In most capital cities the number of residential tenancies continues to grow and will likely outnumber owner occupiers in the future. In addition, residential rents have grown year on year and have resulted in rental stress for many residential tenants.

Government, followed by the media, has turned its focus less than two weeks into the new year from the "housing affordability crises" that first home buyers have been facing in the last few years to tenants' "rental stress" and the need for rental security.

What does this all mean?

Rental security/tenure has now become a social economic issue as the incumbent system with typical tenancy terms of between 6-12 months tenure has not been developed to service the demand for longer term tenancy arrangements, where tenants look to stay in rental premises for five years or more. 

Is the real estate industry that manage near 70% of rental accommodation prepared for discussions around developing a model or product that maybe offered in the rental market place which is designed to ease the burden of some of the housing stress, while at the same time provide an economically sound proposition to landlords by providing longer tenure?

Some have formed the view that demand for such a product would be limited from both landlords & tenants, given that it is likely that flexibility will be traded for security. However could a long term tenancy model be suitable for the minority of landlords and tenants who may see the benefits of such an arrangement via an optional tenancy product based on residential tenancy law coupled with additional flexible added terms that mirrors commercial leases?

What could these terms look like and who do they favour?

The base objectives/terms that may be necessary for this system to be functional could be as follows: 

1.       Optional - That this be an optional agreement to be negotiated between landlords & tenants 

2.       Incentives - Incentives would need to be in place with terms and conditions that outweigh those in the current Residential Tenancy Act 2010. Without these landlords would be resistant to the flexibility available within the current 6-12 month tenancy durations. Incentives could include land tax concessions similar to those provided for low cost housing.  

3.       Flexibility – Any agreement would need to have certain opt out clauses available for both landlords and tenants For example financial hardship or the sale of the asset. Furthermore rental bonds and rent increases would need to be adjusted and indexed and particular repairs and maintenance responsibilities should be placed onto the tenant.

Repeal of outdated laws 

One would think that before looking at the future governments need to look at some antiquated tenancy laws from the past that still exist today. For example in NSW the 1899 & 1948 Landlord & Tenant Act continues to exist today and has not been repealed despite a government inquiry and majority of tenancy stakeholders demonstrating that it has no relevance. It could well be a burden and an obstacle in the market place for landlords fearing a “rent control tenant” situation arising inside a long-term tenancy.

One has to ask of what is the relevance to today’s rental market of such unnecessary legislation that complicates the renting landscape. In future, the aim is to establish a win/win between landlords and tenants and create some certainty and security.

See also:

Is rent control the answer?

Five trends that will shape property in 2017

Residential tenancies legislation set for an overhaul