Headleasing in residential strata

The Victorian Government’s 2023 Housing Statement aims to increase housing supply, but one initiative – “headleasing” apartments – raises significant concerns for the residential strata sector.

Headleasing involves a legal entity, such as a community housing provider or government agency, renting a property from the owner and subleasing it to tenants, often those facing hardship. While the government views this as a way to house vulnerable individuals, past experiences suggest it could lead to more problems than solutions.

Docklands residents and others across Melbourne will recall issues at Queens Place and the Botanic apartment complex in Southbank, where government-purchased apartments were used to house individuals as part of the Homelessness to a Home Program. These well-intentioned efforts quickly became distressing for other residents, with reports of public drug use, aggressive behaviour, and a general sense of insecurity.

The government’s failure to provide adequate support services left fellow residents, along with building and strata management, in the difficult position of directly dealing with these behavioural problems, often acting as de facto support services themselves.

These incidents highlight a deeper issue with the headleasing approach. By placing vulnerable individuals into residential complexes without the necessary infrastructure or support, the government effectively outsources its responsibilities to unprepared owners’ corporations (OC) and their managers. These groups are left managing issues that should be handled by professionals, not ordinary residents.

Owners Corporation Network (OCN) and Strata Community Association (Victoria) have voiced strong concerns, arguing that the government has not fully considered the practicalities and conflicts that arise when integrating social housing into private residential buildings on a large scale.

For example, if a government agency enters into a headlease, what additional responsibilities do they assume in terms of the OC? Will they manage building defects, or will these tasks fall unfairly on the shoulders of others? These questions remain unanswered, highlighting a troubling lack of clarity.

At the recent Housing Forum in August 2024, these concerns were glaringly absent from the discussion with the focus firmly on construction, with little acknowledgment of the operational challenges post-construction. This disconnect between government plans and the realities faced by those managing and living these new residential buildings is alarming.

As the government advances its housing strategy, it must address these critical issues within the residential strata sector. Without proper planning, support, and clear responsibilities, the risk is that dysfunction will be embedded.

The residential strata sector deserves better than to be left managing the fallout of poorly executed policies. •