NOLA property industry reforms bad for consumers? Or is the Real Estate Institute conflicted?

Darren Moffatt

Recently in Property Observer, the CEO of the Real Estate Institute of Australia, Amanda Lynch, argues that the forthcoming national licensing of agents is seriously flawed, and 'bad for consumers'.

Forgive me, but I'm always a little sceptical when industry bodies paint themselves as the consumer's friend. It's such a common communications strategy you could almost say it's corporate PR, 101 these days. I mean, any industry lobby worth their salt is hardly going to position themselves as anti-consumer, are they? Plain as day, industry bodies are there to represent the interests of their industry members, not customers. Notwithstanding this fact, smart operators do embed the consumer interest into their industry mission, because it's usually good for business.

So with this in mind, I decided to visit the REIA website to see how they stack up.

Initially I was encouraged to find the 'Principles of Conduct' page on their site. Great I thought, here's an industry body that's serious about demonstrating their commitment to the public they serve:

 But alas, when I clicked on the link, I got a '404 Not Found' error.  

I'm sure this is just an oversight, but it is disappointing. The national industry body for the Real estate industry - the very one that's apparently so concerned about the effect of NOLA's reforms on the humble consumer - can't even properly publish their 'Principles of Conduct'. After quite a bit more digging I found the document in a section for agents. But what about the link for consumers? One has to ask: what message does it send to the public? Indeed, what example does it set for REIA members? 

From what I gather the REIA is a responsible, effective industry body that represents its members well. I'm sure they ARE genuinely pro-consumer but such a basic lapse unfortunately promotes a rather different perception. 

Moving on from this, I then sought to understand exactly what Ms Lynch finds so objectionable about the proposed NOLA reforms. There's a lot she doesn't like, and she argues persuasively for substantial changes to be made. She seems most concerned by the apparent reduction in educational requirements for new & practising agents:

"The regulatory impact statement should not be recommending the lowest state and territory standard as the new national standard (with automatic mutual recognition), but rather adopt the Diploma of Property Services and a personal probity test as the minimum requirements.

Further, the law and practice of property sales changes from time to time. This means that NOLA’s proposal to abolish Continuing Practice Development requirements would put consumers to further risk. It is far better to educate real estate agents at the start about the right way to do things rather than to track down and deal with agents who have hurt consumers after the event."

Fair enough. These sound like legitimate concerns to me, and no doubt they'll be more fully debated in coming months. But are there any other agendas also at work here?

It's well known that the state-based Real Estate Institutes are major providers of CPD & training to their members. There's no issue with this; it's very common across all types of industry, and such activity probably generates significant revenue for them.

And herein lies the problem. The NOLA reforms are advocating for a 'more flexible' ongoing training, with the removal of minimum CPD hours for all agents, regardless of experience. If this change is enacted then it's a good bet the various Real estate Institutes will suffer much lower revenues as a result. How do we know? NOLA estimates a $60 million annual saving to industry professionals flowing from these changes (this figure includes revenue lost to the entire training industry, not just Real Estate Institutes).

That looks a lot like a conflict of interest to me. In my view, Ms Lynch should have made a disclosure in her article that the Institutes she represents stand to lose revenue under these reforms. Her failure to do so compromises what are otherwise sound arguments. 

Ms Lynch seems to anticipate the question of the Real Estate Institute running other possible agendas with an attack on - of all things -  'economic rationalists':  

"...They dismiss industry opposition to deregulation as a self-serving desire to restrict entry disguised as concern for consumers."

I must admit to feeling bemused by this. The Real Estate industry is perhaps the THE fullest embodiment & greatest beneficiary of our capitalist system - not that there's anything wrong with that - but for the CEO of the peak industry body to be attacking 'economic rationalists' is...unusual, to say the least. When a powerful business lobby uses the rhetoric of the political left to make a point, something's up.  Next thing you know, they'll be hooking up with the Greens...

"The vast majority from the property industry expressed concern verging on alarm. Earlier this month the NSW Greens also expressed concerns. A Greens MLC John Kaye has a notice of motion before the NSW Upper House for a committee inquiry as to whether consumers will be adequately protected."

According to Ms Lynch, 'radical neo-liberal economists' out there might be under the misapprehension that REIA opposes these reforms because they make it too easy for new players to enter the market in large numbers, (& presumably threaten the livelihoods of existing members).

Isn't more competition a good (the best?) thing for consumers in any market? On this issue Ms Lynch appears to concede deregulation has been good in the past. But by not clearly stating that she welcomes more entrants into the industry now, it's hard not to conclude this may well be a factor in their opposition to the NOLA reforms, in spite of the many other valid points she raises.

Regarding the proposed reduction in CPD & training requirements (or to quote NOLA, 'more flexibility'Winkhow do agents on the ground feel? Do agents want MORE regulation, not less? I would guess that many experienced agents & property professionals would welcome the opportunity to cut CPD requirements. The time and money saved could be invested back into their business for more revenue, but whether this is good for customers is another question.

And finally, what about the most important people in this debate - consumers. How do home owners feel about apparently lower educational standards for those selling their biggest asset & handling the trust accounts through which the money flows? Would consumers be happy to learn that much-maligned real estate agents now have an even lower educational bar to jump? 

I must declare I don't yet hold a view either way on the licensing reforms, I'm just asking questions to see what real people think. Too often these debates are dominated by the organisations with the loudest voice. I'd love to hear from agents, homeowners and other stakeholders affected by the new regime. 

The NOLA reforms are aimed at improving productivity by streamlining & standardising government regulation. It's an important & fascinating piece of public policy, and I'm intensely interested to see how this plays out. One thing's for sure, it's not everyday you see The Greens & Real Estate Industry unite in a fight against pernicious 'economic rationalists' - apparently - undermining our system.

NOTE: I confirmed the broken link on the REIA website over two separate days just to be sure wasn't a temporary glitch.