Residential Tenancies Act Review

Response to the Issues Paper

Alternative Forms of Tenure

19 September 2016

  1. Preface

What responsibility do Registered Rooming Houses have to provide affordable accommodation to vulnerable and disadvantaged persons?

The Government says that the “the private rental market needs to be able to provide housing to low-income households”. We know of no social obligation on the part of landlords to be active in social housing.

How can government expect to regulate to require this? The lack of social housing for low-income families is a direct response to the failure of government, both Commonwealth and State to meet the demands for this and to meet rising population growth. Rent has increased faster than affordability – the Federal rental assistance level needs to rise commensurate to rental increases rather than the average wage,which is more likely to assist the vulnerable and disadvantaged.

As a result more people are suffering rental stress. This is not an industry problem but an issue for the Federal government. The private market would only find this sector more attractive for investment if the Commonwealth’s rental assistance levels were increased and over regulation of rooming houses reduced.

What is the role of Registered Rooming Houses

RAAV’s members are major providers of accommodation in both regional and metropolitan locations. In many metropolitan locations the supply of affordable rental accommodation is very limited, and rooming house owners are frequently approached by both government agencies and private agencies seeking accommodation for clients - who for a variety of reasons that can include ongoing homelessness, continuing unemployment, release from jail, domestic disputes, and general isolation from the general community, have been unable to find affordable accommodation.

This tenancy mix can produce a level of volatility in the rooming house residency group that requires skilful management in order to provide a safe and welcoming community for all residents. Registered Rooming Houses provide an important option in the market for affordable, flexible housing.

The numerous documents and Issues Papers published to date provide little direct evidence that Registered Rooming Houses fail in their responsibility to provide safe, affordable and secure housing for tenants who have chosen to live there. Registered Rooming Houses provide an important option in the market for affordable, flexible housing and provide a much-needed back-up for the government social housing programs. Registered Rooming Houses often support some of the neediest people in our society, e.g. women and families seeking refuge from domestic violence, tenants that have been unable to find local rented accommodation.

There is little statistical evidence to indicate that Registered Rooming House owners as landlords fail to provide safe, secure and affordable housing for their tenants. It is important to remember that Registered Rooming House owners, who have invested significantly in building and maintaining a rooming house and in the costly compliance requirements to manage their businesses, have choices as to the best return on this investment.

Should the legislative environment for Registered Rooming Houses become overly restrictive as a result of recommendations arising from this Review, there is a very real threat that owners might reduce their involvement in the supply of rooms for residents in favour of other investments.

Registered Rooming House operators are typically professional business owners seeking long term, sustainable profitability and are less focussed on short term, speculative capital growth. The industry has concern that ongoing changes to the legislation governing the Registered Rooming House industry over the past 10 years have created an increasing administrative burden and as well as uncertainty for operators and residents alike. The risk of introduction of increasingly restrictive legislation could potentially reduce supply of affordable housing in Registered Rooming Houses and further disadvantage already vulnerable residents.

RAAV submits that the need for legislative change in this context is not supported by specific examples or quantitative evidence of complaints, applications to or decisions by VCAT.

The Government should consider the benefits to the Registered Rooming House industry and its customers that would arise from the removal of the current regulatory burden and high associated costs imposed by compliance requirements introduced in numerous pieces of legislation that have been implemented over the last ten years. This burden includes disability access requirements, Licensing requirements to name a few.

Registered Rooming Houses provide a safe environment for vulnerable and disadvantaged persons. Since the tragic deaths in the unregistered rooming houses in Brunswick and Footscray and the good efforts of the Rooming House (Standards) Task Force, RAAV is proud to announce that we are unaware of any deaths caused by similar circumstances in Registered Rooming Houses in recent past history.

RAAV believes that providing support and assistance to the Registered Rooming House sector, combined with vigorous pursuit and prosecution of unregistered, overcrowded, non-compliant accommodation in whatever guise, will do more to provide “fairer, safer housing” for all Victorians.

Rooming house requirements

There is a broad spectrum of tenants and residents in Victoria’s rental market. Some are viewed by landlords as higher risk, or potentially more costly to accommodate than others. This assessment is typically based on the landlord’s perception of the tenant’s ability to afford the rent on the property, the time and administrative cost of dealing with any behavioural problems that may arise and the probability and cost of any damage to the property.

Frequently, residents of Registered Rooming Houses are at the higher-risk end of this spectrum. Screening potential residents is a difficult assessment for rooming house owners as the information available to owners in making this judgement is imperfect. However the process is essential because these costs erode the profitability of the transaction and in the case of damage, also reduce the capital value of the property.

Registered Rooming House owners will attempt to minimise the costs of the residency risks outlined above by reducing their exposure to the risks, i.e. by accepting only those residents who pose the lowest risk of loss and by refusing to accommodate residents who are more likely to require eviction at a later time. This will inevitably provide more barriers to entry into the rental market for new renters and make renting more difficult for high risk residents to find housing.

Persons seeking a tenancy in a Registered Rooming House are generally assessed by the manager or owner according to their potential to fit into the community of residents already in the rooming house. Since the rooms can be compact with shared common areas, it is important that prospective new residents can demonstrate a willingness to live in harmony within the existing community.

Prospective residents also must be able to live independently within the rooming house and to manage daily tasks of independent living such as shopping, cooking, and maintaining a basic level of personal hygiene. Rooming house owners report that this last requirement is very important in ensuring that the rooming house remains clean and safe for other residents.

Again we make the point that some residents who present at the initial screening interview as being suitable for selection into the community can for a variety of reasons fail to settle in. The owner has a duty to the community of residents to be able to call up the notice to leave provisions where this is necessary to preserve the peace and harmony of the rooming house, and the safety of all who call it home.

Registered Rooming Houses offer a safety net to some of the community’s most needy and vulnerable people. They may not always be physically or mentally able to operate as independent occupants of the house. They will not always make a successful transition into a shared community life. They may not always understand the need to be considerate of the requirements of others. And rooming house operators cannot always effectively predict who will and who won’t make this transition effectively. Tighter screening processes may in fact screen out some very needy people who are capable of settling well into rooming house life.

There are two tenancy options available to rooming house operators – rooming house tenancy or standard residential tenancy. Unfortunately the different rules and requirements of the two agreements create confusion and complexity for tenants and operators, particularly where there are tenants in the same rooming house that are resident under different agreements.

Rooming houses, like caravan parks, have shared common areas and amenities that create particular needs and responsibilities that are unique to that environment and bear no relation to the nature of the tenancy agreement. Many rooming house tenants, once established, prefer to go onto a standard residential tenancy agreement to give them certainty and security of tenure in the medium term. Similarly, there are benefits to operators to have tenants on longer term leases to stabilise their income and for insurance purposes. However, there are also disincentives for owners in this as it can affect land tax exemptions and also limit their ability to take action based on issues that impact on others within the rooming house.

It may be beneficial to retain and clarify the renting options available under Part 2 and Part 3 with variable options regarding tenure, however with provision in the Act to take specific measures relevant to rooming houses. As an example, the ability to ensure that tenants that do not abide by house rules relating to common areas or health and safety can be dealt with in a timely and responsive manner for the benefit of other residents. A new model highlighting the importance of retaining current leasing options is detailed later in this submission.

Contents

Page
Preface / 2
  1. Executive Summary
/ 6
  1. An alternative rooming house model
2.1Introduction
2.2Use of a lease
2.3 The New Model:
2.3.1Option 1
2.3.2Option 2
2.4 Complications with other legislation
2.5 Similarities to caravan parks / 8
  1. RAAV’s response to questions 38 to 54
RAAV has reviewed the Issues Paper and is providing responses to Questions 38 to 54 as the preceding questions do not relate to or do not have any significant impact on rooming houses. / 15

NOTE: This submission by the Registered Accommodation Association of Victoria (RAAV) is in support of the registered rooming house industry particularly for class 1B and class 3 buildings. Comments are not intended to be applied to regular tenancies in class 1A and class 2 buildings.

For the sake of brevity, the term “tenant” may also mean “resident” in this submission - and vice a versa, viz.

  • Residents are classified as occupants of a rooming house who are not on a lease and maybe on an agreement; and
  • Tenants are occupants in a rooming house who are on a lease.
  1. Executive Summary

Preface

  • The Government says that the “the private rental market needs to be able to provide housing to low-income households”. We know of no social obligation on the part of landlords to be active in social housing.
  • There is little statistical evidence to indicate that Registered Rooming House owners as landlords fail to provide safe, secure and affordable housing for their tenants.
  • Should the legislative environment for Registered Rooming Houses become overly restrictive as a result of recommendations arising from this Review, there is a very real threat that owners might reduce their involvement in the supply of rooms for residents in favour of other investments.
  • There are two tenancy options available to rooming house operators – rooming house agreement or standard residential tenancy. Unfortunately the different rules and requirements of the two agreements create confusion.
  • Rooming houses have shared common areas and amenities that create particular needs and responsibilities that are unique to that environment and bear no relation to the nature of the tenancy agreement.

New model

  • RAAV’s understanding is that approximately 50% of rooming house landlords use standard Residential Tenancy Agreements but they have to rely on the less appropriate Part 2 provisions instead of the more fit for purpose Part 3 provisions.
  • Anew and streamlined model can be developed which can be underpinned by a number of amendments to the Residential Tenancies Act (RTA).
  • The requirement to use a lease should not be prescriptive but a flexible option which is available to landlords and tenants.
  • It is important that the Review recognises that proposed changes to the RTA may produce complications with other Acts that Registered Rooming House operators need to observe.
  • RAAV is unaware of any rooming house operator (or any regular landlord) who is alleged to have opportunistically used leases to claim compensation for lease-breaks as a strategy to make higher profits.

Response to questions in the Issues Paper

  • RAAV has reviewed the Issues Paper and is providing responses to Questions 38 to 54 as the preceding questions do not relate to or do not have any significant impact on rooming houses.
  • There needs to be clearer definition included in the RTA of what is not a “Rooming House” and the definition of a Shared House needs to be clearly identified as do situations where large numbers of family/extended family members live in the one house.
  • There is an emerging presence of purpose built accommodation which is being designed and deemed “class 1b”or “class 3” under the Building Act. These new properties may require little or no sharing of facilities and generally provide a higher degree of safety and amenity.
  • It is important for the Government to be more active about closing down unregistered, non-compliant properties to deal with the danger to all tenants using this often substandard area of the accommodation market.
  • Mandating a uniform set of “house rules” is unworkable as they often need to be tailored to suit the specific property.
  • Operators need to retain the right to do unplanned inspections to investigate complaints by other residents in relation to drugs, theft, weapons, overcrowding, noise, pets, hygiene and odours, etc.
  • RAAV restates the position it has outlined in previous responses that rooming houses are not suitable accommodation to house pets and that it is not feasible to allow pets in a rooming house without the consent of the operator.
  • If the Act is changed and allows the removal of a tenant or guest of a tenant causing or threatening danger or injury to other tenants, the security of the other residents will be enhanced.
  • The duty to pay rent on time must remain as a duty.
  • It is imperative that landlords and managers of Registered Rooming Houses retain the ability to take action against residents and their visitors who flaunt the accepted behaviour in a rooming house.

oOo

2.New Rooming House Model

2.1Introduction

RAAV’s past survey results indicate approximately 50% of rooming house landlords use standard Residential Tenancy Agreements. The drawback of this is that they have to rely on the less appropriate Part 2 provisions instead of the more fit for purpose Part 3 provisions.

There are good reasons for their decision to use leases and some of the typical reasons cited for using leases in a rooming house are listed below:

  • Stability of the tenure arrangement
  • Financial security
  • To seek and keep specialty insurance
  • To seek and keep mortgage finance
  • To prove Land Tax Exemption under pre-2013 guidelines
  • To meet Housing Establishment Funding receipt guidelines
  • To meet long term requirements of Housing Referring Agencies
  • To meet tenant housing requirements.
  • To take a larger bond to cover higher risks of damage.
  • To use a standard managing agent.

Similarly the 50% of rooming house landlords that choose to not use leases also have good reasons for their decision and some of the typical reasons cited for not using leases in a rooming house are listed below:

  • To take quicker action in the case of rent arrears
  • To be able to use a set of house rules
  • To have greater rights in responding to pets introduced without consent
  • Short term periodic tenure
  • Excellent existing rapport between the tenants and operator
  • Long term arrangements in place with the tenant

In other circumstance, a long term lease may not be appropriate, e.g. Registered Rooming House operators who cater for interstate clients on short term employment contracts, specific student accommodation which matches school or university terms.

Consequently, the requirement to use a lease should not be prescriptive but an option which is available to operators and tenants. It needs to be flexible in both the length of the arrangement and any specific circumstances of the tenancy to allow the operator and tenant to reach a satisfactory outcome.

2.2Use of a lease

Section 27 of the Act prevents a party to a lease agreement from contracting out of any provision of the act, and this is sensible. It makes no sense then that when a resident and operator of a rooming house enter a lease agreement that this decision causes both parties to contract out of the entire Part 3 of the Act, which is specifically tailored to rooming houses.

With this in mind RAAV propose a new model underpinned by one fundamental proposition: that:

  1. a resident should be able to enjoy the increased security of tenure of accepting a lease agreement; and
  2. a landlord should retain the right to request a larger bond whilst all the rooming house provisions would still apply to other aspects of the arrangement for the proper management of the accommodation and the clientele. This is because regardless of the arrangement type, it is actually the close living arrangement of occupants which causes challenges for the landlord to address.

Of particular importance, this amendment could clarify the governance of common areas in rooming houses which appear to cause some confusion amongst advocacy groups, by clarifying that Part 3 would apply if the resident and landlord enter an agreement under Part 3.