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Real Estate

10 June, 2021

Looming investment crisis

Private rental investors could exit the market with proposed changes to Tenancy Act

By Peter McCullagh

Aleisha Heyne, First National Real Estate Cairns Central's Rental Application Processor with some of last month's applications

If the rental crisis was not bad enough in Cairns, a Private Members bill soon to be debated in Queensland Parliament could tighten the rental market further rather than easing the crisis.

At the heart of the issue is a shortage of rental accommodation. First National Real Estate Cairns Central reported that last month they had over 400 applications for 19 property vacancies. This trend is repeated throughout the industry Queensland wide.

The Queensland Greens will introduce a Private Members Bill to Parliament changing the legislation governing tenant’s rights in residential tenancies.

The Real Estate Institute of Queensland (REIQ) has described these proposed reforms as ludicrous as the bill is a recycled policy position from years ago disguised as a necessary response to the current tight vacancy conditions.

Some of the proposed rental reforms included in the Bill include:

• Capping rent increases to once every 24 months and by no more than CPI annually;

• Scrapping “no grounds evictions” thereby preventing owners from being entitled to end a fixed term tenancy at the end of its agreed term;

• Restricting owners’ rights to end tenancies, effectively allowing lessors to give a notice to leave only on the grounds of required occupation by the property owner (or owner’s close family) or on account of major renovations to be made to the property. The Bill also excludes the right for owners to issue notices to leave where they intend to sell the property;

• Banning rental bidding; and,

• Allowing tenants to make property alterations without permission from the owner.

Of greatest concern in the legislation is the removal of the owner’s right not to renew an expiring tenancy at the end of the agreed term. This could allow the tenant to remain in tenancy indefinitely and for as long as they wish, unless the owner can establish one of two grounds for the tenant to move out. 

Effectively, an owner could only issue a notice to leave if they or a family member intends to occupy the property or if major renovations are to be made to the property.

Antonia Mercorella, CEO of the REIQ explained the impact this proposed legislation would have on the investment housing market.

“This reform has been cleverly disguised by the Greens as the abolishment of ‘without grounds terminations or evictions’,” explains Ms. Mercorella.

“What they’re describing is inaccurate and misleading because under Queensland law, lessors cannot evict tenants for no reason during a fixed-term tenancy agreement. By tying the hands of lessors behind their backs, what the Greens are really seeking is for tenants to have the right to stay in a property until it suits them, to make modifications as they please and keep pets in the property without seeking consent.

“Meanwhile, lessors won’t be able to even request tenants pay market rent.

“As a result, no lessor will choose to invest in Queensland property under these proposed laws.  Investors have a range of options open to them, including shares and other asset classes. If their rights to manage an investment property are removed they’ll simply choose to invest elsewhere.

“What we need is a regulatory framework that provides security for both tenants and lessors. A balance must be found but it won’t be if the Greens have their way.”

Access to affordable, safe housing is a basic right. Cairns is in dire need of additional rental housing. The currently of interstate migration to Queensland is stretching the housing market as well as causing timber supply issues for builders state-wide.

Ram Singh, Director of Five Rivers Construction in Cairns is feeling the effect of this timber shortage. Currently they have 16 houses under construction and a further 25 awaiting commencement.

“The supply of timber is slowing our construction and impacting upon our construction times.

“We have the ability to increase the number of houses under construction if we could source a steady and affordable supply of timber.

Greens Members, Michael Berkman & Amy MacMahon Parliament

“This is not just impacting us, this is a Queensland and Australiawide timber shortage,” Mr Singh said.

The Bill is due to be introduced into Parliament by its sponsor, Member for South Brisbane Amy MacMahon, who believes it is a function of government to invest more in public housing.

“We’re pushing for the Labor government to invest in building 25,000 new public homes a year. Not only would this go a long way towards solving the housing crisis, but it would create tens of thousands of steady construction jobs.

“But Queensland is unfortunately still a long way off from having an adequate supply of public homes. Most low-income renters currently rely on the private market for housing, and will do so for years to come, so it’s crucial that we act now to strengthen our rental laws to make renting more affordable and fairer,” Ms MacMahon said.

David Forrest from First National Cairns Central believes it is important to protect not only the tenants but also the owners who invest in providing rental accommodation.

“The private sector does a great job of providing and managing rental accommodation, I do not see heavy government investment in this area as an answer – the taxpayer should see better value than supporting government housing that has not had a particularly good track record.

“We need to protect and encourage private investment, if private investors exit the market the accommodation shortages will only increase, making the current situation worse.”

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