Strata Schemes Management Bill 2015

Dr HUGH McDERMOTT (Prospect) [5.34 p.m.]: I oppose the Strata Schemes Management Bill 2015 and the cognate Strata Schemes Development Bill 2015. The Strata Schemes Development Bill does not protect the best interests of the people of New South Wales. It is retrospective legislation that breaks contracts so that property can be forcibly sold to developers. It is an economically reckless move that will push the New South Wales economy towards a bursting housing bubble and potentially a recession. On the other hand, the Strata Scheme Management Bill 2015 is a reasonably well-thought-through piece of legislation; it offers more rights to residents and holds potentially untrustworthy developers to account. It also reforms how strata committee meetings are conducted, bringing protocol into the twenty-first century. It is a shame that the bills are being debated cognately. If they had been introduced individually, I believe the Opposition would be able to support at least one.

Had the electorate of Prospect existed 10 years ago, these bills would be irrelevant. The great Australian dream of an affordable three-quarter acre block with the Hills hoist out the back was still alive and well 10 years ago. "Strata" would have been a dirty word for new home owners in Western Sydney because they had no intention of sharing their home. Times have changed dramatically. Subdivisions and new developments have boomed, and multi-level apartments are being proposed almost weekly throughout the region. Many families can no longer afford a three-quarter acre block, and ironically now live in townhouses built on subdivided blocks. Therefore, it is more important than ever that we protect from property developers the rights of those living what is left of the great Australian dream.

It appears as though the Baird Government has forgotten the lessons taught in that great Australian movie The Castle. The idea of forcible acquisition of homes is so sensitive that it is addressed in the Commonwealth Constitution, at section 51 (xxxi). Until now, only State, Federal and local governments have been able to acquire land forcibly. Even then, such acquisitions have been allowed only if they relate to matters of public significance, such as airports or highways. Even if acquisition is necessary, it must be a last resort. Importantly, compensation must be fair and meet the market value at the time of the acquisition. Until now, losing one's home—or castle—could be justified only if it were done in the public interest. However, the Baird Government wants to change the doctrine so that a family could lose their home based on interest being shown by developers and in response to market demand. People who bought a home in a strata scheme understood that their right as a home owner would be protected. Their title was deemed indefeasible and home owners did not have to fear a majority vote terminating their right to stay in their home.

The Department of Planning and Environment knows very well that simply changing strata laws will not solve Sydney's housing crisis, and so should the Minister. Similar global cities provide a warning of what is to come if this legislation is passed. Paris experienced a housing boom not long before Sydney's housing boom. It was brought on by the deregulation of the rental market in the mid-1980s. Until deregulation, rents were fixed and landlords often lost money on rental properties because the French legislation was designed to house as many people in the aftermath of the Second World War. A loophole was introduced by changing legislation to allow rents to increase only if significant renovations had been undertaken. Landlords soon refurbished the apartment blocks they owned and the result was a doubling, or even tripling, of rental income. Rents skyrocketed around Paris, leading to the same housing affordability debate we are having now in Sydney.

This raises the question of what will happen to the thousands of ageing strata schemes throughout New South Wales, and particularly in Sydney, when the will of 75 per cent of a strata scheme's owners, or potentially a single investor, reigns supreme. I expect the same crisis that occurred in Paris to occur in Sydney because of this flawed legislation. The affordability crisis we already face will only worsen and the Baird Government, particularly this Minister, will be to blame. The affordability crisis we already face will only worsen and the Baird Government, particularly the Minister, will be to blame. The Baird Government must understand that real life is not like the popular computer game SimCity. There are real families, many already under financial stress, who will suffer due to the effect that this legislation will have on the owner-occupiers of strata accommodation or small-time investors in strata accommodation in New South Wales. The Baird Government also must accept the reality that the real estate market is not a suitably solid foundation for the New South Wales economy.

Only seven years ago the world's economy crumbled as the real estate market in the United States collapsed. The Baird Government knows this, but it is being reckless in its approach to growing the New South Wales economy. Letting property developers loose in a race to buy, evict, demolish and rebuild will create problems down the line. This is not the developers' problem as they are doing their job—it is what developers do. Developers are an important part of the community and have the genuine vision of building homes and communities for families to live and grow in. This is a Baird Government problem and it is acting with typical Baird Government short-sightedness.

If investor confidence in Sydney property falls as a result of a housing super bubble bursting, it could start a chain reaction that will cause the entire New South Wales economy to crumble. This is the exact scenario has occurred recently in the United States. The Baird Government is proposing to give Sydney the worst aspects of both the Paris and United States markets. This is a reckless approach and the Baird Government should know better. Like almost every reform the Baird Government proposes, these cognate bills combine solid ideas with ill-thought-through actions that will be detrimental to the people of New South Wales. For example, reforming strata management laws so that owners can vote via email is a long-overdue reform. The Opposition supports this idea.

Holding property developers to account after the construction and sale of strata lots by charging a 2 per cent bond is also a good reform and one that will be significant to the hundreds of small strata lots throughout Prospect and Western Sydney. I feel this could also improve the reputability of property developers, which is a good thing for the industry. If any developers disagree, the Government should convince them that greater confidence from their customers will only improve their business—that is, of course, unless they had bad intentions from the start, in which case they would be rightfully penalised. However, there is a problem. The Minister is keeping a recent report written by Ernst and Young to "evaluate direct and indirect costs of the bond initiative and review how potential benefits may emerge from the bond's implementation". Why is the Minister hiding this report? What does he have to hide? A good, transparent government would make this report available and I urge the Minister to heed the advice to do so.

There are almost 75,000 strata schemes in New South Wales. This involves some 850,000 lots and more than $350 billion in assets. Reforming strata legislation will have a significant impact on a large portion of the New South Wales population and the New South Wales economy. Therefore it is important to get it right. The Opposition will propose much-needed amendments to these bills to ensure that reforming the real estate sector does not lead to disaster. Many of the reforms proposed by the New South Wales Government will be supported by the Opposition. However, the greater impact on hundreds of thousands of families and the New South Wales economy must be considered. Make no mistake, even seemingly small amendments passed quickly and without proper review through this House can have an enormous impact.

The Baird Government must understand that sometimes short-term gains in the name of reform simply do not balance with the wider scope of governing in the best interests of the people of New South Wales. The 75 per cent threshold to take over a strata scheme must be rejected. Despite believing that strata reform is essential, I am disappointed the Baird Government had an error of judgement in preparing this legislation. I look forward to seeing a more appropriate version of these cognate bills and, as such, I oppose these bills.

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