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Australian Politics in 2023: The pros and cons of rent control proposals

 

Academia invites itself into a contentious debate being had across sections of the national electorate.....

University of New South Wales (UNSW) media release via Medianet, 22 June 2023:

Proposed by the Australian Greens, a two-year emergency rent cap prevents rent increases, providing relief for tenants. However, it may lead to landlords selling their properties. Photo: Getty

 Would you benefit from a rent freeze?

 

 

UNSW

 

 

Mandated rent freezes, one of the rental crisis solutions proposed by the Australian Greens, seek to address the urgent needs of renters. The solution involves introducing an immediate two-year emergency freeze on rent, followed by the implementation of a rent cap where rent increases are capped within certain limits. 

This means that regardless of market fluctuations and rising interest rates, tenants could find solace in knowing their rent payments will remain relatively stable and stress less about their financial situation.  

“Rent increases have been getting much larger and more common,” said Dr Chris Martin, Senior Research Fellow in the City Futures Research Centre at UNSW Arts, Design & Architecture. 

How much have rents gone up? 

Research has shown that the national average of asking rents has increased by 11 per cent in the last 12 months. Renters in Sydney have seen the median average weekly rent for new tenancies soar by 20 per cent over the past year to $650 per week.  

“When properties are re-let, a new tenancy commences and 95 per cent are getting a higher rent than for the previous tenancy,” said Dr Martin.

“Most are going for at least 10 per cent more than previously let. About 75 per cent of properties with existing tenancies have recorded rent increases over the past 12 months, and about 25 per cent are getting increases of more than 10 per cent.” 

With statistics such as these, Dr Martin said a rent freeze, and a subsequent rent cap, would protect existing tenants from rents rising to similar levels.  

Dr Martin explained that significant rental increases are a crucial price signal to property owners. This should encourage the supply of new rental properties, ideally from sources outside the existing stock, such as newly constructed dwellings or currently unused and underused properties like second homes and Airbnb listings.  

“The goal is to expand the rental market by increasing available housing options.  

“That price signal is currently going into the existing stock; as landlords increase rent prices, tenants are being pushed out of their existing homes. That brings the property to the market but also means there’s another tenant looking for a lower-cost rental property or are being made homeless.  

“By regulating rent increases for existing tenants, the price signal from the new tenancy market is directed into sources of genuine new supply,” said Dr Martin. 

This approach aims to ensure that the rental market expands in a sustainable manner while simultaneously addressing the immediate needs of tenants facing displacement and housing instability.  

Rent freeze policy pitfalls  

While the rent freeze policy is designed to alleviate financial stress on renters, crucial questions remain about the impact on landlords.  

With interest rates on the rise and mortgage repayments increasing, the policy could have serious implications for homeowners.  

Dr Peter Swan, a Professor in the School of Banking & Finance at UNSW Business School, said the rental crisis would become “far worse for tenants and landlords” if the policy came into force.  

“While it is true that tenants who are not evicted may gain temporarily, tenants as a whole lose as rental accommodation is withdrawn, fewer new places are provided, and maintenance of rent-controlled housing deteriorates.   

“Rental rates rise due to restricted supply, while landlords with sitting tenants suffer. Eventually, a black market evolves with ‘protected’ tenants unable to move and with the rampant use of sizeable ‘key money’ paid by prospective new tenants.   

“The latest version of the Residential Tenancies Act 1997 in the ACT reveals that pre-existing rent control in Canberra has doubled in its severity in 2019.  It now limits rent increases to no more than 10 per cent above the increase in the rent component of the ACT Consumer Price Index (CPI). It was previously 20 per cent.   

“As a result, it has left some landlords no option but to sell their properties, leaving evicted tenants back on a tighter rental market.” 

Prof. Swan explained how another example can be seen in the Californian Tenant Protection Act of 2019, which imposed a 10 per cent cap on rental increases.   

According to a 2018 analysis by the National Bureau of Economic Research (NBER) on San Francisco legislation, rent control resulted in a 15 per cent reduction in rental supply as landlords converted their properties to exempt building types, subsequently causing a 5.1 per cent rise in rents.  

“The repercussions of these circumstances result in a significant portion of tenants being at risk of eviction and will face the challenge of re-entering an increasingly competitive rental market, where they may be required to pay, effectively, a substantial increase in rent in the form of a bribe to secure a new place.  

“Interest rates will persistently climb until we align with the rates of countries like the US, UK, and others. As a result, these escalations will lead to even higher rental prices and if restrictions were imposed on these unavoidable increases, the current inventory of rental housing will diminish even more,” said Prof. Swan.  

A possible solution: adopting other rental practices  

The rent freeze policy has both positive and negative implications, and it has prompted the need to examine the delicate balance between the needs of renters and the challenges faced by landlords.  

“The solution to the crisis lies in boosting the housing supply. However, governments and councils commonly exhibit significant reluctance when it comes to permitting new developments or streamlining bureaucratic processes plagued by excessive regulations and prolonged delays,” said Prof Swan.  

However, governments and councils often hesitate to approve new developments or streamline bureaucratic processes, which can create housing supply bottlenecks. This begs the question: should we turn to international renting practices and consider alternative methods?  

Dr Martin said: “All these variations on rent regulations should be on the table. 

“Scotland implemented a rent freeze in September 2022, and in April 2023 moved to a rent cap of 3 per cent, in most cases. For years, most Canadian provinces have had rent caps - called ‘guidelines’ there - that limits rent increases to a certain percentage rate set by the government. 

“Ireland has a system of ‘rent pressure zones’, if a local government area records increases in median rents above a certain threshold for successive quarters, a cap kicks in, currently 2 per cent, and not more than once in 12 months.”  

Cartoons of the Week

Matt Golding

 

Cathy Wilcox

Under a Biosecurity Control Order Yamba prawns off the menu until June 2025 as Clarence Valley regional economy takes a hit

 

The Clarence River Prawn Trawl Fishery has been highly productive since its beginnings in the 1880s, with Yamba and Iluka in the modern era being the home ports of the largest prawn trawling fleet in New South Wales [NSW DPI, April 2022] which has a reputation for landing approximately half of the total annual catch of school prawns in the state and is an integral part of the Clarence region seafood industry worth estimated $40-60 million annually.

The total ban on prawn movement out of the Clarence River estuary since 16 February 2023 after White Spot Syndrome Virus* was detected in three northern NSW prawn farms, whilst a vital biosecurity measure, comes on top of flood impacts on the Lower Clarence estuary in 2022 and will inevitably affect the Clarence Valley's Gross Regional Product (GRP) bottom line.

As professional fishers tend to spend most of their income locally, there is likely to be a flow-on effect on businesses in Lower Clarence River commercial precincts.  

Note: White Spot was first detected in NSW in August 2022 & eradicated in September 2022, according to NSW Dept. of Primary Industries. The disease poses no risk to human health.

According to the Fisheries Research and Development Corporation (RFDC):

The Clarence River Region is known for its high-quality prawn markets. The region was kept profitable during COVID restrictions due to a significant portion of the fisher directing its product to the highly profitable bait market. This diversification away from the consumer market has ensured stability for the region. Many fishing businesses pivoted their strategies to meet this new buyer to the region. The loss of the uncooked prawn market in the Clarence region will therefore destabilize the industry.

Clarence Valley Independent, 21 June 2023:

Prawn trawlers will be locked out of the Clarence River for two years as part of a $21.4 million NSW government biosecurity response and recovery plan from White Spot, which has devastated the multi-million-dollar industry.

NSW Chief Veterinary Officer Dr Sarah Britton said a critical component of the plan is the long-term measures to help drive business and trade continuity in NSW and other parts of Australia.

“A number of new and enhanced on-farm biosecurity measures will be essential in ensuring businesses can continue operations safely and securely,” she said.

“These measures are set out in a new Control Order, which includes the continuation of current restrictions on movement of green decapod crustaceans from the existing Clarence River Control Zone for two years.”

Minister for Agriculture Tara Moriarty said the funding is for both the ongoing biosecurity response to White Spot and a targeted assistance package for industry.

“Biosecurity is the number one issue, it presents the most significant threat to our primary industries sector – as well as our economy, environment and communities,” Minister Moriarty said.

“This investment recognises the critical importance an effective response to White Spot has on prawn fishing, farming and trade in Australia. It acknowledges the efforts of fishers and producers from the Clarence River region to the ongoing eradication effort and aims to ensure their ongoing contribution of the local fishing and aquaculture industry in the region.

Ms Moriarty said biosecurity experts had contained the spread of the virus, which poses no threat to human health.

“Biosecurity and fisheries experts from NSW Department of Primary Industry (DPI), working closely with local and national industry, have managed to contain the spread of the virus and are now working to support industry maintain and implement biosecurity measures that will minimise potential future introduction of white spot.

“The DPI recovery team has been on the ground since the first detections of White Spot and many affected fishers and producers have presented options to the team which have been considered when putting this plan together.”

Ms Britton said the plan will see new surveillance measures implemented to protect the industry.

“This approach will help support NSW work to implement nationally agreed surveillance to demonstrate freedom and underpin future market access,” she said.

“White Spot poses no threat to human health and NSW prawns remain safe for human consumption. NSW prawns are available from local seafood suppliers.”

The plan includes:

* $5.4 million to help secure the future for Clarence River prawn fishers

* $1.5 million to help prawn farmers upgrade their operations to better protect the environment

* $309,000 rent fee waiver for the Clarence River Fisherman’s Cooperative

* $82,000 rent fee waiver for mooring fees for the Clarence River prawn trawlers

* $165,000 in waivers for all DPI Administration fees for affected prawn fishers and farmers

* $700,000 to waive interest payments for Seafood Innovation Fund Loans

* $1 million in surveillance and diagnostic activities

* $105,000 for the mental health ‘Stay Afloat’ program

GCB Constructions not out of the woods yet? Still no completion date for Uniting's seniors living development in Yamba.

 

Artist's rendition of planned Uniting retirement/seniors living complex

IMAGE: CVC/Clarence Valley Independent, 30 October 2019

In 2020 the Uniting Church announced the extension of its “Caroona” aged care residential facility in Yamba to include a co-located complex of 34 villas and 50 one, two and three-bedroom apartments with a recreational area.

The building contractor chosen GCB Constructions Pty Ltd (located in Brisbane, Gold Coast and Lismore). Presumably because Uniting was satisfied with the previous 12 bed hostel build.

Work ceased on the complex sometime in early 2023 as GCB’s financial difficulties became apparent.

By beginning June GCB was facing “facing multiple court actions from suppliers, including a wind-up action”, however a spokesperson stated “GCB Constructions maintains a solvent position despite cashflow restraints.” “... we expect to have the majority of our teams back on site over the next week or so”.

Nevertheless, it does not appear that GCB Constructions has returned to the Yamba site, as the yet to be fully completed build remains silent and absent of noticeable activity.

On 21 June the Clarence Valley Independent described the situation as Uniting Yamba Road development in limbo with an accompanying photograph of the 50 apartment section of this development.

IMAGE: Clarence Valley Independent, 21 June 2023.
Photo Rodney Stevens

 

It seems that a number of Ballina Shire councillors are about to show an ugly side

 

Ballina Local Government Area covers 485.6 sq. kilometres with an estimated 46,760 local residents (ABS ERP 2022).

A conservative estimate is that 1,824 men, women & children in this local population are of Aboriginal & Torres Strait Islander descent, with the majority being from First Nations family groups who have lived in the eastern Australia coastal zone since time immemorial.

There are many people living in Ballina today whose families have been birthing their babies and burying their dead in this local government area for tens of thousands of years and they don’t deserve either the level of cultural insensitivity or the false historical narrative of Australia Day celebrations being held on 26 January every year to commemorate the invasion of their country and the subjugation of their families, by an arrogant British Government on the other side of the globe.

However, some Ballina Shire councillors have tin ears and it seems a steely resolve to perpetuate the type of one-dimensional potted 'histories' sometimes found on the back of cereal boxes, lids of gift biscuit tins or sides of shopping bags.

A rescission motion has been put forward for consideration by Council in the Chamber on Thursday 23 June 2023 seeking to nullify Resolution 250523/17:

11.1 Rescission Motion - Australia Day Celebrations 

Councillor Cr Buchanan

Cr Ramsey

Cr Bruem

This is how the the situation is playing out in local media.....

The Echo, 20 June 2023:

Last month’s Ballina Council meeting saw a decision to move the Australia Day Awards and Citizenship Ceremony, to be held at Lennox Head Cultural Centre, from the controversial date of 26 January 2024, to the evening of 25 January. This amendment to an earlier motion was moved by Cr Simon Chate with the support of Cr Stephen McCarthy.

Two conservative councillors allied with Mayor Sharon Cadwallader, Nigel Buchanan and Eva Ramsey, were absent from the meeting when this decision was made. These two councillors, along with Cr Rod Bruem, have since announced that they intend to launch a motion of rescission at this week’s meeting, to return the local ceremony date to 26 January.

As Cr Simon Chate told The Echo, ‘The recission motion is likely to succeed as they have the numbers, with Cr Eoin Johnston and Mayor Cadwallader’s casting vote.

‘There has been strong emailed support from the community for the change of date to the more inclusive and welcoming 25th of January and only a handful of emails supporting the January 26 date,’ he said.

‘In my opinion, if this rescission motion is successful (and barring a miracle, it will be), this is a real lost opportunity for Ballina Council to show compassion and cultural sensitivity to the pain felt amongst many of our First Nations people and their supporters around the January 26 date.’

Simple gesture

According to Cr Chate, ‘Such a simple gesture, to move the awards ceremony forward by about 15 hours, would make our ceremony open, inclusive and welcoming. To rescind it would be narrow-minded and unkind.

‘At every meeting, we stop for an acknowledgement of country and for Council to move the ceremony back to the 26th of January seems dismissive and culturally insensitive.’

Cr Chate suggests that people who agree that the issue is important should contact their councillors. The rescission motion will be debated at this Thursday’s meeting in Ballina.

Australian Bureau of Meteorology (BOM) Outlook for next three months - Part 1

 

There is weather and there is climate.

While we grumble about cold weather and rain this winter, global warming is still inexorably changing Australia's climate as the continent and the oceans around it grow warmer and seasonal rainfalls become more erratic.

La Niña only dissipated in early March 2023 and El Niño was present in the Northern Hemisphere by early June and may be across the Southern Hemisphere before September - the ocean around the Galapagos Islands just south of the Equator is already warming to 20 degrees. It is beginning to appear as if the near average weather pattern period between these two extremes in the global ENSO cycle is beginning to contract.

This is the long range forecast for the next three months for Australia.

Australian Bureau of Meteorology, Climate outlooks—weeks, months and seasons:

Long-range forecast overview

Issued: 15 June 2023

• For July to September, below median rainfall is likely to very likely (60% to greater than 80% chance) for much of the eastern two-thirds of Australia and south-west WA.

• July to September maximum temperatures are likely to very likely warmer than median (60% to greater than 80% chance) for almost all of Australia.

• Above median July to September minimum temperatures likely to very likely (60% to greater than 80% chance) for most of Australia.

• This forecast is influenced by a number of factors, including warming in the tropical Pacific Ocean beyond El Niño thresholds, the potential development of a positive Indian Ocean Dipole, and record warm oceans globally.

Currently Australia’s ENSO Outlook shows El Niño ALERT, which indicates a 70% chance of El Niño forming this year. This equates to roughly three times the normal chance of an El Niño forming.

Rainfall - Totals that have a 75% chance of occurring for July to September

Max temperature - The chance of above median max temperature for July to September

Australia: Sea Surface Temperature Anomaly Outlook – July to November 2023

U.S. NOAA Daily Global 5km Satellite Sea Surface Temperature, 17 July 2023

Click on images to enlarge