a lesser rate than the market for new tenancies, to reflect the value of your regularity; but if you breach the agreement, your landlord will probably threaten to end it and, if you don’t comply, take action to actually end it. Few tenants, on the other hand, try to make a landlord comply by threatening to terminate their tenancy.
In social housing, landlords aren’t motivated by profit, but there’s a similar imbalance: indeed, social housing applicants and tenants typically have even less bargaining power, and social housing landlords can and do enforce their tenancy agreements by taking termination proceedings. To some extent, the position of social housing tenants is strengthened by the way their landlords’ actions are governed by policies and an ethos of ‘client service’. However, social housing tenants are subject individually to more scrutiny and regulation by their landlords and, as a group, to moral panics by politicians and the media about their conduct (‘anti-social behaviour’) and life decisions (whether they ‘deserve’ social housing, etc).
The role of residential tenancies law
Generally speaking, residential tenancies law goes part – but only part – of the way to addressing the basic imbalance in the landlord-tenant relationship. Residential tenancies law reflects in some respects the need to protect tenants as specially disadvantaged consumers; in other respects, however, it accommodates some of the distinctive features of the landlords in our rental housing system.
It provides important consumer protection by setting out standard terms for tenancy agreements that impose obligations on landlords that tenants may not otherwise be able to bargain for. It also provides a degree of protection to tenants from excessive rent increases and retaliatory terminations by landlords, and provides tenants with a range of remedies when their landlords breach their obligations.
These consumer protections are limited, however, because of the accommodations made to landlords. This is especially so in relation to the termination of tenancies. Residential tenancies law allows landlords to take termination proceedings readily, including without grounds. This accommodates landlords as speculators (because they want to be able to sell at the time of their choosing, including to owner-occupiers who will want vacant possession of the property) and as amateurs (because they can threaten to give a termination notice if it all gets too hard).
They are accommodated in other ways, too. Rents are not regulated to achieve affordability, and the provisions about excessive rent increases are pretty mild. Landlords are entitled to refuse consent to tenants’ requests to paint, alter or add fixtures to the premises, or to sublet or assign their tenancies – and, in many circumstances, they are entitled to refuse unreasonably.
Landlords and their representatives argue that these and other limitations on tenants’ rights and protections are necessary, or else landlords will ‘disinvest’ from the rental housing system, to the disadvantage of tenants. All of the research, however, indicates that residential tenancy law is not a significant factor in landlords’ investment decisions: in one survey of landlords, only six per cent said they considered residential tenancy law at all. (Seelig, T, Burke, T and Morris, A (2006) ‘Motivations of investors in the private rental market’, Australian Housing and Urban Research Institute (AHURI). See also Seelig, T, et al(2009) ‘Understanding what motivates households to become and remain investors in the private rental market’, AHURI; Mowbray, R (1996) The Nature of Contemporary Landlordism in New South Wales: implications for tenants’ rights’, PhD thesis, University of Sydney; Kennedy, R, See, P and Sutherland, P (1995) ‘Minimum Legislative Standards for Residential Tenancies in Australia’, report for the Commonwealth Department of Housing and Regional Development.) Instead, landlords’ arguments for limiting consumer protections for tenants and accommodating their own interests should be seen as just that.
As for social housing landlords, they are also accommodated, with numerous special provisions (for example, in relation to rent receipts, water charges and debts from previous tenancies) inserted for the administrative convenience of landlords, and other special provisions (for example, ‘acceptable behaviour agreements’) inserted as a consequence of those occasional moral panics about social housing.
Regarding the Residential Tenancies Act 2010 (RT Act 2010) specifically, this piece of legislation made numerous changes to the law, without striking a radically new balance in the landlord-tenant relationship. Most of the changes are improvements that either deliver a modest but useful benefit to tenants (in particular, new grounds for you to terminate during a fixed term, and the ability to move out in response to a landlord’s termination notice without giving a termination notice of your own), or deal with matters that the previous Act did not deal with adequately – or did not deal with at all (in particular, residential tenancy databases, termination of co-tenancies, and options for victims of domestic violence).
Not all the changes, however, are improvements: in particular, the removal of the Tribunal discretion in landlords’ proceedings for termination without grounds undermines the law’s purpose as consumer protection. And, being a new Act, the meaning of some of its provisions is still uncertain.
Throughout this manual, we’ve highlighted what is new and what is changed in our residential tenancies law. We hope it helps you use the law to protect your interests as a tenant, and encourages you to seek further reforms for better laws and better rental housing.