Camera IconREIWA President Suzanne Brown. Credit: The West Australian.
This conversation is not about evictions. Landlords must have a legislated reason if they pursue an eviction. We are talking about the ability to end, or not renew, a lease – following the proper processes set out by legislation – without having to provide a reason.
This is always a highly emotive debate. When it comes to any reform, we need to put emotion aside and consider the economic costs of change.
I have previously discussed the potential impact to rental supply – and rent prices – of changes to no grounds terminations. Tenancy advocates are confident investors will not leave the market, so let us look at it another way.
If removing no grounds terminations resulted in higher rents due to increased risk and reduced flexibility for housing providers, what level of additional weekly rent would you be willing to pay for that reform?
In the lead-up to the previous reforms, REIWA commissioned Synergies Economic Consulting to survey property investors. More than 10,000 responses were received, which were filtered to minimise sources of error and bias. The resulting 7,000 responses represented a cross-section of the low, mid and high-tier markets.
When it came to no grounds terminations, respondents were primarily concerned about the reduction of their ability to make decisions over their asset. The removal of no grounds terminations would reduce their options for dealing with the small proportion of renters who breached their agreement or behaved in ways that rendered the relationship between the renter and owner unworkable.
The survey found, under existing arrangements, owners typically opted to not renew tenancies at the end of a fixed-term lease, as opposed to issuing a breach notice during the term or applying for a court order. This practice is less costly to both parties and results in a more favourable outcome for the renter, as there is no blemish on their rental history, making it easier for them to secure rental accommodation in future.
The removal of no grounds terminations would lead to a significant increase in the number of breach notices issued, as this would become the only means of removing problematic renters. The cost of anticipating and dealing with these breaches would be material. Further, there would be a shift towards more intensive screening of renters by property managers and owners, and this would add costs to the letting process and make it harder for people with poor, or no, references to find a rental property.
Synergies Economic Consulting’s modelling indicated the reform would see median weekly rents increase by $10 at that time. In the current environment, with ongoing strong demand, lagging supply, rising interest rates and broader cost pressures, that increase is likely to be much higher.
Is that a price you are willing to pay?
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