Secure Occupancy in Rental Housing: Conceptual Foundations and Comparative Perspectives
Improving Secure Occupancy in Rental housing
Kath Hulse, Swinburne Institute of Social Research, Swinburne University of Technology, Melbourne
Vivienne Milligan, City Futures Research Centre, University of New South Wales, Sydney
A sense of security is integral to having a homeand is associated with many important aspects of health and wellbeing including family functioning, childhood development, economic and social participation and physical and mental health. These are building blocks for an inclusive and cohesive society. The purpose of this paper is to develop new ways of thinking about security in a society where renting is becoming more common.
In Australia, we often see security as a ‘natural’ part of home ownership and renting as an inherently insecure form of housing, except traditionally in our small social housing sector. This may not matter if renting is a temporary, transitional step for people but things are changing. High house prices mean that people on low-moderate incomes find it difficult to buy a home and the social rental sector has insufficient accommodation to house many of those who need it. More people are renting in the private sector, including a substantial number of lower income households, including an increasing number of families with children. There are more long term renters spending 10 or more years in the private rental sector but experiencing a series of relatively short term tenancies. The level of security offered in social housing is also changing with the introduction of fixed term tenancies.
Lack of security in renting is not intrinsic to renting per se, but rather is shaped by institutional arrangements and policy settings which in turn reflect the cultural norms that positionrenting as a temporary option compared to home ownership. This mindset can be summed up by sayings such as ‘only a tenant’.This article looks at policies and programs designed to provide secure rental housing in a variety of countries including Australia (see Figure 2 for countries covered).
A New Concept of Secure Occupancy
Generally discussion of security in rental housing centres on ‘security of tenure’, which typically refers to the length of lease arrangements between a tenant and a landlord. We argue that achievement of resident security involves not only legal security of tenurebut also some other dimensions. The broader concept of secure occupancy we have developed also considers whether households are able to:
- participate effectively in rental markets (market factors)
- receive financial and non-financial support from governments or other social service agencies if and when necessary to obtain and/or sustain a tenancy (social policy)
- exercise a degree of control over their housing circumstances and be able to make a home, to the extent that they wish to do this (cultural norms and attitudes).
What is important is how these components link together to shape security for occupants as set out in Figure 1.
Figure 1: Factors Contributing to Secure Occupancy in Rental Housing
How Does the Australian Rental Sector Rate in Terms of Secure Occupancy?
Private renters in Australia often experience low levels of secure occupancy. Half of all Australian renters report that they occupy their current rental property on a short term lease (mainly six to 12 months)and 14 per cent are on periodic tenancy (ABS Survey of Income and Housing). Fixed term leases provide little security, and periodic tenancies allowtermination without specified grounds. This leads to instability in housing and difficulty in planning ahead. 37 per cent of private renters said they were likely to move in the next 12 months but only 11 per cent said they wanted to move. Only 20 per cent of all renters say that have ‘indefinite’ tenure, mainly in social housing.Our research in Victoria and NSWshowed that households who would normally move into social housing are experiencing long waiting periods, with high risk tenants forced to live in marginal housing such as caravan parks and rooming houses. Others obtain tenancies by committing to pay more than they can afford, with loss of tenancy occurring with changed circumstances such as irregular income, loss of job or a rent increase.
How Do other Countries Enable Secure Occupancy in Rental Housing?
There is no ‘one size fits all’ model for enabling secure occupancy and it is not possible simply to take ideas from one country and apply them elsewhere. However, looking at other similarly developed countries opens up different approaches to secure occupancy.
Size and integration of the rental sector
Provisions for secure occupancy are stronger where rental systems are large - in Germany, The Netherlands and Austria (where, respectively, 60 percent, 43 percent and 30 percent of households rent). All of these might be categorised as integrated systems (with more uniform policy and regulatory approaches to rental housing). While the latter two prioritise the social rental sector, the German system relies mainly on private rental. By contrast (see Figure 2) jurisdictions with dual rental systems (Scotland, Flanders, Ontario, New Jersey, Australia) tend to have highly differentiated systems with (traditionally) strong security in social housing and relatively insecure occupancy in private renting. Ireland provides an interesting model whereby assisted lower income households in private rental have similar conditions of tenancy as social housing tenants.
Figure 2 : Proportion of all dwellings rented, by type of investor
Legal provisions for secure tenure
The typical practice in Australia of offering short term fixed leases followed by month to month arrangements is only found elsewhere in Scotland and Ontario (among the countries studied). Other countries have the practice of longer term or unlimited lease terms. Of the cases studied, only Scotland compares with Australia in terms of having short term private tenancies that can be terminated readily without grounds. Even jurisdictions like Ontario and New Jersey that have relatively large private rental sectors, like Australia, have specified grounds for ending a private tenancy.
Regulating for rental market affordability
One of the most important contributors to secure renting is ongoing affordability. While affordability is a major problem in the private rental market in many countries, including Australia, it is less of a problem in places such as the Netherlands, Austria and Germany. Regulation of the size and frequency of rent increases for sitting tenants (but not new tenants) assists in sustaining tenancies. Rent increases are indexed and can only occur annually or less frequently. By contrast, in Australia rent is set by the market for sitting tenants and increases can occur up to twice a year.
Large scale investment and professional management
Countries with larger social rented sectors (Netherlands, Austria, Scotland and Ireland) or higher corporate/institutional investment (Austria, Netherlands, New Jersey, Ontario and Germany) also have a stronger tradition of professionalised management than in Australia. This enables investor risks to be pooled and decisions about occupancy for individual households to be made at arms’ length from decisions about investment. Germany provides a different example, where most landlords are small-scale but are investing for the longer term, enabling more secure occupancy for tenants. In other words, small scale landlordism is not incompatible with a high level of secure occupancy for tenants.
Supporting lease terms that meet the long term needs of residents
Secure occupancy is also about the ability to make a home now and into the future. Crucial in this regard is the type and level of control that people has over their housing and the autonomy to personalise their dwelling. In the German private rental market which provides long term housing for many people, the standard lease considers issues such as pet ownership, behaviours within the house (such as smoking, children playing and even playing of musical instruments), provides capacity to personalise accommodation or even renovate the house, and facilitates access to people with disabilities.
Future Directions
We need to give more priority to the rental sector as a whole and to think broadly and systematically about how people renting fare and their level of security (across different levels of government and types of policy). Policy settings should foster a more integrated rental sector in which there is a range of investment/ownership/management options within a policy and regulatory framework that promotes more choices for households who rely on renting. Policy directions could include the following.
Policy settings
Strategies to encourage more stable and long-term investment in rental housing could be achieved by encouraging greater private investment in the social rental sector (as in Austria and The Netherlands) and/or in return for specified outcomes in the private rental sector (as in Germany and New Jersey). Additional government support and investment will be required to support lower income and vulnerable households and public subsidies, including taxation incentives, should be tied to outcomes such as newly constructed dwellings and affordable rentals.
Regulation and management
Regulation of tenancies could involve initial tenancy provisions that can convert into longer term tenancies if successful, as in Ireland and Flanders. Professional management appears to provide a better basis for secure occupancy, although the German example shows that strong regulation can also have this effect where there are small ‘amateur’ landlords. Professional management can be achieved in various ways, including accredited rental managers (as in Flanders) and measures to improve housing management practices (as in Scotland).
Housing assistance
More coordination of tenancy access and support provisions is required with the aim of assisting lower income and vulnerable households to sustain private rental. The option of enhancing Rent Assistance, as identified in the Henry Review should also be considered. An option is to provide extra subsidy for vulnerable household through those agencies that invest in affordable supply, target low income households and offer longer term leases.
Conclusion
The challenge is to develop a rental system in which households can achieve higher levels of secure occupancy than is currently possible, without compromising those aspects of the Australian system that work well. This is about a cultural shift in the way we view renting as well as technical details of policy and regulation.
Reference
Hulse K, Milligan V and Easthope H 2011, Secure occupancy in rental housing: conceptual foundations and comparative perspectives, AHURI Final Report No 170, Australian Housing and Urban Research Institute, Melbourne, pp. 1-210.
The authors would like to acknowledge AHURI Ltd for funding the research on which this article is based and the assistance of expert informants in the eight case study countries.