Kamis, 11 Maret 2010

Fixed term agreements

Another chart from the ABS's treasure trove of data on Housing Mobility and Conditions, this time on the proportion of tenants who have a fixed term agreement, and the lengths of those fixed terms, for each Australian State and Territory and Australia overall.

(Source: ABS Housing Mobility and Conditions 2007-08, table 29. Click on the image for a better view.)

It's interesting to speculate as to the reasons for the variation between the States and Territories – particularly New South Wales having both the lowest rate of fixed term agreements and the lowest rate of 12-month fixed terms.

Because tenancy agreements usually begin with a fixed term, part of the explanation may be mobility and turn-over of tenancies. Elsewhere in the ABS's data, the two jurisdictions with the highest rates of fixed term agreements – the Northern Territory and Queensland – are shown to also have the highest average number of moves by households... but then again, New South Wales is about average on that score, not last.

Another reason might just be the different practices of agents in different jurisdictions. I know the Tenants' Union of Queensland is concerned that agents there are increasingly asking tenants near the end of a fixed term to sign up to another – and threatening them with termination notices if they don't – apparently the idea being that tenants who move will do so in breach of a fixed term and therefore be liable to compensate the landlord for loss of rent until a new tenant comes along.

I'm inclined to think that there's no one reason, and there may be just as much variation within jurisdictions as between them.

On the other hand, though, one could also say that the graph shows a strong consistency between the various States and Territories – in particular, that very few tenancies are for terms other than six or 12 months. In the debate about housing affordability, you often hear suggested that wouldn't it be good if there were more long fixed term tenancies. As the graph shows, it's an idea that has virtually no basis in current practice.

And for good reason: long fixed terms can be burdensome and expensive for tenants, as more and more Queensland tenants are apparently finding out, and in a rental market that's dominated by small landlords (most Australian landlords own a single property) who don't trade on their reputations, you'd have to be brave to enter into a long fixed term with a landlord you did not already know well.

And long fixed terms don't fit well with the objectives of all those small-holder landlords either – I'm sure many don't want their sole asset tied up with a long fixed term, especially if their main game is to sell when it suits them, including into the owner-occupied market.

That's the main cause of the insecurity of renting, and it cannot be fixed without a fundamental reform the structure of ownership of rental housing. That's quite a job. In the meantime, we seek a much more modest reform to our renting laws in the name of security – abolition of 'no grounds' terminations, and their replacement with certain prescribed reasonable grounds for termination. This sort of reform would not entail or effect a change in landlord's investment objectives, but it would prevent unfair, abusive, discriminatory or retaliatory terminations and give all tenants at least a little more peace of mind.