Donohoe -v- Havelock Housing Association
[2007] ACTRTT 1
•24 January 2007
Donohoe v Havelock Housing Association; McGough v Havelock Housing Association
[2007] ACTRTT 1
CATCHWORDS:
Market rent
Rebated rent
Rent increases
Capacity to pay
Community Housing
ISSUES:
Whether “rent” is the rebated rent or the market rent.
Tenants capacity to pay as a relevant factor in rent increases
Community Housing, its history and role in rent increases
LEGISLATION:
Residential Tenancies Act 1997 sections 3A, 68(3)
Prescribed terms:35
Housing Assistance Act 1987 section 11A, 11B, 12, 15
Public Housing Rental Assistance Program.
Residential Tenancies Act 1987 (NSW) section 47A, 48
CASES CITED:
Progressive Mailing House P/L v Tabali 1985 157 CLR 17;In the Estate of Tanya Humphries v Commissioner for Housing 2003 ACTSC 40
Kilpatrick v Gresser (unreported SC NSW 13 May 1987)
Residential Tenancy Law and Practice (1983) Bradbrook, MacCallum and Moore pp119-122; Residential Tenancies laws and Practice Lang 2nd ed pp1-4
CASE REFERENCE NUMBER: RT 1772 of 2005
Donohoe -v- Havelock Housing Association
RE: Premises at 79 Wakefield Gardens AINSLIE ACT 2602
________________________________________________________________________
CASE REFERENCE NUMBER: RT 1774 of 2005
McGough -v- Havelock Housing Association
RE: Premises at 10a Suttor Street AINSLIE ACT 2602
IN THE RESIDENTIAL )
TENANCIES TRIBUNAL ) ACTRTT1 [2007]
OF THE AUSTRALIAN )
CAPITAL TERRITORY )
CASE REFERENCE NUMBER: RT 1772 of 2005
Donohoe -v- Havelock Housing Association
RE: Premises at 79 Wakefield Gardens AINSLIE ACT 2602
________________________________________________________________________
CASE REFERENCE NUMBER: RT 1774 of 2005
McGough -v- Havelock Housing Association
RE: Premises at 10a Suttor Street AINSLIE ACT 2602
CORRECTION OF ERROR
Member: Allan Anforth
Date: 24 January 2007
Correction:
Pursuant to section 102(2)(c) of the Residential Tenancies Act 1997 the decision of the Tribunal in these proceedings dated 10 January 2007 is amended as follows:
Order 1 should read:
1.In the case of Brigid Donohoe, both the market rent and the rebated rent are fixed at $242.50 per week commencing 1 January 2006;
Member
Residential Tenancies Tribunal
DECISION
ORDERS
In the case of Brigid Donohoe, both the market rent and the rebated rent are fixed at $242.50 per week;
In the case of Janie McGough the application is dismissed.
Member: A. Anforth
Date: 10 January 2007
REASONS FOR DECISION
The matter of Brigid Donohoe:
Ms Donohoe is the tenant of 79 Wakefield Gardens in the ACT. Havelock Housing Association (HHA) is the immediate landlord of Ms Donohoe. The house is a 2 bedroom fibro house. It is one of 7 co-located houses forming the Juno Women’s Housing Co-Operative (Juno). The houses share a driveway, garage, clothes line and garden. There are no fences dividing the houses.
The houses at Juno are the property of the ACT Government and are the subject of a 20 year lease commencing 24 November 1999 to Community Housing Canberra Ltd (CHC), who in turn sub-let the premises to HHA under a 10 year lease commencing on 1 December 1999. A convenient summary of the historical relationship between Juno, HHA, CHC and the ACT is set out in paragraph 33 below as part of the submission prepared for the Respondent by Chamberlain, solicitors. Copies of the various leases are annexed to these submissions.
The current or operative residential tenancy agreement in respect of both Applicants was apparently executed in 1999 between the respective Applicants and CHC, although no copy of either tenancy agreement has been tendered in evidence. When the sub-leases from CHC to HHA was executed on 1 December 1999 all parties appear to have assumed that the Applicants’ residential tenancy agreement remained in force save only that HHA became the immediate landlord of the Applicants in lieu of CHC. The Tribunal has not been asked to review this assumption and is prepared to accept the validity of the assumption for present purposes. In any event it is sufficient apparent from the evidence that both Applicants have satisfied the definition of a residential tenancy agreement in section 6A Residential Tenancies Act 1997 (the Act) at all material times.
By letter of 1 November 2005 HHA advised Ms Donohoe that her assessed market rent was to increase from $275.00 per week to $285.00 per week effective 1 January 2006 which is more than the 8 weeks notice required by prescribed term 38 of the Act. The letter informed Ms Donohoe that she was required to pay the lesser of this market rent or 25% of her gross income. In a second letter of 25 November HHA advised that a rebate of $165 per fortnight would be allowed from the new market rent leaving Ms Donohoe to pay a rent of $405.00 per fortnight or $202.50 per week.
Ms Donohoe wrote to HHA disputing that her rent prior to this latest rent increase notice was $275 per week. The letter recounted the history of rent increases culminating in a rent of $214.00 from 7 November 2003. HHA later accepted that the figure of $275.00 was an error on their part and the true existing market rent relevant to the present application was in fact $214.00 per week.
The history of Ms Donohoe’s disputes with her landlord concerning market rent increases is in part recorded in a decision of the Tribunal dated 12 September 2001 by differently constituted Tribunal. That matter related to a rent increase notice dated 6 December 2000 which proposed a rent increase from $152.00 per week to $215.00 per week. The Tribunal allowed an increase of $27.00 per week to a rent of $179.00 per week and disallowed the remainder of the rent increase. By letter of 3 May 2005 HHA advised Ms Donohoe that her market rent was in fact $214 per week. This letter did not itself purport to be a notice of rent increase but rather was advising a change in the applicable rent rebate to Ms Donohoe. Nevertheless the letter does indicate that a market rent increase from $179.00 per week to $214.00 had occurred at some point in time between the Tribunal decision on 12 September 2001 and the letter of 3 May 2005. The point is not trite because section 70 and prescribed term 35 preclude the imposition of rent increases within the period of 12 months of the last rent increase. In the present matter Ms Donohoe has not directly raised this issue and her evidence was to the effect that her last rent increase was 2 years previously. On these bases the Tribunal has not pursued this issue further.
The increase from $214 to $285 per week represents a 33% increase in rent.
On 23 December 2005 Ms Donohoe lodged an application with the Tribunal opposing the rent increase notified in the letter of 1 November 2005.
The matter was originally listed for 12 January 2006. The parties notified the Tribunal that they were in negotiations and wished the matter stood over generally. The negotiations were not successful and on 22 June 2006 Ms Donohoe applied to have the matter relisted. The matter was relisted for 6 July 2006 and then further adjourned at the parties request to 13 July 2006.
10. On 13 July 2006 Ms Donohoe appeared in person and Ms Bassatt appeared for HHA. Procedural orders were made for the present two matters to be heard together and for the filing of the evidence upon which the parties proposed to rely at the hearing.
11. On 20 July 2006 Ms Donohoe filed the submissions and documents upon which she proposed to rely. The submission did not actually provide the level of Ms Donohoe’s wage but it conceded that due to the rebate system she would not actually have to pay the rent increase. However in her final submissions of 16 October 2006 Ms Donohoe advised that due to a wage increase she was now to be affected by the proposed rent increase to the extent of $40.00 per week (see para …below). The submissions of 20 July 2006 dealt with the following:
(a) She had moved into the Juno Women’s Housing Co-op in 1991 in part due to a need to find safety , security and support in dealing with childhood sexual abuse issues:
(b) Her status as a single full time mother at the time of taking up the tenancy at Juno.
(c) The fact that she was now 57 years of age and had only recently returned to the work force as a consequence of which she had no savings or superannuation to speak of.
(d) The gas heater and gas stove had been defective and were only recently replaced.
(e) The electric heater was defective.
(f) The house has not been painted, inside or outside, for 15 years and was peeling internally. Photographs were provided. The submission attached a letter from Community Housing Canberra Ltd (the former landlord) dated 22 May 2001 acknowledging that the house required internal painting to remove a mould problem. This work has not been done.
(g) The internal shelving Ms Donohoe had erected in the house. Photographs were provided.
12. On 4 August 2005 HHA filed submissions and documents it proposed to rely upon in Ms Donohoe’s matter. Those submissions dealt with:
(a) A market appraisal by Egan National Valuers (ACT) who assessed the market rent on Ms Donohoe’s house at $285.00 per week.
(b) An explanation of the error in the rent increase notice which wrongly asserted the rent prior to the increase to be $275.00 per week and an admission that the true market rent prior to the increase was $214.00 per week.
(c) Details of Ms Donohoe’s income of $810 per week which results in a rent payable of $202.50 per week irrespective of the increase in the market rent. Ms Donohoe was only required to pay 25% of her gross income until such time as this sum reached the level of the market rent at which point it then remained at the market rent.
(d) The program for the proposed painting of the house
(e) A denial of any awareness of the problems with the electric heater until recently.
(f) The repairs which had been carried out. A series of “Work Orders” to various tradesmen for the period January 2006 to April 2006 relating to the oven, a leaking tap and removing of debris from the roof were appended.
13. The report from Egan’s recited the history of rent increases in various categories and locations of housing in Canberra for the period up to the end of the March 2005 quarter (i.e. July 2005). The report showed that for two bedroom premises in the Ainslie area of Canberra the rent increase for the 3 months from March 2005 to July 2005 was 9.1% (or 36.4% on an annualized basis).
14. The submission attached three advertisements from the All Homes web site. The first house was a 2 bedroom fibro in Ainslie at $330 per week. It contained gas heating, new paint and carpets throughout. The second house was a 2 bedroom fibro house in O’Connor at $330 per week. It also contained gas heating and a lock up garage. The third house was a three bedroom fibro house in O’Connor at $320 per week. It contained gas heating and a separate toilet.
15. The matter was listed for hearing on 14 August 2006. Ms Donohoe appeared in person and Ms Bassatt appeared for HHA. The Tribunal discussed with the parties the factors set out in section 68(3)(a)-(h) Residential Tenancies Act 1997. It was agreed between the parties that the relevant responses were as follows:
para (a) $214.00
para (b) the last rent increase was 2 years previously
para (c) not available but not significant
para (d) none
para (e) nil
para (f) nil, just routine maintenance
para (g)renovated in 1991.
para (h) Ms Donohoe had installed internal shelving
16. Ms Donohoe admitted that she did not doubt that the rent increase could be justified on a purely commercial comparative rents basis. Her argument was that the house formed part of a community housing scheme which entailed considerations not applicable to ordinary commercial leases of residential premises. These considerations centered around the public policy underpinning of community housing, the degree to which various facilities were shared between members of the community housing scheme and the extent of tenant participation in the management of the tenancies.
17. The Tribunal then raised with the parties the consideration of:
(a) The relevance of the role of government funding through the Commonwealth-State Housing Agreement (CSHA) in determining rent increases for the purposes of section 68(3)(i) of the Act. In particular the Tribunal was concerned with the relevance of a tenants capacity to pay in determining whether a rent increase was excessive, particularly in the context of government provided housing with its statutory commitment to secure and affordable housing for people on low and modest incomes.
(b) The nature of the public policy features of community housing, and in particular in the Juno Co-Operative, and the of these features for the purposes of section 68(3)(i). In particular the Tribunal was concerned with the extent to which each tenant did not have the exclusive right to occupancy or use of various parts of the premises or facilities provided with the premises. It was also concerned about the extent to which the government had encouraged the residents of housing co-operatives such as Juno to form self supporting communities on the promise of secure and affordable housing tenure.
18. The matter was adjourned for the parties to file submissions on these issues.
19. On 31 August 2006 Chamberlains, solicitors filed submissions on behalf of HHA. This submission helpfully set out the basis of the arrangements between the ACT, CHC and HHA. Pursuant to an agreement between the ACT and CHC on 30 October 1998 the ACT leased 200 houses to CHC. The houses were to be used for the development of “quality, cost effective and efficient community housing in the ACT”. CHC was to allocate the houses to community based housing providers and to assist those providers in developing the necessary skills for managing community housing and related services. The essence of community housing was the role of the ultimate tenant/residents in the day to day management of the housing project, and the provision of sustainable housing choices for people in a manner which promotes community cohesion.
20. The agreement with the ACT required the CHC to select tenants in accordance with the eligibility criteria under the Public Rental Housing Assistance Program (PRHAP) made pursuant to section 12 Housing Assistance Act 1987. This Program provides that tenants are to pay rent at 25% of gross household income up to the limit of the prevailing market rent. The market rent is to be assessed annually by a qualified valuer. A copy of the PRHAP was formed an annexure to the Chamberlain submission.
21. CHC developed and promulgated a By Law for the management of its community housing program. A copy of that By-Law was appended to the submission by Chamberlains.
22. CHC was itself incorporated in January 1998 by the ACT government following a Task Force report commissioned by the ACT, to receive and manage the housing allocation of 200 houses from government housing stock. Extracts from the report itself were appended to the submission by Chamberlains, and contain the notable statement:
Security of tenure is a fundamental community housing principle and assists in developing security and individual well being, encouraging tenants in the care and improvement of their own dwelling.
23. The matter was next before the Tribunal on 12 September 2006. Ms Donohoe appeared in person and Ms Bassatt appeared for HHA. On that occasion the Tribunal was provided with a copy of the Commonwealth Gazette of 17 July 2003 which set out the terms of an agreement between the Commonwealth and the States and Territories to work towards developing new standards for social housing. Those standards were to achieve, inter alia:
(a) a reduction in the work force disincentives arising from the manner in which rent is calculated;
(b) affordable rents.
24. Neither party had complied with the previous orders to file and service submissions directed specifically at the issues raised in the orders of 14 August 2006 at para 17 above. The matter was adjourned for a hearing on a date to be fixed by the Registrar with provision for the parties to file the submissions sought in the orders of 14 August 2006.
25. On 16 October 2006 Ms Donohoe filed her submissions. Ms Donohoe indicated the difficulty she experienced in locating any useful public policy documents pertaining to the development of community housing in the ACT. She cited an extract from a report to the ACT Legislative Assembly of June 2005 entitled “Progress on Affordable Housing in the ACT” which relevantly read:
Community housing is long term, safe, secure and affordable accommodation provided by not for profit community organizations. Community housing is complementary to public housing in that it offers a higher level of tenant participation in tenancy management and seeks to accommodate diverse and complex needs.
26. The Department of Health and Community Services report of May 2003 “Community Housing in the ACT-Future Directions Policy Framework” defined community housing as follows:
Community housing is long term, safe, secure, affordable and appropriate housing provided by non-profit community organizations and which:
·Encourages and maximizes opportunities for tenants to assume control over their home and environment through participation in management
·Is flexible, responsive and respectful of individual rights; and
·Contributes to the development of communities.
27. In addition to the above, Ms Donohoe quoted various extracts from a recent housing conference papers to the effect that community housing in Australia was in a parlous state due in part to the new managerialism of the relevant State and Territory public housing bureaucrats.
28. She stated that Juno Women’s Housing Association Inc had been formed in 1989 by a group of single women concerned about their safety. Juno then sought and obtained tenancies from the ACT over a group of houses, albeit that the lease from the ACT was formally granted to CHC. Ms Donohoe moved into June in 1992. An extract of the Objectives from the constitution of Juno indicated that its goal was to provide “safe, secure housing for single woman and their children”; to provide an extended family environment for these women and their children; to provide affordable housing to woman to alleviate housing poverty and to allow for a degree of control and management by the women of their own housing matters.
29. The Memorandum of Understanding between HHA and Juno specifically stated that tenants must “be on low income” and “demonstrate a need for housing”.
30. Ms Donohoe advised that her gross income had increased to $969.90 per week which meant that her rebated rent had increased to $242.50 per week on the 25% scale. Hence the market rent increase from $214 per week to $285 per week now under review had deprived Ms Donohoe of the benefit of a cap on her rent at $214.00 per week and caused an increase of actual rent payable from the previous cap of $214 per week to $242.50 per week.
31. The matter was listed for final hearing on 24 November 2006. Ms Donohoe appeared in person and Ms Garvie, solicitor appeared on behalf of HHA. On this occasion the Tribunal informed the parties that during the period since the matter was last before the Tribunal the Tribunal member had made inquiries of CHC and the national peak body for community housing to ascertain the existence of any public reports addressing the policy issues at paragraph 17 above. Nothing had eventuated from that inquiry.
32. The parties had nothing further to add by way of submissions or evidence. The matter was adjourned for a decision in writing to be given. The parties were provided with a final opportunity to put any further submissions they so wished in writing prior to Christmas directed to the issues at paragraph 17 above.
33. On 24 December 2006 Chamberlains, solicitors filed its final submissions. This submission is a very helpful and is set out in full hereunder. The submission is accompanied by a range of annexures which are not reproduced in these reasons for decision but which have been studies by the Tribunal:
1. REQUEST FOR SUBMISSIONS
1.1 On 24 November 2006, the Residential Tenancies Tribunal (the Tribunal) requested Community Housing Canberra Ltd (CHC) make further submissions in response to those of the Applicants.
1.2 Previously formal submissions were filed by CHC in relation to levels of government assistance to the sector and its policy regarding security of tenure.
1.3 The submissions included CHC's By Laws relating to the management of its properties and its submissions to the government task force into Community Housing in the ACT, dated 15 November 2001.
1.4 These further submissions have been made at the request of the Tribunal, although CHC is not a party to the proceedings. The Tribunal, in considering this matter, has sought further information under s68(3)(i) of the Residential Tenancies Act 1997 (ACT)(the Act).
1.5 The Tribunal has requested that CHC make submissions that address the policy behind community housing, as compared to public housing or private tenancies. In particular, the Tribunal was interested in the policy in place at the time that the Applicants commenced renting the relevant premises.
1.6 In addressing this issue, these submissions also look at the origins of Juno Women's Housing Association Inc. (Juno), of which both Applicants are members. The Applicants obtained their tenancies at Havelock House through membership of Juno.
2. COMMUNITY HOUSING
2.1 There are a number of definitions of "community housing". However, the essential concept is of empowerment of the tenant by the award of opportunity to participate in housing management for the benefit of the tenant and the organisation of which they are a member.
22 Because of the organisational bond between the housing provider and the individual tenant, community housing arrangements are able to be particularly understanding of, and responsive to, individual tenant's needs as well as the communal needs of the tenants as a group. The representation of tenants on the management committee and their status as members of a duly constituted organisation, provides a very effective quality assurance mechanism for the housing management provided by the organisation.
2.3 The housing provider organisation endeavours, within its resources, to maximize the level of housing amenity available against what tenants can afford. It draws the tenants into helping to make the decisions that affect their housing and thereby there can be a greater sense of tenant ownership of the arrangements and avoidance of frustration that fairly or unfairly is visited at times on the perceived faceless government bureaucracy. There is an ongoing opportunity for feedback between the housing provider organization and the tenants.
2.4 However any structure which has a high degree of direct participation needs clear rules to ensure that the benefits are in fact achieved, that the potential for disharmony is minimized and that there are effective dispute settling mechanisms in place.
2.5 The above benefits are only possible if the community housing organization remains financially viable and has a stable and competent governing body and management.
2.6 Any significant threat to the financial viability directly threatens that stability and consequently the commitment and retention of managers and trained staff. For survival it is necessary for voluntary not for profit organizations to operate to maintain financial viability.
3. HISTORY OF COMMUNITY HOUSING IN THE ACT
3.1 Involvement by non-government organisations and community groups in low-income housing provision in the ACT emerged in the 1980s with the availability of direct capital and infrastructure funding through a number of programs provided by the Commonwealth. A number of housing cooperatives formed with the aim of housing their members through the purchasing of properties under various grant and mortgage arrangements. The total amount of funding available limited the growth of stock to around 40 houses by the mid 1990s.
3.2 A parallel development in the 1980s was the move by some members of the community to lobby the Government to provide more low cost housing in a number of accommodation facilities in the Territory that had become rundown. At both Ainslie Village and Havelock House community organisations formed to provide accommodation and support. Both facilities provided housing for over three hundred people.
3.3 A third development was the growth of short and medium term housing for people in crisis, as well as housing with a strong health or support focus, as the ACT followed the national trend to close institutions and facilities and expand services provided in a suburban residential setting. The availability of capital funding under the Commonwealth-funded Crisis Accommodation Program, as well as the growth of government group houses for people with an intellectual disability, led to the head leasing of ACT Housing stock to a number of non-government organizations and other government agencies under the Community Housing Organizations Rental Housing Assistance Program (CARHOP). Further growth occurred in this program with the head leasing of rundown ACT Housing stock to a group housing tertiary students.
3.4 The Cooperative Resource Centre (CRC) formed prior to 1993 with assistance from ACT Housing to resource and expand the cooperative housing sector. CRC changed its name in 1993 to Community Housing Advisory Service of the ACT (CHASACT). CHASACT took on a wider role in relation to the community housing sector as a whole.
3.5 Resourcing and funding for expansion was provided through the Territory Government's Community Housing Program (CHP). The expansion role included assisting cooperative and community housing groups with applications under the CHP. Further expansion and the development of new groups were judged not to be possible without a large injection of properties from public housing stock. CHASACT consulted and lobbied ACT Government and subsequently the ACT Government took the decision to transfer 200 dwellings to community housing. In August 1997 the government established the Community Housing Expansion Task Force to implement the decision. The Task Force reported in November 1997.
3.6 The key recommendations included the formation of a not-for-profit company limited by guarantee to receive the 200 properties on 20 year leases. This led to the creation of Community Housing Canberra Ltd (CHC). CHC was to sublease parcels of the properties to participating community housing providers which were members of CHC. CHC was to be supported by a start-up grant and an annual subsidy equal to the average Government support of public housing.
3.7 CHC was established in January 1998 and subsequently took over the assets (including some staff) of CHASACT which was wound up on 30 June 1998. A collateral role of CHC was to promote community housing and to act as the ACT peak body in the community housing sector. When the sector developed, the latter function was transferred to the Coalition of Community Housing Organisations of the ACT (CCHOACT). A copy of a CCHOACT brochure is annexed at Annexure A.
3.8 CHC was granted charitable status from the Commonwealth and consequent exemptions from GST. However, it is important to note that this subsidy provided to CHC by ACT Government ceased on 30 June 2006 with the withdrawal of some $612,000 annually.
4. HOW DID JUNO COME INTO EXISTENCE?
4.1 Juno was formed in 1991 by a group of women including single mothers who were renting public housing properties in Lyn ham. The impetus for association was the desire for security and mutual support away from the unsatisfactory environment in which they found themselves.
4.2 Previously, in 1989, the group (unincorporated at that stage) negotiated with the ACT Housing Trust and in May 1991 was allotted seven properties in Ainslie. The women put to the Trust that they could gain some control over their social and physical environment by associating -this was encouraged by the Trust.
4.3 At a meeting with CHC on 22 March 1998, Juno expressed interest in participating in the CHC transfer process. At the time ACT Housing proposed transferring 30 properties per quarter to CHC for sublease to providers. In late 1998 CHC, encouraged by ACT Government, conducted workshops for participants interested in forming cooperative and community housing groups. Some new groups were formed from the initiatives and CHC offered temporary office space to assist them manage their early administration.
4.4 On 20 April 1999 Juno decided to transfer all seven of its properties from ACT Housing to Havelock Housing Association Inc. Subsequently a memorandum of understanding was agreed, a copy of which is annexed at Annexure B.
4.5 It is clear that the ACT Government, pursuant to its social and political stance, encouraged and supported community housing as a part of its housing policy. It was also obliged to meet its CSHA community housing targets and was funded to do so by the Commonwealth through tied grants.
4.6 ACT Government funding for the community housing sector since 1998 has been channeled largely through CHC with other targeted programs aimed at special groups funded directly by government. The focus of this submission is confined to funding for the management of housing for tenants in the 209 CHC properties.
5. FUNDING CHANGES FOR THE COMMUNITY HOUSING SECTOR IN THE ACT
5.1 In 2004/5 the Department of Disability, Housing & Community Services (the Department) commenced a review of the community housing sector largely aimed at improving the effectiveness of its grant funding and improved efficiency of the sector to achieve this.
5.2 SGS Economics and Planning (SGS) was engaged to review the sector and reported in October 2005. A copy of the SGS report is annexed at Annexure C. The report is also available electronically at CHC responded to the report considering it deficient, confused over material facts and drawing invalid conclusions. A copy of CHC's response is annexed at Annexure D.
5.4 The Department received the SGS report but did not accept all its recommendations. However the Department foreshadowed funding cuts and sector structural changes in a report published by the Department in May 2006, a copy of which is annexed at Annexure E.
5.5 The premise underlying the Department's position is that the sector is inefficient and overpopulated with unviable groups. This is evidenced by comments made by Minister Mr John Hargreaves MLA in the ACT Legislative Assembly on 17 October 2006. A transcript of those comments has been annexed at Annexure F.
6. LEGISLATIVE AND CONTRACTUAL BACKGROUND
6.1 In considering the Applicants' submissions, CHC submits that the Tribunal ought to take note of the legislative and contractual framework through which the Applicants came to obtain tenancies at Havelock House.
6.2 The ACT Government has entered into an agreement with the Commonwealth (under the Housing Assistance Act 1996 (Cth)) which provides Commonwealth funding for housing). The agreement is called the Commonwealth State Housing Agreement (CSHA) and operates on five year terms. The current term commenced on 1 July 2003 and will expire on 30 June 2008. At its commencement the current CSHA allocated $136.4m to the ACT over the five year period.
6.3 The Housing Assistance Act 1987 (ACT), gives effect to the CSHA and, inter alia, allows the formulation of Housing Assistance Programs to administer the Commonwealth funds. Of those funds provided by the Commonwealth through the CSHA, $1,050,000.00 is available for the year 2006/07 for community housing.
6.4 The Commissioner for Housing, appointed pursuant to subsection 4 (1) of the Housing Assistance Act 1987 (ACT), has prepared a housing assistance program called the Public Rental Housing Assistance Program 2006 (No 2) (PRHAP). A copy of the PRHAP is annexed at Annexure G.
6.5 The PRHAP sets out the policy framework and rules for operation of public housing in the ACT. CHC is obliged to apply these rules, mutatis mutandis, by operation of its Service Purchasing Contract. A copy of the Service Purchasing Contract is annexed at Annexure H.
6.6 Schedule 1 of the Service Purchasing Contract reads as follows:
1.3 People living in properties managed under this agreement shall have their eligibility for public housing determined according to public housing eligibility guidelines and the reasonable needs of the person and will pay rent in accordance with the Public Rental Housing Assistance Program, and comply with the provisions of that program.
6.7 The Service Purchasing Contract is predicated on the transfer of 209 properties under twenty year leases to CHC. CHC sub-leased all 209 properties to its provider members. The two properties relevant to these proceedings (along with a number of others) have been subleased to Havelock Housing Association Inc (HHA). Copies of the relevant leases are at annexed at Annexures I and J.
6.8 HHA, by virtue of its membership of CHC, is obliged to observe the PHRAP. The obligations upon HHA are set out in CHC's By-Law on the management of residential properties transferred from ACT Housing, annexed at Annexure K.
6.9 A central provision in the PRHAP is the setting and reviewing of the rent for each property. For purposes of the calculation of rebate, the rent charge for each property is the market rent. This is provided for by subsection 15(1) of the Housing Assistance Act J 987 (ACT) which states:
15 Rent charge under housing assistance program
(1) The amount of rent to be charged in relation to a rental housing assistance program shall be an amount equivalent to the market rent.
Market rent is then defined in sub-section (2) as follows:
(2) A reference in subsection (1) to market rent, in relation to a property at a particular time, includes a reference to the rent that would be payable if the property were then let by a willing landlord to a willing tenant-
(a) who had dealt with each other at arm's length; and
(b) each of whom had acted knowledgeably, prudently and without compulsion.
(c) The commissioner shall, annually undertake a review of the rent of each dwelling or dwellings included in each relevant class of dwellings in relation to which an amount of rent is charged under a housing assistance program.
Clause 18 of the PRHAP, titled Rent states:
In working out the market rent for a dwelling, or reviewing rent for a dwelling, the commissioner must take into account what may be included as market rent under the Act, section 15 (2).
Clause 19 of the PRHAP, titled Change in rent payable, obliges the commissioner to give notice in a particular form and sets out when any change takes effect.
Subclause 19(5) states, in part:
The amount stated as the rent payable in the notice is taken to be the amount of rent payable under the tenancy agreement between the tenant and the commissioner...
7. CHC'S OBLIGATIONS REGARDING RENT REVIEW AND CLOSING REMARKS
7.1 CHC's legal obligation to annually assess market rent is described above. A practical consequence arises from the need to:
(a) calculate the amount of rent foregone by the lessor - 'the subsidy or rebate' when rent is set using only a percentage (25% as at September 2006) of a tenant's assessable income; and
(b) set the maximum rent payable by an eligible tenant.
7.2 Market rent is assessed annually for CHC by qualified valuers independent of the company. The most recent assessment (including an assessment of the above two properties) was conducted by Egan National Valuers. A copy of the valuations of the relevant properties (obscured to hide valuations of other properties) and a letter from Egan National Valuers regarding the methodology of valuation are annexed at Annexure L. For the current period the market rentals for the properties were assessed by Egan National Valuers as:79 Wakefield Gardens - $290.00 10A Suttor Street - $325.00
7.3 According to the Applicants' submissions, the market rentals for the respective properties as determined by Egans will still represent more than 25% of the Applicants' gross income. Therefore the Applicants will continue to be subsidised by public funding and by others within the sector.
7.4 It is the submission of CHC that the requirements of section 15(2) of the Housing Assistance Act 1987 (ACT) and the Service Purchasing Contract have been met in the valuation of the properties and the increase of rent to market rent. The reason that increases to market rent have not been implemented since 2001 has been constant resistance and opposition by the Applicants. This explains the situation now experienced where the proposed rental rate increase is more than 20% greater than any increase in the index number of the period since the last rental rate increase: the test for an excessive increase in rental rate as set out in s68(2) of the Residential Tenancies Tribunal Act 1997 (ACT).
7.5 Furthermore, the Applicants' submissions:
(a) draw heavily upon subjective and emotional issues and philosophical viewpoints;
(b) do not address the legal obligations of the parties;
(c) ignore the underpinning contractual arrangements;
(d) draw heavily upon the rights of the tenants without reference to or any acknowledgement of their obligations;
(e) fail to address or recognise the impact that adherence to their claims would have upon the viability of the sector; and
(f) ignore the ability of providers to maintain the integrity of the housing stock for them, for others, and for future generations.
7.6 Both of the Applicants' submissions fail to address the impact that the withdrawal of government funding, implemented on 1 July 2006, will have on the sector.
7.7 Both submissions ignore the fact that both tenants have enjoyed enhanced levels of subsidy over time.
7.8 It is formally noted however, that changes to market rental have been agreed over time, and on an annual basis.
7.9 In conclusion, any further reduction in funding from ACT Government will further threaten the ability of CHC to meet the operational costs of maintenance, support and overheads. The ACT Government has taken its position and is not likely to offer supplemental funding. The community housing sector is now in a situation where community housing tenants stand to receive less support, less amenity and less opportunity to have direct input to the management of their homes as community housing organizations become unviable, wind up their businesses or enter into hasty amalgamations. If the Tribunal sets a precedent whereby the legislative and contractual framework for community housing can be disregarded, it will jeopardise community housing in the ACT.
34. Annexed to the submission was a copy of a report “ACT Community Housing Funding Review” September 2005, commissioned by the ACT Department of Disability, Housing and Community Services. This report stated it was predicated on the recognition of decreasing housing affordability in the ACT for low income households. The report sought to analysis the current status of community housing options in the ACT as a response to housing affordability issues.
35. One focus of the report was the funding problems currently besetting community housing providers in the ACT. The report differentiated between community housing and public housing options, the latter being the role of the Commissioner for Housing in the ACT. The report sets out the numerical extent of community housing in the ACT, the existing funding allocations and the problems being experienced in the management of community housing. A number of models were proposed as potential solutions including the amalgamation of community housing organizations to permit recourse to economies of scale and the retention of professional housing managers.
36. Without wishing to traverse the whole of the report, the tenor of the report appears to the Tribunal to cast doubt on the economic viability of community housing options in the ACT, or at least small scale community housing. This same reservation occurs in the Chamberlain submission above.
37. The Chamberlain submissions appended a copy of the report by Nicholls and Horsham “An Evaluation of ACT Community Housing Funding Models” April 2005, commissioned by the ACT Department of Disability, Housing and Community Services. The authors of this report were critical of the interim version of “ACT Community Housing Funding Review”. Two of the bases for the criticism were the failure of this report to recognize the social benefits of community housing and the failure of the ACT to develop adequate funding guidelines for community housing.
38. The ACT Department of Disability, Housing and Community Services released a “Response To The Recommendations Of The ACT Community Housing Funding Review-Final Report” May 2006. That paper spoke in general terms about the various proposed funding options without appearing to come to any definite position. It certainly did not propose the winding down of the community housing sector in the manner suggested in the original report. The paper address the status of HHA specifically and mooted increased government funding to HHA for tenancy management services. HHA were to meet maintenance of premises from rents collected but otherwise asset management was to remain the responsibility of the ACT. The Tribunal understand this to mean that capital intensive improvements or repairs to premises will be the responsibility of the ACT and that HHA will be responsible only for the regular maintenance or maintenance on a small scale responsive to demand.
39. In the present context the Tribunal found it curious that nowhere in either of the above three reports was there any specific discussion of the issue of charging market rents to community housing tenants. There were some general references to the desirability of long term, secure and affordable housing as a guiding principle of community housing but there was no specific reference to the desirability of facilitating continuation of the long term stable tenure of existing community housing tenants in the face of potential rent increases.
The matter of Janie McGough:
40. Ms McGough’s matter was heard with that of Ms Donohoe at each stage. Evidence and submissions in one matter were taken as evidence and submissions in both matters. For that reason what follows in relation to Ms McGough’s matter does not reproduce the submissions of a general nature which are set out above.
41. Ms McGough also lives at Juno in 10A Suttor St Ainslie. The house is a three bedroom fibro house. She has lived in Juno since 1991. The current operative residential tenancy agreement was entered between Ms McGough and CHC in 1999 in the circumstances set out at paragraph 3 above.
42. Ms McGough received a rent increase notice dated 1 November 2005 proposing a market rent increase from $315.00 per week to $325.00 per week effective 1 January 2006.
43. Ms McGough lodged an application with the Tribunal on 23 December 2005 to oppose the above rent increase which was accompanied by various documents pertaining to the history of her tenancy, including:
(a) A letter of 26 April 2001 from CHC to Ms McGough setting out its justification for a rent increase from $157.00 per week to $235.00 per week. Essentially the justification was based on the fact that the rent had not been increased since October 1998.
(b) A copy of an order of the Tribunal of 2 May 2001 limiting the rent increase to $27.90 per week to $184.90 per week.
(c) A letter from HHA of 5 September 2002 notifying a rent increase from $185.00 per week to $280.00 per week. An application was lodged with the Tribunal concerning this rent increase. An agreement was reached between the parties to increase the rent to $206.00 per week.
(d) A letter from HHA of 12 November 2003 notifying a market rent increase from $206.00 per week to $310.00 per week.
(e) It is not apparent from the material provided when the market rent went from $310.00 per week to the $315.00 per week referred to in the market rent increase notice of 1 November 2005.
44. The rent increase from $206.00 per week to $325.00 per week in the two years since November 2003 represents an increase of nearly 60% or approximately 30% per year. The immediate rent increase under consideration is from $310.00 per week to $325.00 per week which is 5% increase.
45. The matter was originally listed for 12 January 2006. The parties notified the Tribunal that they were in negotiations and wished the matter stood over generally. The negotiations were not successful and on 22 June 2006 Ms McGough applied to have the matter relisted. The matter was relisted for 6 July 2006 and then further adjourned at the parties request to 13 July 2006.
46. On 13 July 2006 Ms McGough appeared in person and Ms Bassatt appeared for HHA. Procedural orders were made for the present two matters to be heard together and for the filing of the evidence upon which the parties proposed to rely at the hearing.
47. On 20 July 2006 Ms McGough filed submissions with the Tribunal. Ms McGough recited the history of Juno Women’s Housing Association and the role it has played in providing her and her child with stable and affordable accommodation. Ms McGough said that she is 48 years old and has a dependant daughter. She has worked part time for most of her working life and has studied. She said she has no assets or savings. She is presently working full time in a short term contract with the Australian Public Service which now affects her rent.
48. The submission from Ms McGough wrongly maintains that the market rent is to increase from $220.00 per to $325.00 per. From the material provided the rent of $220.00 is the actual rent paid by Ms McGough after the rebate and is not the prevailing market rent.
49. Ms McGough maintained that the rent increase notice failed to comply with statutory requirements to give 8 weeks notice per prescribed term 38, and that it was also in breach of section 66. The notice of 1 November 2005 did not purport to take effect to 1 January 2006 and therefore provides more than 8 weeks notice. It is not invalid on this basis. Section 66 provides that no rent increase is to be implemented pending the Tribunal decision. The Tribunal understands that HAA have not purported to enforce any rent increase during this period. However as a matter of practicality tenants need to be aware that if the Tribunal does allow a rent increase then the increase operates from the date set out in the notice i.e. 1 January 2006 and so lengthy delays in the Tribunal processes can produce a large retrospective rent arrears. To avoid this scenario some tenants choose to pay all or part of the rent increase in anticipation of the Tribunal decision.
50. It was alleged that there had been no painting of the premises, inside or outside, in 15 years; there had been no replacement of the carpet or any major repair work by the landlord. Photographs were provided.
51. Ms McGough submitted that any fair comparative market appraisal would need to take into account the matters particular to community housing including the shared facilities (drive ways, gardens, water mains, carport) and the extent of tenant participation in the management role. She provided very scant reference to a number of other premises in the inner north were the rents were less than $300 per week. She said that she had improved the property by planting and maintaining gardens and lawns, painting inside the house and laying pavers.
52. On 4 August 2005 HHA filed its submissions. This submission was substantially the same as the submission of the same date filed in the matter of Ms Donohoe. The valuation from Egans was in substantially the same terms. The comparative premises provided were the same as those used in the submission in Ms Donohoe’s matter notwithstanding that Ms McGough’s house is a three bedroom house and Ms Donohoe’s house is only two bedrooms.
53. The matter was listed before the Tribunal on 14 August 2006. Ms McGough appeared in person and Ms Bassatt appeared for the HHA. Ms McGough gave evidence in terms of the factors set out in section 68(3)(a)-(h) as follows:
para (a)$220 per week to $325.00 (but this appears to be incorrect- see paragraph 37 above)
para (b)The last rent increase was 2 years ago
para (c)not known but not substantial
para (d)nil
para (e)nil
para (f)no repairs or maintenance for 15 years except some routine maintenance
para (g)Ms McGough admitted that on a purely commercial comparative rents basis the rent increase may be justifiable.
para (h)Ms McGough established the yard and gardens, did the paving and internally painted the house.
54. The Tribunal raised with the parties the consideration of:
(a) The relevance of the role of government funding through the Commonwealth-State Housing Agreement (CSHA) in determining rent increases for the purposes of section 68(3)(i) of the Act. In particular the Tribunal was concerned with the relevance of a tenants capacity to pay in determining whether a rent increase was excessive, particularly in the context of government provided housing with its statutory commitment to secure and affordable housing for people on low and modest incomes.
(b) The nature of the public policy features of community housing, and in particular in the Juno Co-Operative, and the of these features for the purposes of section 68(3)(i). In particular the Tribunal was concerned with the extent to which each tenant did not have the exclusive right to occupancy or use of various parts of the premises or facilities provided with the premises and the extent to which the government had encouraged the residents of housing co-operatives such as Juno to form self supporting communities on the promise of secure and affordable housing tenure.
55. On 31 August 2006 Chamberlains, solicitors filed submissions on behalf of HAA. The essence of those submissions is set out above in relation to the claim by Ms Donohoe.
56. The matter was next before the Tribunal on 12 September 2006. Ms McGough appeared in person and Ms Bassatt appeared for HHA. On that occasion the Tribunal was provided with a copy of the Commonwealth Gazette of 17 July 2003 which set out the terms of an agreement between the Commonwealth and the States and Territories to work towards developing new standards for social housing. Those standards were to achieve, inter alia:
(a) a reduction in the work force disincentives arising from the manner in which rent is calculated;
(b) affordable rents.
57. Neither party had complied with the previous orders to file and service submissions directed specifically at the issues raised in the orders of 14 August 2006. The matter was adjourned for a hearing on a date to be fixed by the Registrar with provision for the parties to file the submissions sought in the orders of 14 August 2006.
58. On 16 October 2006 Ms McGough filed further submissions. She reviewed a number of public reports on housing in the ACT. One report was that by ACTCoSS “The Wealth of Home-A Call For Affordable Housing in the ACT” 2005. This report review the sharp increase in rental housing in the ACT over the period June 1999 to June 2005. It noted the health and other social benefits of secure affordable housing. The role of the rebate system in providing a disincentive for work force participation was noted.
59. The matter was listed for final hearing on 24 November 2006. Ms McGough appeared in person and Ms Garvie, solicitor appeared on behalf of HHA. On this occasion the Tribunal informed the parties that during the period since the matter was last before the Tribunal the Tribunal member had made inquiries of CHC and the national peak body for community housing to ascertain the existence of any public reports addressing the policy issues at paragraph 17 and 54 above. Nothing had eventuated from that inquiry.
60. The parties had nothing further to add by way of submissions or evidence. The matter was adjourned for a decision in writing to be given. The parties were provided with a final opportunity to put any further submissions they so wished in writing prior to Christmas directed to the issues at paragraph 17 and 54 above. Final submissions were filed by Chamberlains on behalf of HAA which are set out above.
Legislation:
61. Section 3A Housing Assistance Act 1987 provides:
3A Objects
(1) The objects of this Act are—
(a) to maximise the opportunities for everyone in the ACT to have access to housing that is affordable, secure and appropriate to their needs; and
(b) to facilitate the provision of housing assistance for those in most need; and
(c) to maximise value for money in the provision of housing assistance; and
(d) to promote a choice of forms of assistance and providers of assistance for persons eligible for assistance; and
(e) to facilitate the provision of rental housing that—
(i) has adequate amenity, is of an adequate size and is appropriately located in relation to employment opportunities and necessary services and facilities; and
(ii) is coordinated with any support services (provided under other laws) required by consumers of housing assistance to live in the community; and
(f) to facilitate the provision of an adequate supply of affordable home finance for persons in receipt of low and moderate incomes; and
(g) to promote the development of flexible and innovative financial arrangements to facilitate access to home ownership for persons in receipt of low and moderate incomes; and
(h) to promote the growth of a community housing sector as a viable alternative to public and private rental and home ownership; and
(i) to promote the establishment of appropriate mechanisms and forums to allow input to housing policy by consumers, and potential consumers, of housing assistance and by representative non-government agencies involved in housing policy and provision;
and this Act shall be construed accordingly.
(2) In the administration of this Act regard shall be had to the objects of this Act to the maximum extent practicable with available resources.
62. Section 15 Housing Assistance Act 1987 defines market rent:
15 Rent charge under housing assistance program
(1) The amount of rent to be charged in relation to rental housing assistance under a housing assistance program shall be an amount equivalent to market rent.
(2) A reference in subsection (1) to market rent, in relation to a property at a particular time, includes a reference to the rent that would be payable if the property were then let by a willing landlord to a willing tenant—
(a) who had dealt with each other at arm’s length; and
(b) each of whom had acted knowledgeably, prudently and without compulsion.
(3) The commissioner shall, annually, undertake a review of the rent of each dwelling or dwellings included in each relevant class of dwellings in relation to which an amount of rent is charged under a housing assistance program.
63. Section 6A Residential Tenancies Act 1997 defines a “residential tenancy agreement” as follows:
6A What is a residential tenancy agreement?
(1) An agreement is a residential tenancy agreement if, under the agreement—
(a) a person gives someone else (the tenant) a right to occupy stated premises; and
(b) the premises are for the tenant to use as a home (whether or not together with other people); and
(c) the right is given for value.
(2) The agreement may be—
(a) express or implied; or
(b) in writing, oral, or partly in writing and partly oral.
(3) The right to occupy may be—
(a) exclusive or not exclusive; and
(b) given with a right to use facilities, furniture or goods.
64. Section 8 provides for the standard terms of a residential tenancy agreement:
8 Standard residential tenancy terms
(1) A residential tenancy agreement—
(a) must contain, and is taken to contain, terms to the effect of the standard residential tenancy terms mentioned in schedule 1; and
(b) if the lessor and tenant agree—may contain a fair clause for posted people; and
(c) may contain any other term—
(i) that is consistent with the standard residential tenancy terms; or
(ii) that is inconsistent with a standard residential tenancy term if the term has been endorsed by the tribunal under section 10.
65. Section 65(1) Residential Tenancies Act 1997 provides for the Tribunal to hear applications concerning rent increases even if lodged out of time:
65 Waiver of notice requirements
(1) The tribunal may hear an application for the review of a rental rate increase even though the application is made less than 2 weeks before the day when the proposed increase is to come into effect, if the tribunal is satisfied that—
(a) the application is late because of special circumstances; and
(b) to hear the application will not place the lessor in a significantly worse position than the lessor would have been had the applicant applied as prescribed.
66. Sections 66-70 Residential Tenancies Act 1997 deals with the Tribunal powers in relation to applications concerning excessive rent increases:
67 Orders
The tribunal may make the following orders in relation to an application for review of a rental rate increase:
(a) an order allowing the increase applied for or the other increase that the tribunal considers just;
(b) an order disallowing the increase;
(c) an order disallowing part of the increase.
68 Guideline for orders
(1) The tribunal must allow a rental rate increase that is in accordance with the standard residential tenancy terms unless the increase is excessive.
(2) For subsection (1)—
(a) unless the tenant satisfies the tribunal otherwise, a rental rate increase is not excessive if it is less than 20% greater than any increase in the index number over the period since the last rental rate increase or since the beginning of the lease (whichever is later); and
(b) unless the lessor satisfies the tribunal otherwise, a rental rate increase is excessive if it is more than 20% greater than any increase in the index number over the period since the last rental rate increase or since the beginning of the lease (whichever is later).
(3) If a tenant or lessor proposes that a rental rate increase is or is not excessive, the tribunal, in considering whether it is satisfied about the proposal, must consider the following matters:
(a) the rental rate before the proposed increase;
(b) if the lessor previously increased the rental rate while the relevant tenant was tenant—
(i) the amount of the last increase before the proposed increase; and
(ii) the period since that increase;
(c) outgoings or costs of the lessor in relation to the premises;
(d) services provided by the lessor to the tenant;
(e) the value of fixtures and goods supplied by the lessor as part of the tenancy;
(f) the state of repair of the premises;
(g) rental rates for comparable premises;
(h) the value of any work performed or improvements carried out by the tenant with the lessor’s consent;
(i) any other matter the tribunal considers relevant.
(4) If the tribunal considers a proposed rental rate increase is excessive but a lesser increase would not be, it may disallow so much of the increase as is excessive.
(5) In subsection (2):
index number means the rents component of the housing group of the Consumer Price Index for Canberra published from time to time by the Australian statistician.
69 Effect of orders
(1) If the tribunal makes an order under section 67 (a) or (c), the rental rate increase takes effect from the date when the proposed increase would, apart from section 66, have taken place.
(2) The tribunal may, on application, grant a tenant time to pay rent owed because of the operation of subsection (1).
(3) If—
(a) the tribunal makes an order mentioned in section 67 (b) or (c); and
(b) despite section 66, the tenant has paid the lessor the full amount of the rental rate increase proposed by the lessor;
the tribunal may order the lessor to pay to the tenant the difference between the amount the tenant paid to the lessor and the amount that was payable.
70 Further increases
If a proposed rental rate increase has been reviewed by the tribunal, any further purported increase in the rental rate for a period of 12 months after the day the proposed increase was to take effect is void.
67. Prescribed terms of the Residential Tenancies Act 19997 further regulate the right of a landlord to increase the rent:
Increase in rent
34 The amount of rent must not vary from period to period except as provided by this tenancy agreement and the Residential Tenancies Act.
35 The rent may not be increased at intervals of less than 12 months from either the beginning of the tenancy agreement for the first increase, or after that, from the date of the last increase.
36 Despite clause 35, if the commissioner for housing is the lessor under this tenancy agreement and the commissioner—
(a) undertakes a review of rent in accordance with the Housing Assistance Act 1987, section 15 (3); and
(b) as a result of the review, decides to increase the rent;
then—
(c) if a previous review of rent has been undertaken—the increase must not take effect less than 1 year after the date of the last increase of rent in relation to the premises; or
(d) if no previous review of rent has been undertaken—the commissioner may increase the rent.
37 The restriction on increase in rent applies provided the identity of at least 1 of the tenants who occupy the premises remains the same as at the time of the last increase.
Review of excessive rent increases
38 The lessor must give the tenant 8 weeks written notice of intention to increase the rent and include in the notice the amount of the increase, and the date when it is proposed to increase the rent.
39(1) The tenant may apply in writing to the tribunal for review of an excessive increase in rent (time limits for applying and the meaning of excessive is set out in the Residential Tenancies Act).
(2) On such application being made, no increase in rent is payable until so ordered by the tribunal.
40 If the tenant remains in occupation of the premises without applying to the tribunal for review, the increase in rent takes effect from the date specified in the notice.
The issues for the Tribunal:
68. The issue for the Tribunal in both matters is to determine whether all or part of the proposed rent increases are excessive (s68(1)) having regard to the factors set out in section 68(3).
69. The case for each of the tenants turns essentially on factors 68(3)(b) and (i). In each case the tenants conceded that the proposed new market rents were not inconsistent with comparative commercial rents in the area, albeit that little evidence of the rents of truly comparative premises was adduced before the Tribunal. The reports from Egans constituted little more than a bare statement of opinion unsupported by evidence contained in the reports. They are very limited value to the Tribunal.
70. There was some evidence of the low level of maintenance carried out by HHA over the years and of some improvements to the premises by the tenants. In the scheme of things these factors do not loom large in the Tribunal’s considerations as they are a constant source of complaint by tenants in private sector tenancies as well.
71. The essence of the tenants complaints was:
(a) the sheer size of the recent rent increase (s68(3)(b)) which impacts on their capacity to pay
(b) the failure of the HHA to take into account the special or peculiar nature of community housing in the evaluation of the new market rent
72. It is these two factors which the Tribunal proposes to address.
73. In both cases the proposed market rent increase considerably exceeds the threshold set out in section 68(2). On the assumption that the relevant “rent” increase for the purposes of section 68 is the market rent increase as opposed to any increase in the rebated rent, HHA bears the onus of persuading the Tribunal that the increases are not excessive. In the case of Ms Donohoe the current market rent increase is of the order of 33%. In the case of Ms Gough the current market rent increase is of the order of 5%, albeit was immediately preceded by an increase of the order of 60%.
Whether the “rent” for the purposes of section 68 is the “market rent” or the rebated rent:
74. As a preliminary point it worth noting the confusion which has arisen in the minds of the tenants in this case arising out of the dichotomy between “market rents” and “rebated rent”. This same dictomy is common to all public housing in the ACT but has no relevance to private sector tenancies in which there is only “market rent”.
75. When a tenant enters a residential tenancy agreement in public housing in the ACT a “market rent” is fixed and specified in the residential tenancy agreement. Absent any other provision in the residential tenancy agreement, or the law generally, this would be the rent which is payable.
76. However, the residential tenancy agreements for public housing specifically provide for the calculation of rent in accordance with the Public Rental Housing Assistance Program (PRHAP) which is itself a statutory instrument made pursuant to section 12 Housing Assistance Act 1987. PRHAP provides for the rent rebate system whereby tenants pay 25% of gross house hold income up to the limit of the prevailing market rent.
77. In this context the “market rent” is defined in section 15 Housing Assistance Act 1987 in a manner which clearly requires a comparison with the commercial market, and the definition takes no account of the circumstances of low or modest income earners or any other particular category of potential tenants:
(2) A reference in subsection (1) to market rent, in relation to a property at a particular time, includes a reference to the rent that would be payable if the property were then let by a willing landlord to a willing tenant—
(a) who had dealt with each other at arm’s length; and
(b) each of whom had acted knowledgeably, prudently and without compulsion.
78. The Commissioner for Housing is required to conduct annual assessments of market rents and is require to charge tenants market rents subject to the operation of the PRHAP (s12,15 Housing Assistance Act 1987). The Commissioner requires community housing providers such as HHA as a term of their lease of the premises from the Commissioner, to apply these same rent criteria to their tenants.
79. Public residential tenancies are also governed by the Residential Tenancies Act 1987 and therefore rent increases are limited to one increase per 12 months period (section 70 and prescribed term 35).
80. The Residential Tenancies Act 1987 knows nothing of “rent rebates”. The term “rent” is not defined in the Act. The provisions of the Act dealing with rent increases assume the existence of only one species of rent. The issue therefore arises as to whether the “rent” for the purposes of the rent increase provisions in the Act, sections 65-70, is to be taken as the “market rent” or the “rebated rent”.
81. The fact that it is the market rent which is set out in the original residential tenancy agreement would tend to suggest that the term “rent” where ever it appears in the Act is intended to connote this market rent (as lawfully increased). On this construction of the Act the rebate would amount to a partial waiver of the market rent otherwise payable.
82. But the rent rebate is not a mere gratuitous waiver of part of the rent by the Commissioner or HHA, as the case may be. The rebate is a right the tenant possesses arising from:
(a) the statutory nature of the PRHAP enforceable by review through the Administrative Appeals Tribunal; and
(b) the fact that access to the rebated rent is the primary enticement for most tenant to enter a public housing lease in the first instance. A residential tenancy agreement is a species of contract and a promise of rebated rent as a term and condition of residential tenancy agreement is contractual binding on the Commissioner or HHA, as the case may be(Progressive Mailing House P/L v Tabali 1985 157 CLR 17;In the Estate of Tanya Humphries v Commissioner for Housing 2003 ACTSC 40)
83. In the present Tribunal’s view the rent a tenant is contractually bound to pay is the rebated rent (assuming the tenant qualifies for a rebate). On this basis the term “rent” in the Residential Tenancies Act 1997 should be construed consistently with this contractual obligation, and should therefore be read as a reference to the rebated rent.
84. Adopting this construction of “rent” in the Act eliminates other problems as well. Section 49 and prescribed term 92 of the Act permit a landlord to service a Notice of Termination on a tenant who is one week in rent arrears. In order to determine whether a tenant is a week in rent arrears it is first necessary to know what the relevant rent is. If the term “rent” as it appears in section 49 and prescribed term 92 is taken to be market rent, then every tenant paying only the rebated rent would quickly fall into rent arrears of 1 week or more. For example if the market rent was $325.00 per week and the rebated rent was $202.00 per week, then the tenant would accrue a rent deficit of $123.00 per week. In just two weeks such a tenant is liable for eviction pursuant to section 49 and prescribed term 92 even though the tenant has punctually paid the contractual rebated rent. In practice the Tribunal and the public housing providers routinely adopt the rebated rent for the purposes of section 49 and prescribed term 92.
85. It is all very well to adopt alternative definitions of “rent” for different provisions of the Act when in suits practical convenience, but this is hardly justifiable in terms of the principle of law relating to statutory interpretation. The solution to the problem is to be consistent and to recognize that the “rent” for all purposes in the Act is the rent the tenant is contractually bound to pay i.e. the rebated rent.
86. This approach is not without its own problems in the application of sections 65-70. If “rent” is taken to be the rebated rent then a tenant’s rights pursuant to sections 65-70 would only arise if and when the market rent increase actually produced an increase in the rebated rent.
87. An increase in the market rent can affect a tenant whose gross house hold income increases for some reason eg the tenant receives an increase in pay, or if the tenant forms a domestic partnership with a person in employment, or if a child of the tenant goes to work etc. The market rent constitutes the cap on rebated rent payable as soon as 25% of the gross house hold income equates to the market rent. An increase in the market rent can lead to the kind of poverty trap identified in the Commonwealth-State/Territory agreement set out in the Commonwealth Gazette of 17 July 2003 and referred to at paragraph 23 above. As a tenant on low or modest income increases their hours of work, or level of gross household income for any reason, then the tenant will pay increased rent of 25% of any increase in the house hold gross income which will be additional to the marginal tax paid on the increased income and additional to the increased cost of going to work for the extra hours etc.
88. The Tribunal has no jurisdiction over the rebate scheme per se. The Tribunal has no jurisdiction to increase or decrease the rebate percentage or to review the assessment of the gross house hold income to which the rebate is applied. But an increase in the market rent can cause an increase in the rebated rent in the manner described above, and so in for the Tribunal to exercise its jurisdiction in respect of excessive increases in rebated rents it is also necessary for the Tribunal to simultaneously made orders in relation to the market rent. If HHA is free to increase the market rent as they see fit and then to cap the 25% rebate at the new market rent, unless the Tribunal can adjust the market rent then any order by the Tribunal reducing the increase in the rebated rent must result in an alternation to the 25% rebate percentage, notwithstanding that this is a matter over which the Tribunal has no jurisdiction.
89. In NSW, section 47A Residential Tenancies Act 1987 and regulation 22 of the Residential Tenancies (Residential Premises) Regulations 1995 essentially adopts the approach that a tenant on a rebate is not permitted to challenge a market rent increase until such time as the rebated rent payable is actually affected by the increase in market rent. At this point the tenant is then permitted to re-open all market rent increases which occurred during the period in which the rebated rent was not affected.
90. The difficulties in the ACT legislation identified above arise from the fact that the ACT legislation has simply not addressed the issue of rebated rents, and the public housing providers and the Tribunal have previously adopted the inconsistent approach of swapping between market rent and rebated rent as convenience dictates. In the absence of any legislative reform it seems the most consistent construction of the legislation is to for the Tribunal to take jurisdiction in relation to rent increases where:
(a) an increase in the market rent produces an actual increase in the rebated rent:
(b) with power to fix the level of the market rent increase in so far as this is necessary to fix the level of the rebated rent increase.
(c) where no rebate is applicable, then the only rent involved is the market rent.
91. In the present case Ms Donohoe’s rebated rent is actually affected by the present increase in market rent per paragraph 30 above.
92. The market rent increase has not had any effect on the actual rebated rent payable by Ms McGough. Therefore, on the construction of the definition of “rent” adopted above, there was no rent increase for Ms McGough to challenge and her application is therefore dismissed.
93. In relation to Ms Donohoe’s application the Tribunal must determine whether the increase in the rebated rent by reason of the increase in the market rent from $214.00 per week to $285.00, is excessive. Had there not been any increase in the market rent then Ms Donohoe’s rebated rent would have increased to $214.00 per week only by reason of the increase in her salary, and no right to challenge this increase would have been available to Ms Donohoe. However as a consequence of the increase in market rent, her rebated rent will now increase to $242.50 per week i.e. an increase of 28.50 per week more than the former $214.00 market rent cap.
Whether a tenants capacity to pay a market rent increase is a relevant factor for the purposes of section 68(3)(i):
94. In the event that the Tribunal should be found to be in error in construing the relevant rent increase to be the increase in rebated rent as opposed to the market rent, then different considerations follow, and Ms McGough application is valid.
95. During the hearing of the present matters the Tribunal and the parties had assumed that the relevant rent increase under consideration was the market rent, and submissions were predicated on this basis. It was on this basis that the Tribunal raised for consideration the matters referred to at paragraphs 17 and 54 above.
96. On the assumption that the “rent” for the purposes of the Act is the market rent, then the Tribunal would be entitled to have regard to the magnitude of the market rent increase as a relevant factor in its own right (s68(3)(b)). The Tribunal notes the comments of Foster J in Kilpatrick v Gresser (unreported SC NSW 13 May 1987) to the effect that the equivalent provision in the NSW Act (section 48) is directed to the issue of the sheer size of the rent increase as opposed to the gross rent payable.
97. In the case of Ms Donohoe the increase from $214.00 per week to $285.00 per week constitutes a 33% increase in rent over 2 years. In the case of Ms McGough the increase from $310 per week to $325.00 per week constitutes only a 5% increase, albeit this increase was preceded by a hefty increase of 60% in November 2003.
98. Both these increases are large in percentage terms.
99. The Tribunal is of the view that it is entitled to have regard to the effect of the rent increase on the tenant’s capacity to pay. It is hard to see what other statutory intention could underlay the right to consider the magnitude of the rent increase per see in section 68(3)(b). A large increase in rent could come from a low base and therefore not give rise to a large rent in absolute terms. But a steep rise in rent from a low base can still impose hardship on the tenant who is struggling to pay the rent at the low base.
100.Without wishing to digress into a social history excursion, the present Act stands at the end of long chain of tenancy legislation in the UK and NSW designed to counter identified social evils arising from the dispossession of various class of tenants (Residential Tenancy Law and Practice (1983) Bradbrook, MacCallum and Moore pp119-122; Residential Tenancies laws and Practice Lang 2nd ed pp1-4)). This history includes the notorious events of the clearing of the Scottish highlands down to the mistreatment and evictions of the families of World War II service men while engaged in overseas theatres of war. The present situation in Canberra may not quite compare with these events but there is no doubt that rent are rising fast at the low end of the ACT rental market with adverse effects on affordability for people on low to modest income. If the intent of the legislation is to protect tenants and their family from dispossession arising from excess rents then this can only be done if regard is allowed to capacity to pay, at least in the limited sense of whether the proposed rent is within reach of a family on a income range likely to be seeking housing in the relevant premises. It is not suggested that the particular idiosyncrasies or spending habits of a particular tenant should be taken into account in considering capacity to pay.
101.The public housing operations of the Commissioner for Housing on behalf of the ACT derive from the Housing Assistance Act 1987. The objects of this Act are set out in section 3A and make in abundantly clear that the statutory purpose of the Act is to provide secure, affordable housing to people on low and moderate incomes. Section 11 A-B Housing Assistance Act 1987 provide for the implementation of the Commonwealth-State Housing Agreement through which a large part of the ACT funding for housing is derived. The Commonwealth-Statement Housing Agreement is regularly amended but its constant historical focus is the provision of secure and affordable housing for people on low and moderate incomes. In this sense the objects of the Housing Assistance Act 1987 are consistent with those of the CSHA and lend further support to the proposition that capacity to pay is a relevant consideration in the fixing of rents in public housing. Indeed the whole rebate system is predicated on this basis.
102.The Tribunal notes the terms of para 288 of The Community Law Reform Committee of the ACT, Report No 8; Private Residential Tenancy Law which links the recommendations for inclusion in the Act of the rent increase provisions with the need for tenant protection.
The particular nature of community housing as a factor relevant to section 68(3)(i):
The other matter canvassed by the Tribunal in paragraphs 17 and 54 above is whether there is anything particular about the public policy underpinning community housing which should be taken into account in determining whether an rent increase is excessive. In this context it should be recalled that community housing is a species of public or social housing and so the issue is not relevant to private sector landlords.
The essence and history of community housing is addressed in chapter 2 of the Chamberlain submission. It is encapsulated by the definition adopted by the ACT Department of Health and Community Services report of May 2003 “Community Housing in the ACT-Future Directions Policy Framework”:
Community housing is long term, safe, secure, affordable and appropriate housing provided by non-profit community organizations and which:
·Encourages and maximizes opportunities for tenants to assume control over their home and environment through participation in management
·Is flexible, responsive and respectful of individual rights; and
·Contributes to the development of communities.
Community housing is primarily directed to people on low income. It is a condition of the leasing of houses from the ACT to community housing providers such as HHA that the public housing eligibility criteria be adopted. But community housing is more than just public housing. Community housing providers, and in this case the ACT, CHC and later HAA, historically encouraged the formation of housing co-operatives of which Juno was a product. The residents responded to the encouragement provided by the opportunity to form these housing based communities. They formed personal network in the nature of extended families to provide the support and security they mutually sought. Such is the case in Juno.
Community housing arrangements are not of the traditional commercial kind. The residents share facilities and work collectively in the management of the housing co-operatives. Juno is no different.
One of the fundamentals of community housing is the assumption that the housing choice is long term and secure. People in community housing scheme made decision on the basis of this representation by the community housing providers (i.e. ACT, CHC and then later HAA). If however rents are to be increased for community housing scheme in the same manner as for the commercial market then:
(a) the concept of long term and secure tenure is potentially defeated, at least in the case of the low and modest income tenants in such scheme (which is likely to be most of the tenants given the original eligibility criteria). As a general rule people on low and modest incomes do not aspire to remain on low and modest income all their lives. Over the years they also seek to improve their financial circumstances. Children grow up and go to work. Community housing tenants form domestic partnerships etc. :
(b) little account is taken of the role of self management in community housing which has no counterpart in commercial tenancies;
(c) little account is taken of the extended social networks which have been formed within the community housing scheme;
(d) little account is taken of the fact that many of the residents, including Ms Donohoe and Ms McGough, acted on the basis of a representation by the community housing providers (including the ACT) that they could form their housing communities as a long term support mechanism. A commercial approach to rent increases sees the housing providers effectively resile from their representation. In saying this the Tribunal is cognizant of the affirmation of the role and value of community housing contained in ACT Department of Disability, Housing and Community Services “Response To The Recommendations Of The ACT Community Housing Funding Review-Final Report” May 2006. However ultimately it is necessary to consider the actions rather than the words of the ACT in this context. If the rent increase policy has the effect of destroying community housing then no amount of verbal affirmation will breath life into the corpse.
On the other hand it is also true that community housing providers cannot survive if they have insufficient income to meet their obligations as landlords. But community housing providers do not have all the costs of commercial landlords. Firstly, community housing providers are not-for-profit organizations and therefore no profit margin needs to be factored into rent. Secondly, as charities they pay no tax. Thirdly, they derive a large part of their recurrent costs from government grants. Fourthly, in community housing a part of the management responsibility falls to the tenants and there is considerable reliance on voluntary work by the members of the housing community in the maintenance of the premises. Because the tenants have the view that the house is their home for the long term there is a low rate of rent default and a lower level of damage to the houses. These factors taken collectively suggest that community housing providers such as HHA do not have to levy commercial rents to achieve the revenue necessary to discharge their duties as landlords.
Nevertheless community housing providers need to be able to cover costs. In this regard the Tribunal notes the ACT Department of Disability, Housing and Community Services “Response To The Recommendations Of The ACT Community Housing Funding Review-Final Report” May 2006 in which an increase in government funding to community housing providers was mooted.
For these reason the Tribunal is of the view that section 68(3)(i) permits the Tribunal to have regard to the special nature of community housing when considering whether a rent increase is excessive.
In the event that the Tribunal is found to be error in the construction adopted of the term “rent”, and to the extent that it may provide some assistance to any appellate body, the Tribunal would have found both market rent increases to be excessive and would have allowed only:
(a) in the case of Ms Donohoe an increase in market rent from $214.00 to $242.50 per week.
(b) in the case of Ms McGough no increase having regard to the large previous increases.
Conclusion:
On the premise that the “rent” is the rebated rent, the application by Ms McGough is dismissed. The Tribunal has no jurisdiction to determine whether the increase in the market rent is excessive or not.
On the premise that the “rent” is the rebated rent and Ms Donohoe has or will suffer an increase in the rebated rent as a consequence of the increase in the market rent, the Tribunal has jurisdiction to determine whether the increase in the rebated rent is excessive and make any necessary determination in relation to the level of the market rent.
Had the market rent in the case of Ms Donohoe risen only to $242.50 per week then Ms Donohoe rent would have been capped at this new market rent level. Given her increase in house hold income, her rebated rent would also have risen to this level.
Accordingly rebated rent in Ms Donohoe case is allowed to the extent of $242.50 per week which is also to be the level of the market rent.
The above order is predicated on the evidence of Ms Donohoe that her new rebated rent is $242.50 per week. Should HHA wish to contest this figure they have leave to relist for that limited purpose. Given the serious delays which have already occurred in this case the Tribunal was not dispose to defer giving its reasons for decision by reason only of any fine tuning which may be required concerning this figure.
ORDERS
In the case of Brigid Donohoe, both the market rent and the rebated rent are fixed at $242.50 per week;
In the case of Janie McGough the application is dismissed.
A. Anforth
Member
10 January 2007
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