Could ACT's tenancy law overhaul have 'unintended consequences'?

REIACT criticised the first drafted bill of the proposed amendments —which includes a ban on no-cause evictions, rental bidding and  changes to support a future introduction of minimum standards for rental properties— for failing to adopt any recommendations made by the Institute during the first round of consultation launched on 27 July. 

“The Real Estate Institute has lobbied, on behalf of its members, for fair and achievable outcomes within this legislation draft.

“It has warned the ACT Government of these unintended consequences, (and the very people that are supposedly protecting) are going to be far worse off if the already critical rental market is further impacted by these changes,” REIACT stated. 

It further stated that “to mandate this magnitude of change to legislation, based on just over 700 respondents to a survey, which has a base of over 43000 investors and 55000 renters, is irresponsible and careless by the Attorney General.” 

The Institute argued that its concerns are “well justified” due to its research on the effects on the private rental markets in Victoria and New Zealand,  where similar changes to rental tenancy laws were introduced. 

It cited that the Victorian government’s move to introduce minimum standards in March 2021 is now having an “actual effect on the private rental market”. 

While the Victoria Government maintains that the rental reforms “strike a fair balance between helping tenants to have safe, secure and affordable housing, and benefiting rental providers with clear obligations and stronger accountability for tenants”,  REIACT pointed out that property experts in Victoria are now seeing landlords exiting the  market due to the complex reporting requirements. 

In addition to the tedious reporting obligations driving rental owners away from the market, REIACT noted that rental providers are now finding it  “too hard” to sustain their investment properties.

“This has been further compounded by the crippling backlogs now facing VCAT, with delays of up to 22 weeks for a hearing related to tenancy disputes,” the Institute stated.  

In New Zealand, where changes to the residential tenancy requirements for minimum standards were introduced in 2017, REIACT noted a significant reduction in available rental properties, with some jurisdictions seeing a 50 per cent drop. 

A similar trend of landlord exodus was also observed across the ditch in the wake of the rental law overhaul, with rental property owners reportedly divesting their investment properties due to the “onerous compliance requirements and sentiment that they have had their rights as owners slowly eroded with the implementation of each new legislation mandate.”

It also cited a recent survey by the Real Estate Institute of Western Australia,  which revealed that 61 per cent of 7,000 investors would exit the state’s rental market if major changes to the region’s residential tenancy laws were adopted.

If this survey is indicative of investors nationally, REIACT estimates a similar mandate in the state would see over 26,000 investors leave the market.

And with the state’s rental market already at an extremely low vacancy rate of less than one per cent since March 2020, REIACT pointed out that the government’s move to introduce similar changes in the state will be at odds with the Chief Minister’s previous comments to the media that “he was eager to ensure the ACT maintained a vacancy rate of about 3 per cent”. 

REIACT also argued that while there have been commentaries of the amendments as a push for landlords to “move on with the times”, it surmised that outcome will see tenants as “the biggest losers.” 

“Legislation put in place by these Governments, to protect and ensure renters have a safe, secure and affordable place to live, has resulted in the reduction in the number rental properties available for rent and higher rents,” the Institute stated. 

In addition to these grim precedents in other jurisdictions, ACT pointed out that there are now  added complexities of cost-of-living pressures due to inflation,slow wage growth , interest rate increases, supply chain issues,rising construction costs, as well trade shortages of inspectors, installers and certifier -  all factors which will affect the implementation of the proposed changes for minimum standards.

“The ACT already has the unenviable crown of the most expensive city in which to rent in Australia. To risk further upward pressure on rents and reduction of rental stock availability, will inevitably only see not only our most vulnerable Canberrans, but also many renters already experiencing rental stress, forced into homelessness,” the state real estate body stated.