Podcast: Scots to crack down on holiday lets

This week sees us return to familiar ground both geographically and in terms of our topics as we take a look at an SBS Dateline episode set in and around Edinburgh, Scotland.

Five years ago, Jimmy was in Edinburgh and was interviewed for the Scottish edition of the Sunday Times newspaper (see above), warning the city that it faced a rental crisis if it didn’t curb Airbnb and other short term letting agencies that were moving into residential apartments.

Now, rental availability has plummeted and residential rents have soared, and an SBS crew has visited Scotland which is about to impose among the toughest restrictions in the world on hosts who use the holiday letting internet platform and its ilk.

You can read about how the rest of the world is dealing with airbnb compared to Australia’s “light touch” in this article in The Conversation.

Closer to home, we look at why real estate agents think the ban on rent bidding has backfired.  And we come up with a solution to end it once and for all.

That’s all in this week’s Flat Chat Wrap.

Transcript In Full

Jimmy  00:00

Nice to be back in our little homemade studio.

Sue  00:03

Yes, welcome back, Jimmy!

Jimmy  00:04

It’s funny; I was editing the podcast we did on Zoom last week, in my hotel room in Hanoi and there was this rumbling sound, through about the first three-quarters of the recording. Which I assumed was something to do with the internet and Zoom, and then I got to the last bit, and it was absolute silence.  I’d done all this clever (well,kind of clever), technical stuff, to get rid of the rumbling sound, which is only on my end of the recording; it was only when I was speaking. I thought the microphone in my laptop must be crap. Turns out, it’s actually too good. It was picking up the sound of the air conditioner unit. I didn’t realise it was right above where I was recording and then when it switched itself off, there was perfectly pristine silence. The technical things that one does as a travelling podcaster… But I’m home now.

Sue  01:05

Great, so it should be quite simple.

Jimmy  01:08

Now that you’ve said that… So, today we’re going to talk about a documentary coming up on SBS, about Airbnb in Edinburgh, which I have a close personal connection with. And we’re going to talk about rent-bidding and how the restrictions brought in on that aren’t making very much difference at all. I’m Jimmy Thomson, I write the Flat Chat column for the Australian Financial Review.

Sue  01:37

And I’m Sue Williams and I write about property for Domain.

Jimmy  01:39

And this is the Flat Chat Wrap.

[MUSIC}

Jimmy

It’s been a while since we’ve done anything about Airbnb.

Sue  01:58

But it seems to be back in the news again.

Jimmy  02:00

Well, very much so, with SBS having sent somebody off into the wilds of Edinburgh, to discover what’s going on there.

Sue  02:08

And why Edinburgh, Jimmy?

Jimmy  02:10

Well, Edinburgh is one of the hottest tourist spots in Britain, and has a long history of people renting there. I mean, renting private accommodation in Edinburgh has never been a big issue for Scots’ people. That’s how you live; you rent and you rent for years and years and years, in the same place and then along comes Airbnb and all those traditions (if you want), get thrown out the window.

Sue  02:38

So it affects cities where people rent much more than cities where people buy?

Jimmy  02:43

Pretty much, yes.

Sue  02:44

I’d never thought of that.

Jimmy  02:45

Well, we see it in other European cities as well, like Barcelona and Paris, especially. You know, where renting is part of the natural way of things; where people choose to rent, rather than pouring their money into property, like we are encouraged to do in this country. And in Edinburgh, because it’s also a tourist centre… They’ve always had a thing there, of people renting out rooms during the Edinburgh Festival. You know, when hundreds of thousands of people come into the city and they all need accommodation, and the hotels just cannot cope, then people have always had this thing of (and it’s quite a nice thing)… In some ways, it shows the Airbnb original concept, where you rent your room to somebody and it’s somebody who’s come to listen to music; to go to the theatre.

Sue  03:33

And to meet locals sometimes, as well.  And you can kind of share your own experiences and tell them the good places to go.

Jimmy  03:39

The good pubs to drink in, and the good cafes to eat in; that kind of thing. So that has happened for decades. Then along comes Airbnb, and says “well, all tourists can do this now. You can rent your room, you can share your house and hey, here’s an even better idea. Leave your house, leave your flat and rent it out commercially to people.” So about five years ago, I was in Edinburgh and I could see what was happening there. And I said to them “you guys have got to be careful here (you guys being Scottish Edinburgh people), because Airbnb is coming in a big way and it’s going to change the whole way you live and work in this city.” My friend Kenny Kemp wrote a piece for The Scottish Sunday Times, which appeared in July 2018 and at that point, the convener for housing for Edinburgh City Council said she was concerned and was looking at some ways of curbing what was clearly going to be a big problem for them.

Sue  04:45

And now it has become a big problem, I think.

Jimmy  04:47

Absolutely. And you’re looking at this new documentary that’s coming out on SBS.

Sue  04:53

April the 4th, I think. They found that rental vacancies are less than 1%, which is kind of a bit similar to lots of places in Australia, as well. And rents have gone up 15%, which is probably on a par with lots of places in Sydney and Melbourne, as well. So it’s really exacerbated the housing situation in Scotland, as it has similarly in many places in Australia, too.

Jimmy  05:22

And there was an interesting recent story… Val McDermid, the Scottish crime writer, was complaining about how in Edinburgh, now in the morning, you get woken up by the the rattle of wheelie suitcases along the cobbles. Cobbles are called ‘sets’ in Edinburgh, by the way. But, you know, she being a writer of some repute, has been complaining about Airbnb in Edinburgh and I’ve been complaining about Airbnb in Edinburgh. And lo and behold, the Scottish Government is making moves.

Sue  06:00

They’ve now introduce new laws haven’t they, about Airbnb?

Jimmy  06:03

They’re about to, yes. It sounds like they’re basically saying any Airbnb (not just an Edinburgh, but in the whole of Scotland), has to be licenced. And that means it has to pass certain tests, in terms of things like fire safety, and access and all those things. And just the fact of being licenced, would put a lot of people off anyway, and the kind of fringe -dwellers of the short-term rental market. Once they bring in licencing, then they will know what the numbers are. And once they know what the numbers are, they’ll be able to look at other policies that can mitigate… I mean, the trouble is for a lot of cities and communities around the world, tourists come in and pay; for some reason, they will pay the same money in an Airbnb, or other short-term rental provider, very close to what they’d pay in a hotel these days.

Sue  07:02

Or in a serviced apartment. I think most people kind of assume it’s going to be cheaper, but in fact, it often isn’t. I mean, we’ve had a look around Sydney, and some of the places for Airbnb are so expensive, you’d be mad to go to them, really. You’d be much better off going to a serviced department. You’ve got all the facilities, and it doesn’t have somebody else’s junk around.

Jimmy  07:23

I use booking.com in my various travels, and apart from anything else, I get a discount. Well, you get a substantial discount if you use them enough, but you find yourself looking at properties that could be… It might be a hotel, or it might be a short-term rental place in the same listing. So you’re able to compare like-for-like. I don’t know if hotels are now listing on the Airbnb website.

Sue  07:54

I think a lot of them are.

Jimmy  07:55

Because that’s where people go.

Sue  07:57

Yes, that’s right. And they’re keen to show that their prices are very competitive.

Jimmy  08:02

Closer to home, I was reading the other day that the Premier of WA is now looking at bringing in restrictions there. Because their availability for rentals has dropped through the floor, and rents are going up. And in a smaller community, like Perth and the rest of WA, differences like that can be suddenly much more significant than cities like Melbourne or Sydney, where we can absorb that, to a certain extent.

Sue  08:30

Sure, absolutely. And I mean, how different is asking Airbnb owners to licence their properties? How different is that to, you know, in New South Wales, we were after a register of properties.

Jimmy  08:43

Well, we have one. I don’t know how effective that has been. I don’t think there’s any studies been done on it. The government here doesn’t fall over itself to find anything wrong with Airbnb, ever. And although I think New South Wales has the most restrictive laws, because we have a register, in Victoria and Melbourne, the government doesn’t care; really, really, really doesn’t care. They look at the tourist dollars coming in and think that’s fine, that’s all we need to know. And you’ve got buildings there where between a third and a half of the apartments in the Docklands area (which was supposed to be this jewel in the apartment living crown in Melbourne); a third to a half of some of the the apartments there, are given over to short-term rentals. And that was never planned, but the restrictions there are if the guests (or the hosts); of the apartment causes a problem three times, then they will do something about it. And you think, if you’re living in those buildings near those apartments, and half of them have got three shots at behaving badly, it doesn’t sound like a pleasant environment in which to live, does it?

Sue  09:56

No, absolutely.

Jimmy  09:58

So when is this Dateline on SBS?

Sue  10:02

April the 4th.

Jimmy  10:04

 Right. And some nice pictures of Edinburgh.

Sue  10:08

Yes, absolutely, and those cobblestones, or sets.

Jimmy  10:12

Yes, you got it right.

Sue  10:13

It’s funny, because I went to University in Durham, in the north of England, and there was lots and lots of cobblestones there, because it’s a really old city, and it’s amazing how noisy suitcases can be.

Jimmy  10:27

I mean, I’ve got a little trundley case that I use when I go to college and when I’ve got a lot of books to carry, and I take it along that tunnel to Central Station. You’re walking along there and you’re drowning out the sound of the buskers (which is a good thing sometimes). All right, when we come back, we are going to talk about rent-bidding and how it hasn’t really worked, bringing in restrictions on that.

[MUSIC]

Jimmy

Sue, there was a couple of stories in the weekend papers about rents and rent-bidding. What’s going on with that?

Sue  11:15

The rental crisis; we all know it’s horrendous and lots of newspapers have been focusing on that. I mean, mostly because there’s a shortage of housing. Developers aren’t actually building enough housing for us. There might be restrictions in planning regulations; those kinds of things, making the situation worse. Also, during COVID, people were less keen to share houses; they wanted to live on their own. They got nervous about being around other people and that’s a trend which has continued, as well. So sharehouse kind of broke up and four people went into four little apartments of their own, really.

Jimmy  11:56

So where’s the highest rental changes? I mean, we know that in no other aspect of life, is it more obvious that demand and supply affect each other critically.

Sue  12:08

Sure. Well, one report came out to say that the biggest rent increases in Sydney were in areas that people really like to live. Places like Clovelly, where rents went up $633. As a percentage, that’s about a third, because the rents are usually about… The median rent in Clovelly is $1,995. It’s a lot of money. So that went up by $633. Rose Bay went up by $600 on a $2000 rental. Middle Cove, which is also very nice, and then Riverview, Balmain East, and then the upper North Shore; Curl Curl and North Turramurra.

Jimmy  12:53

It stikes me that these are areas where, generally speaking, people would be able to afford more rent, more easily. We’re not talking about somebody who’s on minimum wage here.

Sue  13:06

No, that’s right, because they’re all quite well-to-do areas.

Jimmy  13:10

And those people are being pushed out of the cities.

Sue  13:14

Yes, because there’s probably a real shortage of rental accommodation. With rents so high, sometimes people are able to buy instead, because it just doesn’t make sense anymore.

Jimmy  13:25

So rents are going up, availability is going down… What difference is the ban on rent-bidding? Do you want to explain what the rent-bidding ban is, to begin with?

Sue  13:38

It’s where landlords, when they see lots of people applying for the same apartment or house to live in… Maybe 20 people want to apply for a rental and maybe it’s been advertised at $800, so the landlord says “okay, you can have it for $850, if you’re willing to pay $850.” So it would be kind of like an auction on the rent, almost.

Jimmy  13:59

So the landlords are saying to the group of people there, if you want to go a bit higher…

Sue  14:04

We’ll give it to the highest bidder. Which is really horribly unfair for all those people applying, coming along, thinking they might be able to afford it. So the rent-bidding ban was meant to stop that.

Jimmy  14:18

So that’s to stop landlords and agents suggesting to potential tenants that they might pay more. But this isn’t working, because people are turning up, competing for the same properties and rather than being urged to offer more, they’re offering more, anyway. So the rent-bidding is going on. Okay, you ban the landlords and you ban the agents from suggesting they might put the rent up, but there’s nothing to stop tenants coming along and saying “we’ll pay more.” And it’s been interesting over the weekend, that the various parties; the Labor Party and Greens, have both come up with their own alleged solutions for this.

Sue  15:01

What’s the difference between them?

Jimmy  15:03

The Labor party has been saying “well, what we’ll do is change it, so that we’ll stop secret bidding. So that if a potential tenant comes along and says “I’ll give you $50 a week more,” the landlord or the agent then has to inform the other tenants that this has happened, so that they can have the opportunity to bid more.”

Sue  15:32

It just sets a fire under the whole situation.

Jimmy  15:35

Absolutely. It just legitimises something they’re trying to stop. The Greens, I believe, are saying it’s got to stop altogether. I haven’t seen their policy on this, but I would imagine it’s basically (and it would be so easy to do)… The landlord or the agent advertises a property at a certain rent, and they can let it for less, but they can’t let it for more, for the next year. And that’s fair enough, I think. A landlord can say “I think in this market, this property is worth $750 a week and obviously, I want to maximise my investment.” But they should have the leeway to go “oh, I’m not getting any bids at $750. I’m going to drop it down to $725.” What they can’t do is say “oh, there’s 20 people queuing up for this, I’m going to put it up to $800.” It would be that simple. So that you can say, as soon as that is advertised (and it must have a fixed rent on it), then the tenants who lose out, can go back to Fair Trading and say “we think somebody bid more for that.” They’d be able to track that through the bond system, and all that stuff. At least it sends a clear signal to people that they can’t just keep bumping up the rents.

Sue  16:57

It’s interesting, though… I was reading about Tim McGibbon, who’s the CEO of the Real Estate Institute of New South Wales. And he was saying it’s a real problem, because investors aren’t coming into the market so much anymore, because of anti-landlord policies. And these anti-landlord policies are things like no-grounds terminations; banning those.

Jimmy  17:20

Tim McGibbon is a really nice guy and a very smart person, and I’m calling bullshit on that. That sounds so self-serving, for real estate agents to be saying… For a start, we do not have no-fault evictions; they are banned in New South Wales. So that’s bs, for a start. He’s trying to fire a warning shot against the Labor Party trying to introduce it, which are they and the Greens would be very keen to do. And the other thing about investors not coming in, because they’re scared off by anti-landlord… Come on.

Sue  17:59

Yes, it’s rubbish.

Jimmy  18:00

It’s absolute nonsense. Hey, Tim, if you’re listening, send us the figures that prove that and we’ll publish them. Send us the hard details and we’ll publish them. Just give us your wish list, or your dreams, or your nightmares… Send us the hard facts and figures and I will publish them.

Sue  18:22

Quite. I mean, investors are now coming back into the market.

Jimmy  18:26

They’re just not telling Tim.

Sue  18:30

Because property prices; a lot of people think that they’ve kind of hit the bottom now, already. In some areas, they’re just starting to bounce back. Investors are seeing that and seeing the first green shoots of recovery and they’re getting in now. And there are also maybe only one or two rate rises left; interest rate rate rises from the RBA. So things are looking pretty good.

Jimmy  18:55

I actually don’t think we’ll see any more.

Sue  18:57

I think we’ll see one more.

Jimmy  18:59

Just to make people realise that this is a serious situation.

Sue  19:04

Just to stamp out the last of the increasing inflation; another  0.25  basis points raised.

Jimmy  19:13

They soon add up though, don’t they? Add up faster than Qantas Frequent Flyer points, a lot faster. So rent-bidding and the rental crisis is still with us. We know that this is a supply and demand issue and demand is exceeding supply… Is there any sign that there is going to be more housing coming on-stream anytime soon?

Sue  19:38

There’s a big push as well, for build-to-rent. which is the new thing isn’t it? Well, approvals are still down. But do you think with the bouncing back of the property market (you know, prices looking as if they’re past the bottom), that some developers will be coming back and putting in more development applications for housing, because suddenly it’s more worth their while? Construction prices had gone up hugely and they’re starting to come down as well, so that would be encouraging developers too. It won’t happen very quickly. I mean, these things never do. But hopefully, in the next couple of years, we will see a lot more housing coming onto the market. That’s right. And also, co-living is getting bigger and bigger.

Jimmy  19:53

 Explain co-living.

Sue  20:32

Do you remember the new-generation boarding houses, where you have a studio and it has a very minimal kitchen, or maybe it has a microwave, or just a sink in the kitchen; that kind of thing. But it has lots of shared amenities with the other tenants. They are quite small studio apartments, but they have a big common area. They have a big gourmet kitchen that they can all use at various times; big fridges, that kind of thing. Maybe they have a rooftop barbecue. They have lots and lots of amenities and they can all share those, but the actual living space is much smaller.

Jimmy  21:09

Do they have their own bathroom?

Sue  21:10

Oh, yes, absolutely, but they share the laundry. It’s kind of almost like student living and I think a lot of them are based on student accommodation.

Jimmy  21:19

I just recently, as you know, visited my sister in Scotland, and she’s got a lovely house. But there were basically three groups of people… My sister and her husband and my aunt and I in one of each of the three bedrooms. One bathroom; absolute nightmare!

Sue  21:41

Well, that is Britain isn’t it really?

Jimmy  21:42

Considering that way, way, way back in the history of time, I lived in houses with outside toilets, I think it’s probably a bit much for me to complain about only one bathroom. But it makes you appreciate the level of relative luxury in which we live these days.

Sue  22:01

Absolutely. I was writing about a house the other day. It has five bedrooms and eight bathrooms. You think, why do they need so many bathrooms?

Jimmy  22:12

I’ve just been taking my students through The Broken Shore, the Peter Temple novel, and to the central character, Joe Cashins’ brother, his mother says ‘oh, he’s got a flat in Melbourne, with one-and-a-half bathrooms.’ And he says ‘what do you do in the half-bathroom?’ Do  you have half-a-pee? Okay, enough of that jollity. I think we’ve covered it all. I’m looking forward to the SBS Dateline, if only to see those streets in Edinburgh, which took me by surprise, when we went to see the Lost King, about Richard the Third. I’m looking at all the street scenes, because I thought it was set in Nottingham, which is where they found (spoiler alert), the body. I’m going “that looks like Edinburgh; that looks like the Grassmarket,” and sure enough… Of course, she started her quest in Edinburgh. But it’s so nice to see. I mean, I lived there for about a year, many years ago and despite all the sounds of suitcases on the sets, it’s a nice city to live in and visit. When you visited Edinburgh, you should visit Scotland, because they’re very different places. Alright Sue, thanks very much for coming in and doing this and thank you all for listening. We’ll talk to you again soon.

[MUSIC]

Jimmy

Thanks for listening to the Flat Chat Wrap podcast. You’ll find links to the stories and other references on our website flatchat.com.au. And if you haven’t already done so, you can subscribe to this podcast completely free on Apple podcasts, Google podcasts, Spotify, Stitcher, or your favourite pod catcher. Just search for Flat Chat Wrap with a w, click on subscribe, and you’ll get this podcast every week, without even trying. Thanks again. Talk to you again next week.