450k Victorian landlords risking fines, falling short on rental reform

The Victorian government is facing calls for better education for landlords with suggestions 69 per cent are failing to meet minimum standards. Picture: Ian Currie.

Hundreds of thousands of Victorian landlords are potentially failing to keep up with the state’s waves of rental reforms, risking fines that could force them to sell their investment.

The Consumer Policy Research Centre’s inaugural report into minimum standards and energy efficient housing released yesterday found 69 per cent of the more than 1000 tenants surveyed believed the home they lived in did not meet minimum standards.

About 27 per cent of them reported issues with poor insulation or temperature control, 23 per cent had problems with water inefficiency due to old shower heads and almost one in five were grappling with mould and damp.

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Another 17 per cent had issues with ineffective heating and a similar number with the home needing general repairs or maintenance.

CPRC deputy chief executive Chandni Gupta said the survey had captured a broad segment of renters around the state, and pointed to issues both with people understanding the minimum standards and with their enforcement.

Homes might also be slipping under the radar as a result of tenants being too worried about reprisals if they questioned the condition of their home.

“We have not seen as much enforcement when it comes to these laws, so potentially there are properties out there that are not meeting minimum standards,” Ms Gupta said.

Contrasted with the state’s 655,626 active residential tenancy bonds, the 69 per cent who felt their home didn’t meet regulations would translate to more than 450,000 homes falling short.

Surveys of 300 landlords as part of the research also found 10 per cent of them had concerns about the minimum standards.

From Melbourne to regional Victoria, landlords have had to adjust to 150 rental reforms since 2017 — including two sets of changes in the past two weeks.

The most common gripe was cost or inconvenience, followed with providing the services to tenants who were not paying rent or looking after the home, and others who felt there were too many standards to contend with.

Ms Gupta said she believed the most likely to be caught out were “accidental landlords” — people who inherited homes or who wound up having to rent a home out due to changes in life circumstances.

“People are finding themselves accidentally in this spot and they are the ones who are most unclear about their requirements as a landlord, and there’s a real opportunity to help educate and raise awareness about what is required from owning these services,” she said.

“At the moment becoming a landlord is having an investment property, and it’s looking at it through an investor lens.

“It needs to be looked at through an essential services lens.”

Ms Gupta added that while 75 per cent of surveyed landlords said they saw their role as providing an essential service, she said the government now had a role to play in providing better education for landlords — and more enforcement for breaches.

Mould and damp were among the more common complaints from tenants questioning if their rental was really fit for purpose.

“There seems to be a gap there that could be filled in terms of ensuring that landlords are more aware of what’s needed to meet the minimum requirements,” she said.

“And I don’t think there’s been as much enforcement in that space and there’s definitely an opportunity for the government to lift its enforcement.”

The state’s rental minimum standards can be enforced with a maximum fine of up to $12,210.60 for individuals, and $61,053 for companies.

Property Investor Council of Australia chair Ben Kingsley said a fine above $10,000 would be more than enough to force most investors to sell, especially those who have their home negatively geared and are actively losing money on the investment.

Mr Kingsley said having hundreds of thousands of homes failing to meet minimum standards “would be catastrophic”, but he suspected the 69 per cent estimate was not right at the statewide level.

“We do know that most properties are inspected twice yearly, so it should be picked up,” he said.

There are warnings from PICA that coming down too hard on landlords could lead to more investment properties being sold, leaving renters being shown the door.

However, he said he wouldn’t be surprised if some landlords weren’t fully across their obligations as there had been significant reforms at a time of high turn over of property managers as reforms which had been coupled with poor communication from the government to industry groups like PICA that could inform landlords directly.

While he said those who breached regulations around health and safety and put their residents at risk should face hefty fines, Mr Kingsley said there was a risk a government cash grab could backfire and lead to more landlords abandoning Victoria.

“The reality is that being hit with a $10,000-plus fine for minor breaches, it’s ridiculous, and likely to result in landlords selling up,” he said.

The property adviser added that as more of them became aware of the huge list of requirements they now had to meet, they were choosing to sell.

There are 15 categories of minimum standards that rental homes in Victoria must meet, and if they are not up to speed a tenant can request they be addressed before moving in.

It is also OK for them to end their rental contract before moving in without penalty.

Consumer Affairs minister Nick Staikos said last week’s raft of new reforms had included a requirement for landlords provide “documentary evidence” that the home meets minimum standards before being advertised.

“We know there’s more to do and we have even more reforms next year, including our portable rental bonds scheme which will mean renters won’t be stuck paying the dreaded ‘double-bond’ while moving home,” Mr Staikos said.

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