Wednesday, December 31, 2008

#111: The Price Of Love

Day in and day out all we hear from different people are complaints about the rising costs of rental properties in and around our fine city. I can understand this and also appreciate the difficulty in finding suitable rental at an affordable price – after all rental has gone through the roof and yet wages and benefits haven’t increased at the same rate to keep up with it all. Most real estate agencies and tenancy bodies refute this though and will claim that rental increases with the CPI and no higher. Let me tell you right now that they're all lying and here’s your proof.

In 1995 I moved into a large two bedroom property in a suburb just outside of the city. When I moved in the rent was $110 per week, when I moved out in mid 1998 the rent had increased to $125 per week. I was partially working and partially living off the goodwill of our Federal siblings at the time at a rate of around $320 per fortnight with some rental assistance, bringing the total up to around $375 per fortnight. That wasn’t bad in 1998, now I doubt I could feed my cats on that rate.

According to a 2001 paper published by FaCS in 1998 the full rate of Newstart, or whatever the equivalent was called back then, was, pre-rent assistance, roughly $322 per fortnight. According to Centrelink in 2008 the full rate of Newstart is, pre-rent assistance, roughly $440 per fortnight. That’s roughly a 37% increase in earnings over ten years, which equates to 3.7% per annum, which is in line with the CPI. The rent assistance has dropped as back in 1998 you could access a rent rebate from both us in the form of a weekly cheque and also assistance via Centrelink, now the feds have taken it over entirely and I believe that it turns out to be less than what could have been claimed back in the day. As it stands the maximum amount of rent assistance payable is around $52 per week, adding an extra $104 to every payment. In 1998 the amount was around $45 per week, adding an extra $90, plus an additional $50 per fortnight from us, $25 per week.

As of this week the same property that I lived at in 1998, which cost $125 per week in rental, now costs $250 per week in rental. That’s a 100% increase in ten years, or 10% per annum. There’s a fair difference there, in fact it’s a whopping difference between the rent increase and the CPI. Now how do I know what the rent of my old place has increased to? I’ve seen an ad for a place across the road which is very similar in size and location to the property I lived in and I checked the current market rental on the property I lived at back then and the rental prices are exactly the same. Clearly there’s a wide paddock between what the Government gives you and what landlords charge in rent and that difference is virtually unworkable. Even factoring in rental assistance will bring the same rough numbers forward – there’s no parity between the two amounts. Even essential services, such as gas and electricity have increased over the CPI (58% and 46% respectively) and that other most basic of essentials, food, has also gone up and above the CPI (48%) but rent has increased, in this case, by 100%. I’m sure the same applies elsewhere. And let's not mention the increases in medical costs.

So who controls the prices of rent? The easy answer is the market as a whole, which is a joke answer at best. Landlords control rents and there is no real regulatory body to monitor the increases in rent. Even the RTT has no real control. The landlord is obliged by law not to increase the rent by more than the CPI and if such an act happens then a tenant may apply to the RTT to have the rental increase look at as being unreasonable and thus brought into line with the CPI. That looks good on a policy paper, but the stark reality is that if a landlord wants to increase the rent by a considerable amount then they will. The easy way out is for a landlord to merely terminate the tenancy with the required time frames at the end of the lease and then re-let the property at a vastly inflated rate. I’ve heard of this happening more than once and at times the person moving into the property at the increased amount is the same person who just moved out. It’s called circumventing the system. Most landlords will gamble on the fact that their tenants either have no knowledge that they can dispute the amount of rent that they pay to the RTT or that they’ll be too eager to hold onto their tenancy to take the risk. After all the landlord, when it comes to rent, holds the aces in the bulk of the situations. As long as the rent isn’t increased by a large amount then they will continue to get away with increasing it and the majority of landlords will increase the rent of a property anywhere from 5 to 10% per annum, and that’s a conservative estimate. Despite the efforts of the RTT there isn’t anything, nor anyone, to regulate the increases of rent, nor is there anyone to stop the increases of rent. I’ve yet to hear of anyone who has ever successfully challenged a rent increase and remained in the property, quite the opposite. Tenants will frequently grumble about their rent but they’ll still pay it because what are the alternatives? Being homeless? Finding a new devil perhaps? Often it’s a case of the better the devil you know, no matter how expensive and unfair.

I’ve said it before and I’ll say it again – self regulation of the real estate business just doesn’t work. It needs an independent body to regulate it, but one with some real power to effect change and control oput of control rents and landlords, along with exercising some form of legal power over cretinous tenants, unlike both the RTT and Consumer Affairs. Perhaps one day...but not today.

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