Bills

Residential Tenancies (Rent Control) Amendment Bill

Second Reading

Adjourned debate on second reading.

(Continued from 6 July 2022.)

The Hon. T.T. NGO (17:19): I rise to make a brief contribution to this bill on behalf of government members. South Australians are currently facing increased cost-of-living pressures, with factors such as rent increases and available rental property further contributing to the issue. Rent increases reflect demand and rental availability. Contributing factors, such as higher contribution costs potentially delaying new builds and higher home-loan repayments, are causing current and potential landlords to reconsider their positions.

The topic of rental affordability was raised at a residential tenancies forum hosted by the Minister for Consumer and Business Affairs, the Hon. Andrea Michaels MP, in August last year. At the forum, a range of issues were discussed that are currently affecting the residential tenancies sector, with representatives on behalf of both tenants and landlords attending. I acknowledge and thank the Hon. Robert Simms for being there to observe the proceedings.

Concerns were raised that imposing rent restrictions could result in some landlords choosing to exit the market, which may in turn worsen current availability issues. Accordingly, I understand that it was the overall view of the parties in attendance at the forum that rent control measures or rent capping was not a viable solution, and may cause an upsurge in rental prices prior to commencement.

Between 15 November 2022 and 16 December 2022, more than 5,000 South Australians contributed to the state government's most extensive review of the Residential Tenancies Act 1995 (RTA) in almost a decade. Consumer and Business Services (CBS) recorded a high level of public engagement in consultation on the RTA, with 15,183 unique visitors to the YourSAy consultation web page, 3,001 people downloading the discussion paper, 5,565 responding to surveys and 155 written submissions being received.

Following public consultation, the minister asked the Commissioner for Consumer and Business Services, who is responsible for the administration of the RTA, to advise the minister on the outcome of consultation so as to inform the government's consideration on the best way forward for South Australia. The commissioner recognised that, while some stakeholders indicated they support rent capping, such measures may be viewed as an overreach by government and interfere in the private market and relationship between the tenant and the landlord.

The commissioner has also advised that rent capping would be out of step with other jurisdictions. The Australian Capital Territory's regulatory framework is the closest to rent regulation in Australia, with rent increases tied to CPI plus10 per cent. There is also a concern that rent capping could result in landlords routinely raising rent by the legislated amount each year, where they otherwise would not have considered an increase.

Taking into consideration discussions at the forum on the outcome of public consultation, it is the government's view that rent capping and the Residential Tenancies (Rent Control) Amendment Bill 2022 should be opposed.

It was reported on the ABC website recently that Adelaide is one of the cheapest places for housing in Australia. For around $500 a week, it is still possible to live in the inner city of Adelaide. This includes houses and apartments with at least two bedrooms. Within walking distance of the city, an unrenovated three-bedroom bungalow in Gilberton with a backyard and shed will set you back $495 per week. Further out, in St Agnes, a leafy three-bedroom home with a large backyard is advertised for roughly under $500.

Members interjecting:

The PRESIDENT: Order! No harassing the Hon. Mr Ngo please.

Members interjecting:

The PRESIDENT: Order! The Hon. Mr Simms and the Hon. Ms Franks, stop badgering the Hon. Mr Ngo.

The Hon. T.T. NGO: However, late this morning in the media, it was reported that data compiled by property market analysts CoreLogic shows that rent prices rose by 0.8 per cent in Adelaide last month and were up 1.1 per cent in regional South Australia. However, it was reported today that CoreLogic's numbers have Adelaide as the most affordable rental market nationally and they described a median cost of $534 a week. I would like to note that after doing a bit more searching, Adelaide is the cheapest city to rent, therefore, as the government spokesperson, we would oppose this legislation.

The Hon. F. PANGALLO (17:27): I rise to speak on the Hon. Robert Simms's Residential Tenancies (Rent Control) Amendment Bill and indicate that SA-Best will not be supporting it. I will also declare my conflict as a rental property owner, although I do not believe it will cloud my objectivity on this topic.

However, I do need to commend the Hon. Mr Simms and also the Hon. Tammy Franks on their strong and passionate social justice values, particularly when it comes to affordable housing availability which, as we know, is a chronic problem, not just in this state but elsewhere in the country.

I think there may be some economic naivety here, coupled with an unrealistic federal Greens policy. We need to be mindful that we do not allow ourselves to be tiptoed or sleepwalked into sleight of hand authoritarianism where governments impose themselves and tell us what to do and when to dog whistle.

Australia is not a communist country. It is a capitalistic free market economy. Property investment is a cornerstone of that economy, from large investment funds and corporate developers through to mum-and-dad investors aspiring to get ahead as economic headwinds now begin to gather speed and threaten to push us towards the R word—recession.

When it comes to property ownership, you cannot dictate to property owners what they can or cannot do with their investment. It is the biggest investment they will make in their lifetime. It is undeniable that housing in South Australia is in a crisis and it has been created by a multitude of economic and social reasons: affordability to buy a house, affordability to rent, if you can find one. Supply is one of the main reasons houses are costing so much and are out of reach for some. There simply is not enough stock on the market to meet the demand, and that has also seen rents spiral.

Property taxes, like the Marshall government's harsh land tax reforms, have seen many mum-and-dad investors and self-funded retirees reluctantly abandon their rentals and sell them off for their capital gain rather than be put through the complex and costly maze of conditions and red tape they were required to meet. That certainly contributed to the drop in the number of vacant properties available for rent. Added to that, higher income from short-term holiday accommodation platforms like Airbnb and Stayz are making it far more attractive for investors than long-term leases, therefore further reducing properties available for rental.

Telling a landlord that they must cap or freeze their rents is a disincentive for further investment in property. Not all landlords are wealthy. They have mortgages where repayments have climbed 11 times in the past 12 months. They have maintenance costs, service costs, and rising insurance premiums. They had to accept rent freezes during the pandemic, absorbing their own costs.

While urgent fixes are needed to assist renters, what the Greens are proposing is an awfully blunt instrument that will have a negative effect on the property market and send the wrong message to potential investors. Financial experts are in unison about this. Warren Hogan, an investment adviser with Judo Bank, this week warned the federal government against artificial rent caps, saying they would scare off investment and further jeopardise future supply of housing in Australia. Mr Hogan said in The Australian this week that we must get to the heart of the problem, which is demand and supply, rather than patchwork policy solutions with a whole bunch of unintended consequences which would undermine the economy.

He has been backed up by another expert, Peter Tulip, an economist for the Centre for Independent Studies, who predicted that increased renter protections would only worsen a shortfall in the housing market, with mum-and-dad investors more wary of investing in a climate where interest rates are climbing.

Bruce Djite, the executive director of the Property Council, also hit the nail on the head with his opinion piece in The Advertiser today in which he, too, warned that investor confidence would take a big hit if there was artificial manipulation of the rental market. He pointed to initiatives already announced that could supercharge investment in housing, including the lowering of the Management Investment Trust withholding tax rate from 30 per cent to 15 per cent. This, Mr Djite said, would act as an incentive for institutional investors to develop and manage housing dedicated to renters. He also believes it could be as close as you could get to a silver bullet as similar schemes reducing tax hurdles are working overseas. We have also had the state government releasing large tracts of Crown land for housing development and projects—including the Franklin Street bus depot—which are slated in the city.

As for The Advertiser, while I have no issue with my property interests or those of other members being disclosed, as they are under our register of interest, I was disturbed to see that the editor decided to also publish photographs and disclose locations of properties owned by members of parliament. As we know, politicians are fair game constantly for the media, but this was a gross and unwarranted invasion of privacy, and potentially places the safety of members, their families and their homes at risk.

In my view, and as a former newspaper editor, I think it was an unwise editorial call considering the sometimes explosive opinionated world we live in and where hate speech levelled against politicians is a daily occurrence on social media platforms. The Advertiser would not have a clue about the personal circumstances of members, nor whether they have been subjected to any threats in the past.

The Advertiser also has a duty of care to politicians, which they would also afford to other citizens. Considering the range of volatile and controversial topics covered by the newspaper on a daily basis, I am certain the editor would be most unhappy if anyone were to post a photograph of her home or that of any of her staff on a social media website. With that, I conclude my remarks and I thank you.

The Hon. J.M.A. LENSINK (17:34): I rise to indicate the Liberal Party position in relation to this particular bill before us. As we know, these are difficult times. We are in the midst of a housing crisis and all ideas should be on the table. In that context, I thank the Greens for putting a bill before the parliament. Unfortunately, the Liberal Party will not be supporting it—as I am sure the member is shocked to learn; in fact, we were outed in the paper today—consistent with our position over many years that property is an asset class and subject to market forces and that there would be some very significant unintended consequences of passing these sorts of rental control bills.

If we look at how we have come to the position that we are in at the moment, there are supply side issues in South Australia and nationally, in that there are fewer houses available than people who want them. Particularly during COVID, South Australia was a very safe place, probably the safest place in the world, and a lot of people wanted to return. We saw significant increases in property prices that we have not seen in South Australia probably for 20 years, and well above what our typical averages would be because there were so many people returning to South Australia. Off the back of that, we have seen a lot of landlords take advantage of that and sell a property that would have been rented to a tenant to owner/occupiers.

Certainly, more supply, as other speakers have noted, is important. We are also seeing the advent of build-to-rent in Australia, which is a fairly new thing for Australia. The Marshall Liberal government initiated the first build-to-rent project at Park Court at Eastwood, which is proceeding in a different format under the new government. For the benefit of members, with build-to-rent prices are generally capped at 75 per cent or 80 per cent of what the market price is for those properties, so it is not as cheap for people as being in public or community housing, but there is certainly a discount.

I know a number of the personal stories of people who have been successfully living in the private rental market who have either been priced out or their properties have been sold and they have just been unable to secure another one because the market is so tight. The answer to that is not to cap rental increases, which is what this bill would do: the answer is to see more supply both through the private sector and through the build-to-rent market.

A number of single mothers I have met and spoken to in the last year or so, who find themselves in this invidious situation, would manage very well in a build-to-rent type scenario. Some of them do not necessarily want to live in public housing. Some of our walk-up flats are less than desirable places for a number of reasons and this would be of great benefit to them.

In the context of 'all good ideas should be on the table', I want to place on the record that the Liberal Party released a 10-point plan in July last year, which was to assist people who might be experiencing homelessness and/or people who are in the private rental market. We did that proactively in terms of putting some ideas out there for consideration and things we know would have been successful.

In terms of that, I am pleased that the government has since adopted a number of these suggestions, including changing the Private Rental Assistance Program cash asset limit of $5,000 to align with the asset limits for public and community housing, which at the time were $48,250 for a one-person household or $61,600 for a two-person household. What that effectively means is that people who were seeking to access the Private Rental Assistance Program could not and they would run down their savings before they could access it, which really did not make any sense.

I have mentioned the build-to-rent initiative, which will increase the number of affordable and market rental properties. We were also looking at the matter of reducing rental bonds from six weeks to four weeks, which would mean South Australia was more consistent with other jurisdictions. Disappointingly, the new Labor government has not acted on the following suggestions in our 10-point plan.

We had a domestic and family violence crisis accommodation program, which was very successful, of some 31 beds that operated throughout most of our term. I note that the new government has extended the funding of that, but we actually had cabinet approval to increase that from 31 to 100 beds. That does not seem to be taking place under the new government.

We were also interested in and examining an immediate accommodation program for family households as an alternative to emergency hotel and motel accommodation because we know that hotel and motel accommodation is incredibly expensive. It is not suitable accommodation for people in most circumstances, but certainly not for families. So those funds would be better placed to head leasing properties in the private sector and putting families in those is a much more suitable place for them to be.

We sought that the new government would recommit to the Affordable Community Housing Land Tax Exemption program. I think Minister Cook on radio dubbed that as a dud; however, we believe it should be readvertised, particularly under the current circumstances, because landlords would have a land tax holiday for five years if they placed those properties in that program.

We also think it is worth seriously considering what the disincentives are for people who have converted their longer term rentals to short-term rentals, such as Airbnb and Stayz, that have been mentioned because a lot of these issues are driven by tax policies at state or federal level, and also to examine how people who might be wanting to stay in a hotel or motel to access the private rental assistance available if they are provided with a longer term tenancy.

Those are some of the things we think ought to also be looked at in this current market, but a lot of this does come down to financing. We believe that the effect of passing this piece of legislation would be to actually reduce the number of properties in the private rental market and therefore would actually have the effect of placing a further squeeze on the number of rental properties available and therefore would be quite detrimental in the market.

The Hon. S.L. GAME (17:43): I rise to oppose this bill. Interest rates have risen 11 times this year and they have become out of control as most South Australians are feeling the pressure from the increase of living costs. Increasing interest rates put landlords in vulnerable positions. As they feel the squeeze of yet another interest rate rise, they will end up possibly exiting the market. This will be exacerbated if landlords do not have autonomy over their property prices. How can we expect property owners to keep their stock in the market if they cannot afford their own repayments to the banks?

This bill will not only price lock the top end of town but also mum-and-dad investors who may only have one or two investment properties. The rent control will ultimately lead to a reduction in housing stock and renters will miss out. I do, however, agree with the statement that we have seen the Labor Party and the Liberal Party fail to do anything to deal with social housing over the last 10, 20, 30 years. However, the way I see it is that the answer is not through rent control.

Politicians should not be focusing on dictating what landlords can and cannot do with their property. This only causes uncertainty and distress in a rental crisis. The cost and risk associated with supplying new rental properties is the big problem. Interest rate hikes significantly lower their borrowing capacity. If mum-and-dad investors manage to hold onto their property, they are now faced with the introduction of this type of bill that will possibly force them into looking into short-term rental leases, which destroys supply.

We should be focusing on supply and affordable entry into the investment market. More than 80 per cent of Australian residential rental properties is supplied by mum-and-dad investors. Instead of rent capping, we should be interested in looking at incentivising people to get into the market.

The Hon. R.A. SIMMS (17:45): I want to thank all honourable members for their contributions: the Hon. Mr Ngo, the Hon. Frank Pangallo, the Hon. Ms Lensink and the Hon. Ms Game. It is disappointing to note that it seems only the Greens will be supporting this bill. I do not propose to speak for very long tonight because I appreciate members accommodating this bill on tonight's schedule, but I do want to correct some of the incorrect or ill-informed statements that have been made in the context of this debate.

The Hon. Mr Ngo talked about Adelaide being some sort of nirvana for affordable housing. I would urge the government to turn its attention to the latest findings from Anglicare. In fact, they should look at the snapshot weekend of Saturday 18 March this year, which looked at 1,456 private rentals that were advertised for rent in South Australia. That report found that just 11 individual properties, or 1 per cent, were suitable for at least one household type living on income support payments without placing them in housing stress.

Just 256, that is 18 per cent of individual properties, were suitable for at least one household type living on minimum wage without placing them in housing stress. Zero per cent of rentals, that is not one of the listed rental properties, were affordable for a single childless person trying to live on the JobSeeker payment, and just two properties out of all of those listed on the day of the snapshot—zero per cent—were affordable and appropriate for out-of-work couples with two children. Anybody who seeks to suggest that rental accommodation is affordable in South Australia has the wrong information.

There also appears to be a concern from some members of this chamber that to implement rent controls of the kind that the Greens have proposed would create a terrible stress for landlords. I do not accept that argument given all that my bill is seeking to do is limit rent increases in line with CPI. That has happened in other jurisdictions around the world. It would allow landlords to increase the rent but not in an exorbitant way. The problem that we are facing in our state at the moment is that rent prices are simply surging out of control due to lack of regulation.

I should put on the public record my appreciation for some of the actions that the Malinauskas government have taken to date. In particular, I welcome their efforts to ban rent bidding, albeit in a partial way, but I do support that and I recognise that there is broad support for that across the chamber. They have also made some changes relating to the amount of bond that somebody is required to put forward when they are acquiring a new property, and that will be a welcome relief for many renters. They have also announced a large affordable housing spend, which I think also will have a positive impact on the market, although it will take several years for that property to come to fruition.

The reality is that these things do not go far enough in terms of addressing rent prices in our state, rent prices that are surging out of control. I urge members of parliament to turn their attention to their fellow South Australians who are sleeping on the street, sleeping in tents, sleeping in caravans because they cannot afford a place to rent. I urge them to think of their fellow South Australians who are anxious, worrying about the skyrocketing rent prices that they are facing, and then I urge them to think about whether or not the solution that the Labor government has put forward goes far enough. The reality is this is well short of what is needed. It is not enough.

If there is not support for rent capping in this chamber tonight, then my challenge to the government is to come to the parliament with a clear plan to deal with rent prices. It is on them to try to solve this crisis, and I urge them to take action. With that, I conclude my remarks and indicate that I will be calling a division to put people's positions on the public record.

The council divided on the second reading:

Ayes 2

Noes 19

Majority 17

AYES

NOES

Second reading thus negatived.