Tenants' Union of Tasmania

Rent Increases

Present Situation

The TUT has been dealing with more mid-lease rent increases from clients on its telephone advice line and face-to-face advocacy.  If there is provision for a rent increase in the lease agreement, the landlord may increase rents every 6 months during the tenancy period.   A tenant may challenge a rent increase that is excessive. The application fee to the Magistrates Court is $42.35.  The issue the court is directed to have regard to is the ‘general level of rents’. 

Evidence of the market rent for the premises in question may cost a tenant between $300-$500 (for a professional evaluation), which is not recoverable, even in the event of a successful application.  The Tenants Union has recorded many extreme rent increases demanded from tenants. Examples include a 150% rise from $100 to $250 per week in Devonport and a $100 rise from $180 to $280 per week in Hobart.  
 
Under the Residential Tenancy Act (1997) s.23:
(1) A tenant may apply to the Court for an order declaring that an increase in the rent payable under a residential tenancy agreement is unreasonable.
(2) In determining whether an increase in the rent is unreasonable, the Court is to have regard to –
(a) the general level of rents for comparable residential premises in the locality or a similar locality; and
(b) any other relevant matter.
 
In effect, any rent increase may be granted and housing affordability is not taken into consideration when determining rent increases.  Therefore a household could move from a manageable level of rent, through the ‘housing stress’ level (30% of income) into ‘housing crisis’ (50% of income) during a tenancy, without changes in other circumstances.  
Property owners are in the advantageous position of knowing that the costs and inconveniences associated with uprooting a household are high, and many tenants will not challenge the rise through the court process. Tenants do not have a right to break the lease as a result of the rent increase unless they are willing to face costs of finding new tenants and paying rent until new tenants are found.
 
Case study
Joan* is a pensioner, living with her pensioner husband and pensioner mother.  They moved into a three bedroom house in Devonport with a friend of the family as landlord and the rent was set at $432 per calendar month or $100 per week.  They paid no bond and had no written lease, which made it difficult to obtain Centrelink Rent Assistance.  
After eight months the landlord notified the tenants that the rent was to be raised to $1083 per calendar month or $250 per week.   The TUT advised the tenants that they could apply to the Magistrates Court to see whether this was reasonable, but there was no certainty of a reduction due to the increase in local market rents.
They decided it was too hard to fight it and moved out into $210 per week accommodation where at least they can receive some Rent Assistance because they now have a 12 month written lease.   There were considerable relocation costs, and Joan’s mother, who is blind, has had to familiarise herself with another house.  They do not know if a further lease will available after the current lease expires. It is very expensive for them and they have applied for public housing in the hope of eventually having affordable secure housing.  
 
Tenants' Union Preliminary Position on Rent Increases

The TUT published a law reform issues paper in 2006 called Through the Roof.   It included detailed comparisons of State and International legislation relating to rent increases. To summarise the paper, Tasmania has some of the most inequitable legislation in this area in Australia.  All other jurisdictions have varying degrees of comprehensiveness and ability to deliver just outcomes.  The ACT uses the Housing Consumer Price Index plus 20% to give a basic benchmark of an acceptable rent increase, and most jurisdictions have many explicit factors that are considered in determining whether a rent increase was reasonable or not. 
 
The TUT recommends the following with regard to rent increases:
 
Recommendation: Rents may only be increased by the Housing CPI during the tenancy and that only one increase may occur every twelve months and this must be stated in the residential tenancy agreement.  If a landlord requires an increase in excess of the Housing CPI, then the onus is placed on the landlord to justify the excess increase.
 
It is reasonable for a tenant to know the approximate cost of rent throughout the tenancy when signing a lease agreement, therefore the TUT submits that a maximum Housing CPI increase is fair for both Tenant and Landlord.  If there are considerable changes in circumstances, there may still be the option of seeking a rent increase through an impartial body.  Landlords have a relative position of power against tenants due to the relative scarcity of housing and the essential nature of shelter, and therefore it is logical to place the onus of justification upon the landlord.

Recommendation: A list of definite factors be determined that can be taken into consideration for rent increases (and rent decreases).  A community consultation process should be undertaken to determine these factors.
 
A list of factors will help all parties including arbiters to determine fair rent increases (and decreases) and give greater certainty to the process.
 
Recommendation: A tenant has the option of terminating the lease if the rent is increased above the Housing CPI.
 
In the event of a high rent increase being granted tenants should be able to seek new accommodation without the added burden of costs and possible litigation.  This measure will help allow tenants to avoid being pushed into housing stress or housing crisis levels.