Victorian government announces long-term leases, but do landlords and renters want them?

Landlords will be reluctant to offer their tenants new long-term leases announced on Thursday by state government, property mangers say.

The Andrews government announced on Thursday a new standard tenancy agreement for rental leases longer than five years to be implemented next year. The change will mean that fixed-term agreements of more than five years will now be covered by the Residential Tenancies Act.

But property mangers say landlords will be unlikely to offer such long leases, given personal circumstances are likely to change within that time frame, and believe tenants, too, will snub their noses at locking themselves in for longer periods. 

Even the Tenants Union of Victoria, which welcomed the changes, said longer-term leases may not be the best answer for more security for the growing cohort of Melbourne renters.

The announcement, part of the government’s update to the Residential Tenancies Act and its plan to tackle housing affordability issue, comes as Melbourne renters continue to face a financial squeeze.

Rents are at record highs, rising faster than incomes, and the number of vacant properties is shrinking despite a building boom in the city.

The Real Estate Institute of Victoria, which is working with the government on its tenancy review, said it was unclear why today’s announcement was made in the middle of an ongoing consultation process.

Chief executive Gil King said, though the REIV generally supported the change, it was more broadly concerned with how other parts of the review may drive up rents and force landlords to exit the market.

Yaelle Caspi, policy officer at the Tenants Union of Victoria, said the best way to improve security for renters would be to repeal no reason eviction notices and provide increased protections from unfair and unnecessary evictions.

“We know that tenants want more security, but that doesn’t necessarily mean longer fixed-term leases,” she said.

There will also need to be fairer processes for rent increases and limits on lease breaking costs, Ms Caspi said.

Nelson Alexander Ivanhoe’s Jason Pettit said demand for leases of more than five years would be extremely slim. It was difficult for landlords and tenants to know what their circumstances would be in 12 months, let alone five years, he said.

“If either parties locked themselves in for a period of that length, it could get them into more trouble than it’s worth,” Mr Pettit.

“I’ve had tenants request leases for two or three years on occasion – more often than not, the landlords refused and preferred to just do the 12 months with recurring renewals.

“You can get relationship breakdowns, financial difficulties, job relocations and family matters – there’s so many different variables outside of just living in a property that could cause a move.

“And if you’re breaking a lease of that length, it would be almost diabolical.”

​Hodges Sandringham director Katie Pickering said many investors who owned a family home in the bayside relocated interstate or overseas for work purposes.

Those investors would probably not enter into a five year lease because they might be sent home, she said, or they may decide to sell the property because they wanted to stay where they were.

It would be a lot harder to sell a leased family home to an investor than to someone moving into the area, she added.