National Licensing for Property Occupations Consultation Regulation Impact Statement

Reform can benefit property occupations by overcoming current problems

Property occupations are currently licensed under state and territory legislation and administered by jurisdictional regulators. All jurisdictions have some form of licensing, though the approach to licensing varies across jurisdictions. Property agents wishing to work across multiple jurisdictions are required to obtain the relevant licence or licences in each of those jurisdictions through a process of mutual recognition.

Recent reforms to mutual recognition for the licensed property occupations, while beneficial in some respects, have not:

removed the need for licence holders to apply for a new licence when they wish to work in a different state or territory

eliminated the cost to licence holders of holding multiple licences. These costs include licence fees and costs of licence renewal, as well as costs associated with keeping up to date with various skills- and non-skills-based licence requirements. In addition, there are productivity costs to businesses due to processing time and administration

harmonised the eligibility requirements for licences across jurisdictions. For example, similar licences may vary considerably in terms of skill, managerial or experience requirements, qualifications, nominees, state-based competency testing, or the requirement to work under supervision before a full licence can be granted

harmonised licensing frameworks. Many existing licences are not readily comparable or transferable across jurisdictions and a number of endorsements or restrictions may be required to achieve equivalence across jurisdictions

stemmed the ability for jurisdictions to unilaterally change licence categories, scopes of work, qualification or eligibility requirements.

Furthermore, not all licences have an equivalent licence in other jurisdictions, and some occupations (or areas of work within occupations) are not licensed in all jurisdictions. In these cases, individuals may be required to be licensed where they were previously not required to be, or they may need to apply for a new licence because there is no equivalent to the licence that they currently hold. In addition, mutual recognition creates a large number of conditioned or restricted licences as jurisdictions attempt to issue an equivalent licence. Furthermore, ministerial declarations of equivalency must be updated annually in order to remain current; therefore, maintaining those declarations incurs an administrative cost.

The Productivity Commission reviewed mutual recognition in 2003, and again in 2009. The commission found in both reports that, on the whole, mutual recognition had reduced impediments to labour mobility. In particular, it found that ‘mutual recognition appears to be associated with a modest increase in the number of interstate arrivals in registered occupations compared with other occupations’³. The commission did, however, identify some problems with the day-to-day operation of mutual recognition. Those included the failure of some regulators to apply mutual recognition correctly, and the complications created by conditions and restrictions placed on licensees when they move across jurisdictions. In both reports it made recommendations for improvements.

The Productivity Commission supported the development of nationally uniform licensing requirements and national registration systems for occupations that were highly mobile across jurisdictions, where licence requirements between jurisdictions were significantly different, and where the benefits would justify the costs.

The state and territory based approach to licensing of the property occupations means that there are up to eight different approaches to setting licensing requirements. Analysis of these requirements has found that not all meet best practice regulation standards – that is, they cannot be justified as being necessary to achieve the regulatory objective for property occupations. There are examples of:

the scope of regulation being broader than may be necessary – for example, licensing work that may not need to be licensed, such as licensing the sale and purchase of livestock, which could be perceived as unnecessary

the level of skill requirements being higher than may be necessary – for example, requiring a Certificate IV level qualification for an agent’s representative when a skill set comprising specified units of competency appears to address risks

other requirements that are not consistent with the regulatory objective (judged by their relevance to the objective) – for example, duplicate testing of qualified applicants that occurs in some jurisdictions.

The current approach, therefore, leads to:

costs to property agents and businesses in the form of financial and time costs associated with maintaining a multiple jurisdiction approach to licensing and meeting a range of regulatory requirements (not all of which are necessary)

reduced efficiency impacts on households and the economy more broadly where the current regulatory approach creates impediments to mobility of labour and imposes unnecessary regulatory burdens.

These are discussed in turn below.

Administrative burden on licensees

Under current licence requirements, a licence holder must apply for a new licence if they wish to work in more than one state or territory. While mutual recognition arrangements mean that a person is entitled to a licence for the same scope of work in a second jurisdiction, this involves payment of additional licence fees. Subsequently, that person must also periodically renew those licences, again involving payment of additional fees. This is the case even when mutual recognition of a licence is granted (i.e. when a regulator determines that the applicant has an equivalent licence). This creates an impost for licensees, particularly if they work in a border area.

Fees charged by jurisdictions vary across licence categories for essentially the same occupational area. While the fees recover costs for regulatory activities undertaken by each of the states and territories, property licensees who are working in multiple jurisdictions pay those costs many times.

Inconsistent and unnecessary requirements

A number of examples from the property occupations show inconsistent regulatory requirements across jurisdictions and areas of regulation that do not have a strong rationale (given stated regulatory objectives).

Licences issued in different jurisdictions for the same occupational area often have different parameters, eligibility requirements and scopes of regulated work. Different licence classifications, training requirements, licence periods and licence structures commonly apply. These differences can impose costs on those businesses that operate in multiple jurisdictions, as shown in the case study in Box ES.1.

Box ES.1: Case study of an agent’s representative dealing with different eligibility requirements

Dear Sir/Madam, I previously worked as an ‘Agents’ Representative/Sub Agent’ in residential real estate in Victoria from 3/2004 – 12/2006. I am now living in another jurisdiction and I am being told by the regulator I have to virtually re-do all my study in order to work over here. They say because I did not hold a ‘Full’ Real Estate Agent’s Licence in XXX my qualifications are not recognised here. The regulator in my home state has told me I am legally able to resume work as an Agent’s Rep/Sub Agent there at any time up until 10 years from the last day of my last employment, i.e. 10 years from 15/12/2006. Can you please tell me why I cannot begin work here in the new state immediately? I believe Commonwealth laws override State ones and Section 17 of The Mutual Recognition Act guarantees this.

Source: Query received through the Licence Recognition website inbox and supplied by the National Occupational Licensing Taskforce.

Note: Victoria operates an employer-administered registration scheme where the employer assesses the eligibility of an agent's representative (employee) and advises the regulator of commencement or ceasing of employment so that a public register contains the current employment status.

Barriers to the mobility of labour

Labour mobility is defined as the extent to which labour is free to move around the economy in response to opportunities in the marketplace. Labour mobility has important economic benefits. When workers are able to relocate to regions and firms that have prospective employment opportunities, there are benefits to both the individual and the economy more broadly:

Individuals benefit by being able to take advantage of new employment opportunities that will provide them with financial and/or lifestyle benefits.

The economy benefits through the efficient allocation of resources where they are most highly valued (and, therefore, where they will provide the greatest return to the economy).

A complex set of factors can influence the mobility of labour in an economy. Even when there are employment opportunities for workers across the economy, the extent to which these will be filled is influenced by the cost of moving, and the availability of factors like housing and schools in a region.

Mutual recognition is intended to improve labour mobility for licensed occupations by reducing regulatory barriers for individuals to move to a new jurisdiction and work in their chosen occupation. As the Productivity Commission concluded in its 2009 review of mutual recognition, this has occurred to some extent, but there remains room for improvement.

One of the key considerations for this analysis is not the extent to which regulations directly impede the mobility of labour, but how much they increase the cost of moving. Mutual recognition has worked towards reducing these costs, but, as noted above, costs of multiple application fees and additional training and conditions still apply for property occupations. In making employment decisions, each individual will have a ‘threshold cost’ of moving to a new position in another jurisdiction – whether that be a permanent or a temporary move. Box ES.2 illustrates a person’s hesitation to expand business prospects due to the cost of holding multiple licences.

For property occupations, the realisation of labour mobility benefits may depend on the extent to which local knowledge affects a licensee’s ability to compete in another jurisdiction. While this may limit some licensees from becoming more mobile in the property market, there would still be greater opportunity to work in border towns, generate more integrated national practices and work in jurisdictions with high demand for property services.

This Consultation RIS uses more recent estimates on labour mobility drawn from the Productivity Commission, which are discussed below.

Box ES.2: Case study of business prohibited from expansion due to the cost of multiple licences

I am starting a Real Estate buyer’s agency business. I would like to source property for clients throughout Australia, not just Queensland and am therefore extremely interested in the implementation of National Licensing for Real Estate Agents. I realise that current licenses will automatically transition to a National Licence upon implementation. I see that the implementation for the first wave which includes Real Estate Agents is still listed to commence on 1st July 2012. Is this still on track as your NOLA website is very light on info re current developments? This transition will be very important to my business, affecting my ability to expand outside of Qld and I am trying to plan for that with the 1st of July 2012 in mind. If it doesn’t occur, I then have to apply for licences in every State and Territory of Australia which would be too cost prohibitive.

Source: Text taken from the Licence Recognition website inbox and supplied by National Occupational Licensing Taskforce.