One of the most widely debated topics in the New South Wales political landscape presently relates to the supply, availability and affordability of rental housing throughout the state.
As inflation, interest rates and the cost of living continue to rise, the reality of owning a home for a large number of residents in the state is now simply unrealistic. This is turning more and more people into the rental market, whereby the supply cannot meet the demand. Due to the lack of rental properties available throughout the state, current vacancy rates for rental properties are believed to be sitting around a historic low of 1.5%. This has caused a dramatic increase in the competition for rental properties, driving rental prices up and pricing many people out of the market.
In an attempt to combat this, on 10 May 2023, the NSW Government introduced the Residential Tenancies Amendment (Rental Fairness) Bill 2023 into Parliament. The bill, in its original form, intended to introduce changes to require potential applicants for a tenancy to be notified of any other offers received that are higher that the advertised rental price. The intention behind this transparency is to eradicate ‘bidding wars’ whereby rent was increased. The remainder of the legislation sought to implement a portable bond scheme (which seeks to streamline the rental bond process to allow renters to directly transfer bonds from one property to another) and to extend the ban on soliciting rental bids so it applies to third party platforms and owners, not just real estate agents.
Following review from a parliamentary committee however, the NSW Government announced that they would be dropping the rent bidding element of the bill in order to push ahead with other components of the rent relief legalisation including its portable bond scheme. This obviously was met with varying responses. For landlords or owners of investment properties, this is obviously beneficial as greater income can be derived from rental properties if ‘bidding wars’ are permitted. For renters, this obviously only contributes to the struggle.
The NSW Government has foreshadowed a portion of the upcoming budget will be dedicated to addressing the rental market. What the NSW Government have been clear on however is that there will be no support in the budget for the introduction of a ‘rent freeze’. Greens MP Ms Jenny Leong introduced the Residential Tenancies Amendment (Rent Freeze) Bill 2023 on 29 June 2023. The Bill seeks to amend the Residential Tenancies Act 2010 by introducing a ‘rent freeze’ whereby the increase of rent for any residential premises will be prohibited for a period of two (2) years from the current rates as at 30 June 2023.
In commenting on the Greens proposed bill, Premier Chris Minns noted that a rent freeze would "put pressure on new entrants and builders coming into the market and supplying households for the people of Sydney, we could make what is a desperately bad situation worse". His main concern was that announcing such a freeze would cause a dramatic reaction from landlords in increasing their rental prices before such a freeze would come into effect. This would then price even more renters out of the market.
Whilst the future legislative landscape in respect of rental properties remains largely unclear (at least up until the state budget is released), the government has all but conceded that it is going to be virtually impossible to keep each stakeholder happy. Whilst tenants cannot afford the rising rental rates, conversely, landlords often cannot afford to meet the rising costs of owning the property. The NSW Parliament are now tasked with the difficult job of finding a happy medium in between.
As always, we will keep you informed on the progression of the proposed bills in respect of rental properties in NSW and update you if/when they become legislated. If you require further information about the proposed reforms or rental properties generally, please do not hesitate to contact our Property Department on (02) 4626 5077.
The contents of this publication are for reference purposes only. This publication does not constitute legal advice and should not be relied upon as legal advice. Specific legal advice should always be sought separately before taking any action based on this publication.
