Funding model of the RTA
On 1 April 2022, the REIQ provided a Submission to the Economics and Governance Committee of the Queensland Government in relation to the State Penalties Enforcement (Modernisation) Amendment Bill (Bill). Our feedback related to the Bill’s proposed amendments to the Residential Tenancies and Rooming Accommodation Act 2008 (RTRA Act) with respect to the funding model for Residential Tenancies Authority (RTA).
The Bill proposed to change the funding model of the RTA so that instead of holding rental bonds and investing returns to fund its operations autonomously and independently, the Queensland Treasury hold tenant’s bonds in an operating bank account and will provide the RTA with an annual grant from the Consolidated Fund.
The REIQ noted its deep concern with the proposed amendments to the funding model of the RTA set out in the Bill. The brief summary provided in the Explanatory Notes did not, in our view, substantiate any basis for the proposed material amendments. We were also disappointed by the absence of any stakeholder consultation prior to the Bill and the insertion of such a fundamental change in a nondescript Omnibus Bill. The process lacked the transparency we would expect given the nature of the proposed reform.
In our Submission, we noted that the RTA currently holds close to $1 billion of rental bonds for Queensland tenants1. The proposed amendments to the RTRA Act have the effect of allocating these funds to the Government’s operating bank account (and its balance sheet). These monies belong to Queenslanders and the REIQ submitted they should remain held by the RTA ‘on trust’.
As an independent statutory body, the RTA is an autonomous body that operates and is regulated under relevant legislation. Most notably, the Statutory Bodies Financial Arrangements Act 1982 (SBFA Act). We considered it inappropriate to make such radical changes to the RTRA Act without due consideration to the existing financial and investment regulation, mechanisms and protections afforded under the SBFA Act governing all statutory bodies.
No significant evidence had been provided to establish that the RTA funding model was in need of this significant overhaul. For example, we are not aware of instances of the RTA failing to pay out a rental bond due to cashflow. We understand that the RTA had successfully funded its operations since its inception. The financial reporting data of the RTA demonstrates a very strong 2021 financial year and we noted that the RTA had close to $60 million invested with Queensland Investment Council2.
The REIQ submitted that the proposed reforms will lead to lower returns on the monies collected. The RTA’s autonomy and power to invest interest earned on its investments would be significantly diminished. Funds deposited in a Government controlled bank account would attract much lower interest than that generated by RTA’s current investments with QIC. The ability to manage funds autonomously is vital for the operational and financial stability of the RTA and its independence.
We suggested that if the Government had a legitimate concern about the financial stability of the RTA, less extreme options could be explored and implemented. For example, the regulation of how funds can be invested and support mechanisms available to the RTA under the SBFA Act could be reviewed. By analysing shortfalls of the actual relevant legislation, other outcomes or measures that are less detrimental or serious could be developed.
We also consider that the changes undermine the vital independence of the RTA.
The State Penalties Enforcement (Modernisation) Amendment Bill was passed on 24 May 2022.