Banks will assess landlords’ maintenance affordability,
Banks would need to check if potential landlords can afford to maintain their properties under a new plan.
This proposal aims to improve housing affordability and living conditions for renters in Australia.
The Consumer Policy Research Centre made this recommendation to a senate inquiry examining financial regulations and home ownership.
Their goal is to see if lending rules help Australians buy their own homes effectively.
Erin Turner, the centre’s chief executive, highlighted that banks currently consider living expenses when assessing home loans.
However, they often overlook the maintenance costs investors will incur over the lifetime of their loans.
Turner stated, “What we’re asking for is simple: if someone is borrowing to buy an investment property.”
She added, “Make sure they can afford the property as a whole, including maintenance and repairs.”
This is essential for ensuring minimum standards in housing, which the federal government must oversee.
Furthermore, she noted that the financial system is closely linked to the housing system.
“When someone borrows to invest, we need to consider the experience of the tenants living in that house,” she emphasized.
Leo Patterson Ross, chief executive of the NSW Tenants’ Union, also expressed his views on the matter.
He suggested that banks should treat investment loans similarly to business loans for better oversight.
Ross mentioned, “We’ve had banks lending money to investors without checking if they can provide necessary services.”
Additionally, he recommended that banks ask borrowers about their business plans and risk profiles before approving loans.
Minimum rental standards vary across Australia, but landlords are legally obligated to maintain properties in good repair.
The centre’s submission cited 2020 research revealing that one-quarter of rentals in Australia needed repairs.
Overall, Turner believes that these changes would prevent unsuitable property investors from entering the market.
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“What we want in the private rental market is responsible landlords who can afford to fix appliances when they break,” she stated.
She emphasized that if regulations are tightened, some potential investors may not be able to participate.
In her view, this outcome would be beneficial for the housing market overall.
“I hope that such changes lead to more responsible and high-quality landlords,” she added.
These are landlords who expect to address issues promptly when things break down.
Both Turner and Patterson Ross suggested that these changes could also reduce investor demand and borrowing capacity.
As a result, this would make the housing market easier for first-time homebuyers to navigate.
“We would likely see a drop in property prices,” Patterson Ross noted.
He explained that the current problems arise from how easy it is to secure large loans, which drive up prices.
“If there were less credit available, prices would likely decrease,” he asserted.
Jarrod McCabe, director of Wakelin Property Advisory, shared concerns about the potential impact on rental availability.
He stated, “While these changes may reduce homebuying demand, they could also make rentals scarcer.”
“I believe the intention is good, but these changes are not isolated,” he added.
One major issue is that we need high-quality homes, but we also need enough available homes.
In contrast, Patterson Ross disagreed with the idea that stricter landlord requirements would negatively affect the rental market.
“If some landlords aren’t able or willing to fulfill their responsibilities, they may sell to owner-occupiers,” he explained.
This transition would result in a neutral impact on the rental market overall.
Alternatively, properties could be sold to investors who are better equipped to maintain them.
“If the government is concerned about landlords selling properties, they can begin purchasing those homes themselves,” he suggested.
Turner concurred, stating, “If an investor chooses not to buy a property, it doesn’t just disappear from the market.”
Recently, housing investors have left the Victorian property market due to changes in land taxes on investment properties.
This shift has increased supply and put downward pressure on house prices in many parts of Melbourne.
McCabe mentioned that his advisory company advises investors to set aside funds annually for repairs, even if they aren’t urgent.
However, he noted it can be difficult to determine if landlords cannot perform repairs or simply choose not to.
“This unfortunate situation occurs with some rental providers who lack the right mindset, which is far from ideal,” he said.
In fact, he believes this mentality is even worse for the rental market overall.
