Selasa, 26 November 2013

Three ways to pay, and locked out twice...

We've been watching a bit of shift, of late, in the way house price movements are being reported. There's a growing concern that first home buyers are disappearing as house prices heat up, the booming housing market is leaving first home buyers behind, and that a housing crisis has locked out Generation Rent. There's the usual guff about how first home buyers just need to temper their expectations and save up for longer, and even a suggestion today that housing is as affordable as it's been in a decade - although that last article does at least acknowledge that it is investors, and not first home buyers, who are currently jumping in.


It's an interesting dynamic out there. Despite the emerging sense that first home buyers are mostly all goners, houses continue to change hands, and prices continue to climb. Landlords don't seem to be in short supply, and of course nobody who is selling a house can be heard to complain about the price. But this leaves us in a situation where landlords are locking tenants out of home ownership.

They're billing them for it, too.

There are three ways that they do this. The first is pretty obvious - they charge rent. And as the rent is adjusted, always upwards, to increase the cash-flow or maximise a yield, it makes it just that little bit harder for tenants to put a few dollars aside for a deposit to buy.

The second is pretty obvious, too, and it works in a couple of different ways. Chances are, your landlord has purchased your home in order to sell it down the track, at a higher price than that which they paid for it, because that's how speculation works. In order to do this, they'd like for you to aspire to buy it  - or at least one just like it, so that there is a bit of competition for it when they do decide to sell. And when they sell, your aspiration to buy helps them command a higher price; and if you do manage to buy a house one day - whether it's the one you're renting, or one just like it - you might be expected to pay more than your landlord did. You contribute to their capital gain. Sure, it's not like you're handing them the money directly. You might be hanging onto it, saving for that deposit instead, which just keeps getting away from you as house prices continue to rise. We must concede, of course, that you might have decided to stick with renting after all. If that's the case then you're probably not contributing to your landlord's capital gain. In all likelihood it's other landlords who are doing that, while you continue to fork out the rent.

The third way is a little less obvious - but we've talked about it so often on the Brown Couch that we really need not go through it in too much detail again: the tax system. Your landlord might be negatively geared, and they'll definitely be counting on discounts to capital gains tax when they sell. Neither of these things help to reduce the rent or the deposit burden over time - in fact, they actively increase them... Not only that, but they also mean that governments miss out on a whole lot of tax revenue, that they could be collecting to spend for everyone's benefit. That's kind of like landlords taking a little bit out of everybody's annual tax-return, and sticking it under their mattress.

It's bad news for would-be first home buyers, because it locks them out of that certain level of security that home-ownership is seen to provide... and they're locked out again when it comes to their residential tenancy agreements. That, of course, applies to all tenants - not just those who aspire to buy - because landlords are lawfully entitled to end tenancies in New South Wales without any reason.

Let's not forget that our current laws have taken a step backwards in this regard. Prior to 2010 a tenant could argue, in the Tribunal if it came down to it, that a termination with no reason should not be allowed if that was appropriate in the circumstances of the case. This was the result of a 1997 Supreme Court case, known as the Swain decision, where the meaning of the words "in the circumstances of the case" were considered. These words appeared at the relevant section of the old Residential Tenancies Act 1987, but they do not so appear in the current Residential Tenancies Act 2010. Their removal was deliberate and intentional: it was done at the request of landlords and real estate agents. The Real Estate Institute of NSW are only too happy to take credit for this on their website.

Tenants should not accept this. Laws can be changed. And if landlords are to continue to keep would-be home-owners out of the market - requiring them to rent for longer and at higher and higher costs - then the very least they can do is get out of the way of stronger legislative protections for those who make it worth their while.