By Karl Hoerr -
A pre-election commitment to end no grounds evictions in NSW is a step closer to being realised, after the NSW Government recently announced it would proceed with the pledge.
The proposed reform is aimed at making the system fairer and comes at a time when a growing proportion of the state is living in rental accommodation – now sitting at 33 per cent.
Some details have been announced, including the reasonable grounds that homeowners will have to establish to evict someone and the notice that will be required.
But penalties for breaches of the new law, have not been revealed. And there are other aspects of the reform that are yet to emerge.
So will the changes answer the calls made by tenancy advocates or open up a series of unintended consequences?
What has the NSW Government announced?
At the moment, owners can end a periodic lease at any time, for no reason. The NSW Government says this can create a sense of insecurity and financial pressure for tenants.
Tenancy advocates have also argued the existing arrangements make tenants less likely to assert their rights, including rights to repairs.
Under the change, homeowners will have to have a reason to end both periodic (no agreed time) and fixed term (agreed time) leases. Those reasons will include where a tenant has breached the lease by causing damage or failing to pay rent; if the property is being sold; is undergoing significant repair or renovation; will no longer be rented; the owner/family is moving or if the tenant is no longer eligible for affordable housing.
Leo Patterson Ross is the CEO of the Tenants’ Union of NSW, which has long argued in favour of the policy. Broadly speaking, he welcomes the announcement. But he is awaiting further details about how the new rules will work.
“These reasonable grounds will all have slightly different evidence requirements, different conditions on how quickly you can re-let the property,” he says.
“And that will really determine how trustworthy, how genuine people will consider the notices.”
A bill is expected to go before the NSW Parliament in September, with the law expected to come into force in early 2025.
What happens if someone is unfairly evicted?
The NSW Government has said it will engage with stakeholders on the reform. “Bad tenants will still be able to be evicted,” said Premier Chris Minns. “But anyone who rents in NSW knows just how anxious and challenging renting can be at the moment,” he said.
The NSW Rental Commissioner and NSW Fair Trading recently noted the average tenancy period for property is 1.6 years, despite people renting for longer. Around 300,000 bonds are processed every year. And 35 per cent of renters are experiencing rental stress, meaning more than 30 per cent of their household income is going on rent. The figure is more like 50 per cent in areas such as Western Sydney.
The penalties that will apply to those in breach of the law have not yet been laid out. “In order to make sure that (the grounds) are genuine, there needs to be some consequence for trying to gain the system, for essentially trying to deceive your way through it,” says Patterson Ross.
“There’s only a small number of people who’ll attempt to do that, but it is important that it’s there for the integrity of the system as a whole.”
Will it actually make matters worse?
Critics of the policy have warned it will make the plight of renters even worse, because it will drive investors away from the property market. In response to the announcement, the Real Estate Institute of NSW (REINSW) said the reform only serves to divert attention from a failure to provide more housing and encourage investment.
REINSW CEO Tim McKibbon described it as a “cruel irony”. “Investors can put their money into shares, commercial property, fixed interest and other alternatives. For them to chose residential property, it has to be the most attractive option,” he said.
Leo Patterson Ross says similar arguments were made about previous reform and the evidence from overseas does not support the concerns.
“Which suggests that it might just be a convenient scare tactic rather than anything that’s based in evidence that we should take very seriously,” he says.
Overall, Patterson Ross describes the reform as well designed., but says the detail will be key.
“The design of the evidence requirements, the way that people can scrutinise, the consequences for misleading, will be the thing that makes this an effective or ineffective reform.”
