Rental reforms (WA rental laws 2023: what’s happening?)
A major update to Western Australia’s rental laws should go before Parliament at the end of this year.
The raft of new laws will restrict rent increases to once annually, and introduce other changes – like allowing tenants to make minor modifications to the home.
How it began (and stalled):
Rental reform has been on WA’s horizon since 2019, when the state government announced a review into the Residential Tenancies Act (RTA).
We’ve all been eager to learn more about the proposed changes, but the global health pandemic created delays.
Now we finally have more information about what rental reform will look like:
Earlier this year, the Western Australian government revealed what key changes are being considered to give renters more protection, without sacrificing the needs of landlords.
This reform comes at a critical time, as tenants feel the pinch of higher rents in a tight market (limited supply of rental listings). There’s also some pressure on landlords, who must contend with inflated interest rates driving up mortgage repayments.
These challenges aren’t limited to Western Australia, but are widespread nationally.
The federal government is also focused on rent reform, as it works with all states and territories to establish nationally consistent rental laws. More on this later!
But first, let’s dive into WA rental reforms, and the possible implications for landlords and tenants.
Why are WA rental laws under review in the first place?
“There is no single solution to ease the current tight rental market. The new laws proposed by the McGowan Government strike a good balance by protecting the owner’s investment property while providing stability and certainty for tenants.” Commerce Minister Sue Ellery
Across Australia, there aren’t enough rental dwellings to house the number of tenants looking to put a roof over their heads.
This is a huge problem in Western Australia, with Perth having one of the lowest vacancy rates in the nation.
A low vacancy rate indicates there’s too much tenant demand for a limited supply of properties.
In December 2022, Perth’s vacancy rate fell to record lows at 0.6 per cent.
There’s been a small jump since then. As of July 2023, the rental vacancy rate is 0.9 per cent, which is still far below a balanced market range (2.5 to 3.5 per cent).
Let’s put this in perspective:
That’s LESS THAN ONE rental dwelling available “for every 100 renter households”, according to PropTrack economist Angus Moore.
This helps to explain why Perth’s year-on-year rent increases are the highest in the nation, as more people compete for suitable accommodation (and often struggle to find it).
“I don’t really do anything fun…When your rent is [more than] 50 per cent of your income, you just put the rest of that money into paying your other bills and living.” – Alyssa, 29-year old renter (source: ABC news)
Rental reforms (WA) aim to balance two critical elements:
- Improve circumstances for tenants
- Encourage more investors to enter the market to increase the number of rental dwellings available for tenants
The WA government wants to create fairer conditions for tenants – while making it easier for landlords to manage their rental properties.
As you know, our nation is facing difficult financial times, and landlords aren’t immune. Cath Hart, CEO of the Real Estate Institute of Western Australia (REIWA), says we must also consider the intense pressures landlords face, so they don’t lose confidence and leave the property market.
“There’s pressures on landlords at the moment, really with those 11 interest rate rises, and you know the increased cost of living where some of them will look to consolidate their portfolios and exit the market,” she told the ABC.
Investors need a sense of certainty, to boost the supply of rental properties:
“WA’s affordable housing is already attracting the attention of eastern states investors, and this balanced approach to rental reform will also give them more confidence in investing in our market,” Ms Hart said.
Proposed changes to WA’s Residential Tenancies Act
For the first phase of the review:
- Rent reviews limited to once every 12 months
- Pets permitted on property (unless there’s a good reason not to)
- More freedom for tenants to make minor modifications to the home
- Easier bond disposal process for tenants and landlords
- Commissioner for Consumer Protection will handle most disputes
- No more rent bidding
- Tenant advocacy and education services will be boosted by $4.5 million
Rent reviews limited to once every 12 months
Under current WA rental laws, property owners can increase rents every six months, putting extra pressure on tenants.
This will change under the reforms, which place a yearly limit on rent increases.
However, tenancy advocates are also asking for a cap on rent rises – so that families aren’t forced out of their homes, as there’s no limit to how high rents can get during this cost of living crisis.
“It shouldn’t be solely up to the tenant to try to negotiate the amount of a rent increase – especially when they can be evicted without any reason.” Alice Pennycott, spokesperson for Make Renting Fair
Earlier this year, former WA Premier Mark McGowan resisted calls for a rent cap by saying it could lead to investors pulling out of the market.
“The experience internationally when you do these things is often that it means less investment,” Mr McGowan said.
“The main thing is we’ve got to get more houses and more rental properties and more apartments and units as rental properties.”
No more rent bidding
A ban is to be placed on landlords and property managers encouraging applicants to offer a higher price to acquire the lease. “Secret shoppers” will attend open properties, to ensure that rules are followed.
There will also be a requirement to advertise properties with a fixed price, rather than a range. Tenants will still be free to offer a higher rent, if they want to.
Pets permitted on property (unless there’s good reason not to)
The updated WA rental laws will give tenants more freedom to keep pets on the property if they get landlord approval, as a default position.
Around one-third of WA rental properties currently have a pet bond, but landlords can refuse the request without giving a reason.
Automatic refusal will no longer occur under the changes.
Landlords will still be able to refuse a request for pet ownership, BUT they will first need to give a reasonable reason to the Commissioner for Consumer Protection. The government hasn’t yet clarified what’s considered reasonable.
Real estate peak body REIWA wants the pet bond to be increased, to cover potential damage from these changes. The pet bond currently only covers fumigation with a $260 limit for all pets. There’s concern this allocation won’t be enough.
More freedom for tenants to make minor modifications to the home
Tenants will no longer need to seek approval from landlords to make small modifications to rental dwellings, like hanging pictures, installing hooks and painting walls. This will help people feel at home in a more personalised space.
Landlords can only refuse permission under certain conditions (yet to be determined).
Tenants may also be required to restore the property to its original condition when their lease ends. Even so, REIWA says some investors are worried this policy could lead to major damage.
“Something as simple as driving a nail into a wall to hang a picture causes major damage when it is removed. It takes out a chunk of plaster, which needs patching. Then the whole wall needs repainting.” – Investor
The current situation:
Landlords can prohibit tenants from making minor alterations, with some exceptions (such as changing a lock for domestic violence situations, or fixing furniture to walls to protect children).
Easier bond disposal process for tenants and landlords
Many property managers try to release the bond to the tenant as quickly as possible, but must follow a process that usually takes a few days to complete. The rental reforms (WA) will streamline this process by enabling tenants and landlords to apply separately for how bonds are paid out.
Commissioner for Consumer Protection will handle most disputes
The Commissioner for Consumer Protection will handle disputes over bonds, pets and modifications (instead of the Magistrates Court).
Tenant advocacy and education services will get boosted by $4.5 million
The WA government will provide a 35 per cent funding boost to the Tenant Advocacy and Education Services program (TAES) over the next two financial years, to give tenants more support during tough economic times.
Will no-grounds evictions remain?
Yes.
No-grounds evictions enable property owners in Western Australia to evict tenants without giving a reason.
The notice period for termination provisions is currently:
- 60 days for periodic leases
- 30 days for fixed leases
In May 2023, the WA government said no-grounds evictions would remain (also known as no-fault evictions):
“At this time the McGowan Government is not making any changes to the “without grounds” terminations provisions in the Act,” according to a WA government media statement
“With the current challenges facing WA’s rental market, it is not in the community’s interests to make it more complex to own and manage a long-term rental property. Our State needs more investors in the market and uncertainty about their ability to manage their own asset may stand in the way of increasing supply.”
What about the recent national cabinet meeting on housing – did that cause the WA government to reverse its decision?
No.
When state and territory leaders met with the Prime Minister on August 16, they agreed to move towards nationally consistent laws on renting – including removing no-grounds evictions. In fact, most jurisdictions have already banned no-grounds evictions.
However, the WA government will retain no-grounds evictions, despite national cabinet guidelines.
WA property bodies welcome this decision. They worry that removing no-grounds evictions could turn investors away from the market – leading to fewer properties for tenants. This will cause prices to soar even higher, due to supply and demand.
What’s the next step for WA rental laws?
These proposed changes aren’t law, they still need to be drafted in Parliament.
The government is now consulting with important stakeholders to iron out the execution. Organisations that represent landlords and tenants are included in this process, like REIWA and Make Renting Fair.
State government expects the reforms to go before Parliament later this year, before being introduced as law in the second half of 2024 (a specific date hasn’t been set yet).
Let’s talk briefly about the national approach to rent reform too
Australian states and territories set their own tenancy laws, but the housing crisis put rental reform at the top of the national agenda this year.
Western Australia’s rental reforms are separate from what’s happening elsewhere, but may be shaped by federal changes that are yet to be determined.
This month we saw National Cabinet agree to:
- Limit rent hikes to once a year (already included in WA rent reforms, and law for most other jurisdictions).
- Ban rent bidding (already included in WA rent reforms, and banned in most states).
- Assess the impact of short-term accommodation (like Airbnb) on the rental market.
- A national planning reform blueprint to boost the affordability and number of available properties.
- Increase Australia’s housing supply by an extra 200,000 homes, on top of a previous target.
- States and territories get an extra $3 billion if they build above their allocated portion of homes set by the National Housing Accord.
- Introduce national rental standards, such as hot and cold running water.
Political leaders also discussed creating a unified policy on landlords showing reasonable grounds for evictions mid-lease.
However, they ruled out introducing a national rent freeze.
Prime Minister Anthony Albanese said no jurisdiction believes capping rental increases will make a difference. It could actually backfire.
“Indeed, we believe that will make it worse. The key to addressing these issues is supply and that’s why we have focused our attention on supply,” Mr Albanese said.
The federal Greens are pushing for a two-year freeze on rent rises (and then a cap on annual rent rises). Greens MP Max Chandler-Mather said this will prevent “astronomical rent increases” that lead to the eviction of tenants who can’t afford payments.
“No-grounds evictions have already been banned in most states and territories across the country, but landlords continue to use massive rental increases as a loophole to evict tenants,” Mr Chandler-Mather said.
The Greens have refused to approve federal Labor’s $10 billion housing bill, because a national rent freeze hasn’t been introduced. The Coalition is also blocking the Housing Australia Future Fund (HAFF), but for different reasons.
Voting on this bill has been delayed until October. Another impasse could lead to a double dissolution election, where Australians head to the polls early.
A Senate inquiry into Australia’s rental situation is underway, with submissions open until September 1 2023. An interim report will incorporate these submissions, to help national cabinet decide on renters’ rights.
Watch this space, we’ll talk more about national rent reform as the situation evolves.
Orana is keeping track of changes to WA rental laws
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We handle all the day-to-day responsibilities that come with looking after a property, so clients can focus on other priorities.
Our experienced team provides management services at a competitive price. We deliver a premium service, and help clients to navigate WA rental laws in a way that’s fair to landlords and tenants.
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