Key takeaways
Landlords will soon be banned from evicting tenants without "reasonable grounds" in New South Wales.
The proposed reforms would give homeowners a reason to end a tenancy for both periodic and fixed-term leases, including damage to the property or non-payment of rent.
The Real Estate Institute of NSW (REINSW) has criticized the Minns Government's proposed tenancy reforms, arguing that it will drive more investors away from the market and worsen the already dire situation for renters.
Every day Australian property investors want to make a profit from their private rental accommodation business. The rules and regulations to support their investment and ownership rights adequately, less market intervention by government and regulators, and social and public housing for the most vulnerable.
In fact, landlords could be fined for making up a “non-genuine reason” for evicting a tenant under New South Wales laws to scrap no-grounds evictions.
The NSW premier, Chris Minns, said his government aims to introduce legislation to end the practice in September, fulfilling a 2023 state election promise.
Some of those include existing rules for breach of lease, damage to the property or non-payment of rent.
Other eviction reasons would include a property being sold or offered for sale with vacant possession, a property requiring significant repairs, renovations or demolition, or a property no longer being used as a rental.
A homeowner would not be able to re-list a property for at least four weeks should the eviction be sought on renovation or repair grounds.
The Real Estate Institute of NSW (REINSW) has criticized the Minns Government’s proposed tenancy reforms, specifically the ‘no grounds evictions’ ban, arguing that it will drive more investors away from the market and worsen the already dire situation for renters.
REINSW CEO Tim McKibbin said:
“The Government is trying to frame this reform as tenant-friendly to distract from its consistent failure to provide more housing and attract more investors to make their properties available for rent.
The cruel irony for tenants is that making residential property a less attractive investment drives investors away, reducing the number of homes available for rent.
This isn't just a forecast; it’s happening now.”
Mr McKibbin further explained that in June, the number of rental bonds held by the NSW Bonds Board decreased by 1,251.
Each bond represents a property rented out, so this decline is deeply concerning, especially when the severe shortage of rental accommodation is already causing hardship for many.
He also pointed out:
“Investors have various options like shares, commercial property, and fixed interest. For them to choose a residential property, it needs to be the most attractive option.
Tenants depend on this choice. But currently, investors are net sellers."
The number of investors selling properties is outpacing those buying them.
This trend is evident in near-zero vacancy rates and the growing queues of hopeful tenants at inspections.
According to Mr McKibbin, the NSW Government wrongly suggests that landlords evict tenants without good reason.
In reality, landlords value good tenants because no tenant means no rent, which they rely on to service debt or, for retirees, to cover living expenses.
He noted that:
“By presenting landlords unfairly, the Government is failing both landlords and tenants.
The reform will not improve renters’ circumstances. Instead, it will give investors more reasons to invest elsewhere, leaving tenants with even fewer options.
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The inevitable outcome is upward pressure on rents."
Finally, McKibbin warns that unfortunately, NCAT is likely to see a spike in disputes:
"There are countless personal, health, and other reasons why a landlord might need to reclaim their property.
Restricting their right to do so unless they meet a narrow set of criteria will open a Pandora’s Box."
The Property Investment Council of Australia's response to the proposed reforms
National Chair of PICA, Ben Kingsley was also very vocal regarding the reforms saying:
Governments and politicians are naive if they don't think that some reforms to the current tenancy laws put tens of billions of annual investment dollars at risk in the private rental sector being spent in their state or territory.
Money that creates initial and ongoing jobs and adds critical supply to the rental pool.
Put simply, small business private rental accommodation providers have a choice on whether they invest at all in this sector and, if they do, where they invest in Australia.
Public servants of the day shouldn't underestimate how much their market interventions can inform these investment decisions.
You only need to look at the recent experience in Victoria where significant tenancy reforms, along with higher property taxes have resulted in 15,600 fewer rental properties in Victoria in the past 12 months along, based on reported bond registration data.
Fewer rental properties and higher operating costs equates to higher rents – that's a fact.
If fewer everyday Australians don't believe they will achieve an adequate return on their private rental accommodation businesses, then further pressure will be put on these politicians to cover the supply shortfall in rental housing, resulting in increased government spending and higher government debt, which only results in higher taxes and charges for every citizen of that state, not just the property investor or renter.
As governments realise they don't have the tens of billions needed each year to supply this accommodation, they look to big business or super funds to help with the supply of “Build to Rent” solutions, but the numbers don't stack up.
The return on investment isn't adequate for the cost/risk assessment.
So, these is where market manipulation fails in the real world, and the unintended consequences kick in.
Governments then try to offer tens of millions of dollars of future land tax concessions and the Federal Government also helps out with more 'special' concessions to make the numbers work.
The irony here is that the existing 2.3 million private rental accommodation providers – who have done the heavy lifting for decades in providing the essential rental accommodation needed to help with human capital mobility, economic advancement and society building – get nothing.
No such perks for us.
And we are only in this political position because of the lack of investment into social and public housing over the past 30 years by previous governments.
If any current government, like NSW, is looking to amend no grounds evictions and replace it with reasonable grounds rules, then the results of our recent snap survey should help inform their decision making.
At the end of the day, every day Australian property investors who are currently running or look to set up their small private rental accommodation businesses, they want the following to be true:
- An adequate return for the risk they take with investing and running their private rental accommodation business
- The rules and regulations to support their investment and their ownership rights adequately
- Their tenants enjoy safe and quiet enjoyment of their property for the time they spend accessing it
- Less market intervention by government and regulators which puts at risk their adequate future returns
- Government to supply social and public housing for the most vulnerable and disadvantaged in our community, and the free market to provide the other 90% to 95%.
And in terms of NSW rental property owners, a snap survey from PICA clearly indicates where they want the ability to remove a tenant in the property they own.
