Landlords smashed with new rules, rents to soar in one state

A bigger battle is shaping up between landlords and renters, but one property owner has argued they should combine forces to fight against the government.

A landlord has warned a government proposal to introduce new minimum rental standards will only “worsen” the rental crisis and cause tenants more pain as property owners pass on the blowout in costs.

Simon*, from Victoria, said the situation has gotten so bad for landlords in the state that he is looking to sell and get out of the rental game.

He believes new rental rules would cost thousands of dollars to ensure compliance and said ultimately these costs will be passed on to tenants.

“I would suggest across Victoria that rents would skyrocket. My wife and I would certainly apply a hefty increase and I have just increased the rent by $2500 for the year,” he said.

The Victorian government is proposing to introduce new minimum heating and cooling standards for rental properties.

It would include things such as installing ceiling insulation where none exists, droughtproofing with weather seals on all external doors, new electric hot water systems and three-star efficiency cooling.

The Victorian government has launched a consultation on the requirements, which would also encompass replacing broken appliances with energy efficient ones, which it said would drive down power bills for renters by more than $800 a year.

Overall, the government estimates these proposed upgrades would save renters about $567 a year off their energy bills.

Rental providers would also be required to replace hot water and heating systems with energy-efficient electric appliances when their current appliance reaches end of life.

The government said it would save renters 4567 a year. Picture: NCA NewsWire / Andrew Henshaw

The move is expected to save renters $215 off their power bills a year, while the lower-cost option to upgrade a hot water system would save tenants about $113 a year.

While landlords have hit out at the move, Everybody’s Home, a group campaigning to fix the housing crisis, has welcomed the move.

“Landlords are taking every opportunity they can to increase rents. There have been huge rent increases year-on-year and major increases since the pandemic. We need these reforms to be passed alongside caps to rental increases as they have in ACT – they go hand-in-hand,” Everybody’s Home spokeswoman Maiy Azize told news.com.au.
“Housing hasn’t collapsed in the ACT with these requirements. We have just got people living in homes that are of a decent standard and their rent increases are capped to 10 per cent of CPI, which is very reasonable.”

Everybody’s Home spokeswoman Maiy Azize. Picture: Supplied

However, Simon, who owns a three-bedroom unit in the suburb of Ringwood, argued that any more costs would only worsen the situation for all.

He said he has watched costs for landlords increase from land tax to smoke detection inspections to sending out tradies for maintenance, while insurance has jumped by 30 per cent.

The business owner said he can’t “keep absorbing these costs”.

“Landlords are leaving the market in the droves. Those remaining are being forced to pass the costs onto tenants,” he said.

“I, like many others, don’t like displacing tenants or passing on rental increases. I have just received the $2200 or thereabouts insurance costs for this year and that does not even include the additional public liability insurance we have to have for inside the property.”

The business owner said landlords don’t buy property for the rental income.

“You would have be a moron to buy a property for rent – you buy in hope that maybe in five, 10, 15 or 20 years, prices have gone up substantially and you make some capital growth on it. Anyone with a brain is investing in property not to make rent – no one does it to get rich.”

Simon said costs for landlords in Victoria have exploded. Picture: NCA NewsWire / Luis Enrique Ascui

The 57-year-old said he had previously had five rental properties but was grateful he had sold them declaring he would never invest in property again in Victoria given compliance costs and other expenses. He has tried twice to sell the Ringwood property already.

“I plan to sell it again to get out of the market – I have simply been waiting for the right time,” he shared.

“I would earn more money in a 5 per cent term deposit with no outgoings, no management fees, no land taxes, no compliance costs, no 8.8 per cent investor mortgage rates, stress, damage.”

He said his wife also owned a rental and after hearing about the Victorian government’s proposal for new standards said “she would give up and get out” if they were introduced by immediately putting it on the market for sale.

Simon said renters and landlords should join forces to lobby the government to bring down taxes and “horrendous costs for landlords” who are “suffering” so that these savings could be passed on to renters.

Victorian’s new rental standards would be staggered into operation from 30 October 2025.

The state government also introduced minimum renting standards in 2021, which include a requirement for landlords to provide a fixed heater.

Victoria would become closer to the ACT by introducing minimum rental standards. Picture: NCA NewsWire / Luis Ascui

Ms Azize said the reforms were a step forward in making sure landlords are not just investing in themselves as they are a “supplier of an essential service”.

“If they can’t provide a home to a minimum standard and they are so highly leveraged that these reforms are going to send them into tail spin or create liability issues, they do need to examine if they are able to supply an essential service to someone,” she added.

“I think landlords are not performing a public service. If they sell the home, it doesn’t dematerialise. It’s sold to another person who will be a landlord or become a home for a buyer who will live in it which we need to see more of in Australia.

“I don’t think it’s a huge disaster if people who are not equipped to supplying housing stop supply housing. It’s not a reason to have minimum standards.”

Victorian Minister for Consumer Affairs Gabrielle Williams said the proposed standards will make rental properties safer and more comfortable – giving renters peace of mind for both the winter and summer and driving down costs.

“Everyone deserves to live comfortably – these proposed standards will make rentals more energy efficient and cheaper to run – slashing their bills and making them more climate resilient,” Victorian Minister for Energy and Resources Lily D’Ambrosio added.

Commissioner for Better Regulation Cressida Wall. Picture: David Crosling

However, the Department of Government Services and the Department of Energy, Environment and Climate Action highlighted in documents that there would be short term pain for renters.

“The departments acknowledge that it is likely that at least some of the costs will be passed on to tenants, and that recent cost-of-living pressures and interest rate rises may limit the amount of cost increases that rental providers and rooming house operators can absorb,” said Commissioner for Better Regulation Cressida Wall.

Opposition housing affordability spokesman Evan Mulholland said investors were already fleeing the state and costs would be passed on and the people that would pay are “vulnerable renters who need to get a roof over their head”.

Consultations close in July before the new standards are determined in October.

*Name changed for privacy reasons