How does Australia compare when it comes to security of tenure for renters?
Research identifies a range of regulatory approaches in place internationally
While Australian state and territory governments do not have unified residential tenancy laws, there has been some debate about no grounds evictions and improving security of tenure for renters. The policy debate centres upon finding a fair balance between the rights of property owners to be free to do what they wish with their property, with the rights of tenants who are paying for the service of safe and secure housing (i.e. their home).
What is security of tenure?
Being able to call the rented dwelling one is living in ‘home’ means more than just living in a property that is of adequate standard, safe, reasonably comfortable and quiet. It also means having security of tenure, meaning the extent to which households can make a home and stay there for reasonable periods if they wish to do so, provided that they meet their legal obligations (such as paying the rent and respecting the property). AHURI research which examined the private rental sector of 10 different countries found the policy settings which influenced security of tenure for tenants included grounds for eviction, rent regulation and fixed term tenancies. So what role do each of these play and how does Australia's current policy settings compare with other countries?
Understanding 'no grounds' and 'prescribed grounds' evictions
‘No grounds eviction’ means landlords have the right to evict tenants without a reason. If such a practice is permissible, then tenants can never be confident how long their rented dwelling will be their home. In Australia, if the dwelling is rented through a fixed-term lease the landlord can give the tenant 30 days notice to move out of the premises at the end of the lease, and if the lease is a periodic agreement, the landlord can give the tenant 90 days notice to move out at any time.
Recent AHURI research identifies that the 'foremost approach to assuring tenants security is to allow landlords to terminate on prescribed grounds only.’ Prescribed grounds for evictions could be, for example, if the tenant damages the property or fails to pay rent.
In comparison to the other countries examined, only Australia, New Zealand, the UK (excluding Scotland) and some US jurisdictions allow eviction without grounds.
What role does rent regulation play?
Enabling security of tenure also involves rent regulation. Indeed, the research shows ‘the degree of tenants’ legal security against termination by landlords varies on a pattern with rent regulation. This reflects a necessary connection between effective rent regulation and security: rents cannot be regulated effectively if tenancies can be readily terminated and legal security is ineffective if rents can be increased without restriction.’
What role do fixed term leases play?
The research reveals that most countries that afford greater security do not use fixed term leases to provide that security. For example, in Germany most tenancy agreements are for no fixed period. Instead, security for tenants is assured by laws that require landlords to show reasonable grounds for termination. Similarly in Canada, short fixed terms (6–12 months) are commonly used, but security is assured by a reasonable grounds justification, which in most cases do not include termination at the end of the fixed term.
How does Australia compare with other countries?
The countries represented in the research exhibit a considerable range of regulatory approaches: from those that are strongly protective of tenants (e.g. Germany and Sweden) through to those which only offer moderate protections (Australia and New Zealand).
While many international private rental sectors have different policy settings to Australia, they also share similarities. Even countries that have the strongest laws protecting tenants’ rights have private rental sectors where, like Australia, the majority of landlords are smallholding private individuals (i.e. ‘mum and dad investors’). Of the 10 countries studied, only in Sweden are housing companies the most common provider of rental housing. In Germany, where tenant rights are strong, 65 per cent of rental housing is provided by individual private landlords.
Table 1: Security of tenure policy settings in Australasia, Europe, North America (select countries)
|Grounds for termination|
|Fixed term and periodic tenancies||Rent increases||Setting of new tenancy rents|
|Australia||No-grounds termination allowed; Victoria has proposed legislation to remove the ‘no specified reason’ ground||Short (6–12 months), fixed-term and periodic tenancies||Varies by state; mostly provision for disputing 'excessive to market' increases||No regulation|
|Belgium||Termination at end of fixed term allowed||9-year fixed terms, but most are 3-year terms||Increases in line with CPI||No regulation|
|Canada||Mostly prescribed grounds only; some allow termination at end of fixed term||Mostly short (6–12 months), fixed-term and periodic tenancies||Varies by province; most restrict increases to annual 'guideline' rate||No regulation|
|Germany||Prescribed grounds only||Little use of fixed-term tenancies||Restrictions by reference to ‘reference rents’ and caps; additional increases for improvements||Restriction by reference to ‘reference rents’ in specified areas (but regulation is in doubt)|
|Ireland||Prescribed 6-year cycle with lesser restrictions on termination in initial 6 months, then prescribed grounds only||Short fixed-term and periodic tenancies||Rents must not exceed market rent; high pressure zones||Rents must not exceed market rent|
|New Zealand||No-grounds termination allowed||Short (6–12 months), fixed-term and periodic tenancies||Restrictions against ‘excessive to market’ increases||No regulation|
|Sweden||Prescribed grounds only||Little use of fixed-term tenancies||Collectively bargained utility rents||Collectively bargained utility rents|
|Spain||Termination at end of and, in limited circumstances during, fixed term||3-year fixed terms with some provision for early termination||Increases in line with CPI; additional increases for improvements||No regulation|
|United Kingdom||No-grounds termination allowed (England and Wales); prescribed grounds only (Scotland)||Short (6–12 months), fixed-term and periodic tenancies||Provision for disputing excessive rent increases; in Scotland, high pressure zones||No regulation|
|United States||Varies by state and municipality: most allow termination without grounds, a few large cities allow termination on prescribed grounds only||Short fixed-term and periodic tenancies||Mostly no regulation; a few major cities have rent regulation (by annual guideline rates) and rent control||Mostly no regulation; a few major cities have rent regulation|
Source: AHURI Final Report No. 292
The international experience suggests that the rights of both landlords and tenants can be accommodated in a healthy private rental sector and that individual landlords can operate without undue difficulty in environments that are more strongly regulated than in Australia.