Only The Sangfroid

Mark is of fair average intelligence, who is neither perverse, nor morbid or suspicious of mind, nor avid for scandal. He does live in an ivory tower.

These are his draft thoughts…

Quick Post: Notes on housing, residential tenancy law, and property managers

A rather good article by Slate and thread on Twitter by Henry Grabar about the housing crisis in the United States prompted me to procrastinate with some notes of my own about the situation in Australia.  The unifying theme between the Australian and North American arguments is the need to think through the history of how we arrived in our situations.  There is a tendency to look at housing problems as a ‘view from nowhere’ problem: a problem has emerged and now we need a solution.  The Grabar article and thread show part of the pathway to the current situation in the United States, and also show how things have worked (to greater or lesser extent) in the past.

The history of residential tenancy law in Australia is very different from that of the United States.  The United States has had a history of extremely varied living arrangements that we have not really seen in Australia.  The history of tenancy law in Australia, on the other hand, was about controlling rents and evictions; it was comparatively recently that tenants were considered consumers who should enjoy consumer protections.  Between 1978 and 1999, States and Territories began to codify residential tenancy law with greater protections for tenants.  Tenants were paying for a service; there should be protections that recognise their status as consumers.  Recent shifts in discussion about residential law reform have had a focus on improving the lot of long-term tenants, but I think this overlooks the unfinished work of consumer protection.

At each point in the development of residential tenancy law in Australia, landlords (represented mostly through real estate agent peak bodies) have tried to characterise greater rights for tenants as an attack on landlords.  This dynamic has always been extremely strange.  Ask service providers in other sectors and you ordinarily hear a very different narrative: consumer rights aren’t the problem; shady competitors are the problem.  Why?  Because consumer rights get rid of the competitors who try to compete in the market with substandard products.  Think about minimum standards for a property: who does this affect?  If you’re a landlord who has a property that is warm during winter and cool during summer, what do you care if tenants now have the right to a property that is warm during winter and cool during summer?  You don’t.  This is only going to hurt landlords who have properties that freeze during winter and cook during summer.  Why would anybody want to protect that landlord?  Further, if you bought a heater from Bunnings and it failed to heat up an area, you could return it for a refund for being defective.  If you pay money for the right to a tenancy, why should you have fewer rights than if you bought a heater from Bunnings?

Landlords do not provide properties; they take rents.  Property managers are paid by taking a slice of tenants’ salaries and, yet, instead of hearing ‘Yes, sir.  Sorry, sir.  Three bags full, sir,’ I hear aggressive threats, defensive retaliations, and outright lies about residential tenancy law from property managers.  This is a bizarre situation.  I should be treated like a little king, paying for this whole system to exist: I am the only person in this dynamic who actually works for their income with everybody else parasitically feasting from my wallet.  Instead, dealing with property managers is like pulling teeth: a dynamic informed by the fact that I need a roof over my head while they get their salary regardless.

Residential tenancy law in many ways is still better suited to agrarian economic structures than the modern world.  A tenancy is a property right: the landlord (or their agent) has no right to enter the property unless by permission.  But cultural understanding of that property right has been steadily eroded in favour of landlords.  Even now, I have to ask the landlord’s permission to install disability supports or safety adjustments.  It’s my property!  Until the end of the tenancy, it is my property.  The landlord only has the right of reversion at the end of the tenancy.  The landlord shouldn’t be allowed to say shit about what colour the walls are, whether I have pets, if I have children, or where I can smoke in the property.  It is the same relationship as if a likely future owner of the property could somehow get the right to tut-tut the current owner of a property about their choices.

I’m not even joking.  We are aware of situations as recent as 2010 where landlords (in reality: property managers) radically misunderstood the purpose of a legal provision to avoid overcrowding and applied it in such a way that tenants couldn’t have children that didn’t exist at the start of the tenancy.  If that sentence seems bizarre, it’s because it’s an outright bizarre situation.  Imagine commencing tenancy breach action against a new parent, or against a family that just fostered or adopted a child.  Congratulations, you’ve just imagined what it would be like to be a property manager.  In some jurisdictions, it was even possible (prior to legislative reform) to outright ban children in the property; real estate peak bodies opposed the reform, and property managers had to be brought–kicking and screaming–to the realisation that this was appalling discrimination.  Remember: they’re the ones lining their pockets from the salaries of tenants, and they’re treating tenants like this.

In the 1970s, there was a recognition that tenants were increasingly from disadvantaged backgrounds.  The development of legislation thought in terms of consumer protections: an individual would get rights against the service provider.  The major problem emerged that tenants who tried to enforce those rights would be punished by service providers (in this case, property mangers) through ‘tenant blacklists’.  The problem got so severe that the use of these blacklists had to be regulated, but it is not uncommon for modern tenants to hold folk-legal intuitions about their draconian use.  The threat of the blacklist is enough to stop some tenants from exercising their rights, even when the property manager has grossly breached the law.  But the bigger problem was harder to see: this model relies upon the individual tenant being able to enforce their rights against somebody who has the option to make them homeless.  There was both a power disparity and an information disparity: tenants regularly did not know their rights.

Over the past twenty years, there has been a shift in the demographics.  We now have larger numbers of Millennial professionals as tenants instead of as property owners.  The market is unusual: we have tenants whose rents exceed what the same person would pay in mortgage repayments on a property of their own.  So why aren’t those tenants moving into their own properties?  Because they can’t save the deposits because the rents are so high.  In Australia, we have places where the cost of a deposit is increasing significantly faster than increases in salaries.

If the markets were working properly, the upper end of the tenant market would be moving into the lower end of the property ownership market.  This is the optimal situation for everybody: fewer upper-end tenants means downwards pressure on rents and more lower-end owner-occupiers tend to renovate ageing housing stock, improving the overall quality of the housing supply.

But the market isn’t working properly.  Instead of going to an owner-occupier, those properties are going cheaply to prospective landlords who want to farm rents from ageing housing stock.  Again, the question is why we’re protecting the rent-farmers and not young owner-occupiers who are better for the economy and the environment (through their ability to make energy-saving improvements to the home).

Return to the tenants: one of the reasons that property managers have been able to get away with poor treatment of tenants is that it was largely invisible to other demographics.  The shift in demographics has changed this, and people are seeing how property managers treat the most vulnerable people in society: extremely badly.  We now have very well-educated tenants locked out of the property market and property managers who–as a category–tend not to be well-educated.  And yet it’s not resulting in a shift in property manager behaviour.  Why?  Historically, if a property manager rocks up at the front door and says that they’re having an inspection, the tenant has not been able to avail themselves of statutory protections to prevent it.  Now, even well-educated tenants have to weigh up the costs of making use of those protections.  Not only is there the perceived threat of the tenant blacklist (even though it’s not a live threat), but property managers frequently retaliate in response to tenants making use of their rights, and a tenant is likely to get exhausted trying to protect their rights.  It ends up not being worth it.  Let’s say an hour of my time is worth $40; dealing with a dispute might take 10 hours.  Would I prefer to win the dispute (for which I might not receive any compensation) or have $400 of my time?

The main strategy of the property manager is to frustrate complainants: they are betting that 90% of people they piss off will simply think it’s not worth their time to pursue their rights.  The most obvious instance of this is with bond refunds at the end of a tenancy.  As best as I can tell, most bond claims by property managers are indistinguishable from theft.  They’re of small amounts that are frustrating to contest, but also framed in a way to suggest that the tenant has the obligation of disproving the claim rather than the legal reality: the obligation is on the property manager to substantiate both the cause of the claim (that is, that the damage is not mere wear and tear) and the quantum (that is, the damage suffered by the landlord).  I’m aware of multiple instances where claims were made for damage that was indistinguishable from wear and tear and where the amount claimed was simply imagined rather than based on quotes or actual cost to remedy.  We talk regularly of wage theft, but the theft of bonds is a blatantly unlawful theft of money from tenants in favour of landlords, and it is done specifically because the system is not policed adequately.

The current advocacy in the tenancy space is to protect long-term tenants.  We have debates about abolishing ‘no cause’ tenancy terminations and improving the quality of properties as tenants are unable to effect these improvements themselves.  There is an extent to which this rhetoric is merely surrendering to the monster of the property market: we accept that many Millennials will never be home-owners, and so we need to tweak residential tenancy law.

I argue, instead, that there is unfinished work from the 1970s: the consumer protection model only works if the consumer actually does end up with protections that they can use and rely upon.  But the current approach depends entirely upon the capacity of the individual tenant rather than systemically ensuring that property managers are behaving properly.  Bond is the clearest example: why does the fox have the key to the chicken coop?  This should be policed.  If there is clear evidence of non-compliance with the Act (which there regularly is), then it should not be on the tenant to enforce their rights but on the State to sanction the property manager.  But the bond is not the only place that needs policing.  If a property manager rocks up with the keys to my property to do an inspection when they haven’t obtained consent, I should be a telephone call to an Authority to have them sanctioned.  I know for a fact that a real estate company here still has my bank details on file from an application that was not approved.  They are sitting there with a honeypot of private information from people who were never their tenants.  I’m aware of one case in the ACT where it seems very likely that information given to a real estate agency by a prospective tenant was used for identity theft.  Nobody is actively policing this.  I’m aware of a rental payment app used by a real estate agency that I am fairly confident breaches the Act by charging ‘dishonour fees’ if payment doesn’t go through as scheduled.  Nobody is actively policing this.  Real estate agents gave a third party keys the to a tenant’s home when they hadn’t obtained the correct consents.  Why is this profession escaping proper regulation?

If I’m paying a small fortune in rent, I expect to get basic protections and to have the industry properly regulated.  The current framework is disgraceful, and real estate agents are playing cowboy because they know nobody is policing them.


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