We need to talk about the landlord

This piece was originally published in the Parity edition 'Tenancy and Tenancy Reform in Troubled Times: Covid-19 and Renting'. Parity is Australia's national homelessness publication. It has been lightly edited for this version.

Recently in Sydney, a landlord showed up at a tenant’s door with a ‘friend’. He claimed the tenant was short on rent. The tenant claimed that the two had done exactly as the government asked and negotiated a rent reduction plan. The pair of unauthorised visitors forced their way in to the premises and allegedly assaulted the tenant until they transferred the disputed money across.

The appalling assault in the middle of a pandemic is an extreme example of bad behaviour and a person who should fail any character test, an important feature of many licencing schemes. We can certainly contrast it with a person who, facing the prospect of retirement with Australia’s insufficient government pension, decides to sink what money they do have into an investment property in the hope that it will provide them with some financial security as they age. They may decide to invest this way because of a belief that property investment is safe, easy and even ethical.

As the last five years has been dominated by the review of tenancy laws in New South Wales (NSW) I have spent many hours thinking about the fundamentals of our regulatory system. My colleagues and comrades have written about some other aspects of the review in this issue (here and here), but one thing keeps coming back to me and COVID‑19 has only strengthened this feeling. We don’t only need to talk about the relationship between tenants and landlords – we also need to talk about the landlords themselves.

A key flaw exposed through the response to COVID‑19 is the profile of those who act as landlords in Australia. They are heavily indebted. They are mostly without training or expertise. As a result, they were scared and desperate and clinging firmly to the one power dynamic they felt they had control over. The need for a more compassionate response to tenants was as apparent to everyone as were the barriers.

Landlords are as politically powerful as any monopolists within a market system, especially over as essential a service as shelter, but in a way that is largely dormant. It is the spectre of their power rather than their actually expressed desires that keeps government from acting to implement sensible tenancy reforms. Their interests are asserted most commonly by real estate agent representative groups who either assume or dictate back to them what they should think. In conversation, and in the rare polls that identify property status, it is clear there is often a diverse range of views, including people who agree our rental frameworks are insufficient but feel they lack the voice to effect change.

The fundamental model of the Residential Tenancies Acts which spread across the country from the 1980s onwards is a consumer protection framework that uses the contract between parties as the key regulatory tool. While contracts are routinely the basis of our relationships with each other unlike in the provision of healthcare, energy or education there are no standards that assign who can provide an essential service.

Many landlords, indeed many Australians, have been sold an ideal around property ownership. Nearly 70 years and in a range of ways of being told property is the way for you and your family to achieve wealth will do that. However, if they are not adequately advised and prepared for the potential risks and pitfalls of property ownership, they too may struggle to comply with their obligations both legal and societal.

The repairs may not get done, or get done on the cheap – I recall an s‑bend in one of my homes that was closer to a cursive ‘w’ because it was created using ill‑fitting off-cuts. A heavily indebted or financially vulnerable landlord during COVID‑19 may claim that they can’t afford to reduce the rent any further without jeopardising their ongoing ownership of the property and their future independence from government. But we must ask them to acknowledge that this is a risk they took on, and that no matter any claims of independence, they are in fact receiving large amounts of both government and community assistance to grow their wealth. That assistance should come with social responsibility, even beyond the legal contract.

To be a landlord, all a person needs is legal power over a property. They do not need to know anything about the property – they need never have even visited it! They don’t need to know anything about the Residential Tenancies Act — they need never have even read it! Indeed, as entrepreneurial head tenants have shown, they need not even own the property they control.

Collectively, they receive more than $43 billion a year in rent but, beyond the obligations in the tenancy contract, have no obligations to ensure they have sufficient cash flow to cover legal obligations like repairs and maintenance. Tax records show that the average spend on repairs is little more than six per cent of the rent collected. We are rightfully outraged at the size of the maintenance backlog in public and community housing, but many of us shrug on learning that more than half of Australia’s rental properties are in disrepair. We have been trained to accept such poor service. Given a typical landlord in Australia collects more than $20,000 a year in rent for their service, this is jarring.

It is time for Australia to seriously consider licencing and directly regulating its providers of housing. If we are to continue our private rental sector, then we need to ensure the providers are actually capable of delivering the essential service of housing.

There are substantial benefits to a register and licencing system. Such systems are being rolled out across the United Kingdom and we can see both the benefits and the lessons learnt.

Responsibility

‘What about the agent?’ I hear some ask. Well, about 70 per cent of individual landlords report using one – meaning 30 per cent don’t! But agents act for their landlord, who is their client and they are bound to act in their interests. While they are at least theoretically bound by professional standards they are also not their landlord’s keeper – an agent can’t force a landlord to carry out repairs.

It is necessary to be clear about the lines of responsibility, and the buck stops with the landlord.

As with any licence holder, there would be nothing preventing a delegation of work to be carried out. A landlord who chooses to hire an agent is clearly still responsible for the actions their agent carries out. Agents have their own licences and separate responsibilities – mostly around financial obligations to their clients.

Transparency

At the height of COVID‑19 I knew of at least three separate groups designing new ‘landlord databases’. They join the long line of similar endeavours over the years, with only a few managing to operate for long.

At their root, they are all attempting to address a frustration of renters – it is nearly impossible to know your landlord before moving in (it remains difficult enough once you have moved in!). You agree to a contract with many thousands of dollars a year, without any information about the other party beyond a name. What is their approach to repairs? How have they treated other tenants? These questions are nearly impossible to answer.

A licencing scheme would allow for much greater transparency. Complaints made can be seen, and responded to through improved behaviour.

Data

Transparency comes along with new data sets that we can use to properly understand our private rental sector. As a community we do know slightly more about our landlords than we do as individuals, often from tax data, but it is often murky leading to policy decisions being made blind and without regard to actual outcomes.

This might particularly be useful given the very fluid nature of our housing stock that can move from rented to owner-occupied and back again very quickly. One of the key limitations on studies of short‑term letting in Australia has been the difficulty knowing what use was being made of a property prior to being let. We see the other end of this now during COVID‑19. Many operators of short‑term holiday lettings appear to have listed their properties for lease, but only for short three month agreements while they bide their time for the market to turn. It currently would take enormous effort to track this dynamic. A register would make this simple.

We can also track expenditure of government interventions such as First Home Owner Grants or HomeBuilder. How many of today’s first ‘home owners’ become tomorrow’s landlords? How many renovations by owner‑occupiers are on properties that were tenanted a month ago and will be again within the year?

What’s in a Name?

Moving towards a framework of licensed, capable and responsible property investors might finally and genuinely open the door to moving away from the landlord moniker. This is a hot topic but I find myself a descriptivist – words describe what is, rather than what we might hope a thing becomes. As long as a person holds and acts out the power of a lord controlling their domain then the landlord moniker will stick.

We saw this in Victoria’s long‑pending tenancy regulations that refer to ‘rental providers’ but daily conversation has not adopted that language. The stickiness is because the focus of the interaction remains on what profit can the landlord extract from their ownership of land, whether through rents collected or future sale. It is not genuinely about any service being provided.

It is no longer sufficient to leave the provision of housing in the hands of people who are simply unsuited to the important work they are responsible for. Housing is an essential service. Service providers should be acknowledged and should be held to account.

For more info on renting in NSW during COVID-19, see our Renters' Guide to COVID-19.