Property industry experts fear a rental ‘collapse’ in September when the multiple measures designed to keep eight million families in their homes roll back.
Measures like the eviction moratorium, income support and mortgage repayment holidays for landlords, JobKeeper and JobSeeker are masking the real economic viability of renters – and once they come off, many could find themselves facing huge repayments.
The median weekly rent in Sydney, Melbourne and Brisbane is $574, $458, and $440 respectively, according to CoreLogic. By September, those renters who have taken a payment holiday will have a debt to the tune of $14,924, $11,908 and $11,440 respectively.
“We have to consider where the tenant is going to be and what sort of a debt has been accumulated,” Real Estate Institute NSW chief executive Tim McKibbin told the ABC this week.
“There’s an assumption that everybody is going to get their jobs back, and the tenant can start a repayment program of whatever the tenant can afford over the next period of months following that … and everything will go back to normal,” Mr McKibbin said.
“I think that is wearing rose-coloured glasses.”
The cautionary cry is echoed by economists who believe we are still to see the worst effects of the pandemic on Australian households. Jobs and incomes simply won’t return to normal in a few weeks.
The Tenant’s Union of New South Wales also cautions tenants against taking up an offer for rent deferral.
“We do not recommend rent deferrals for most people unless they think their income will be higher after the period than it was before – for most people it will only put pressure on household finances at a time when they are trying to recover from hardship,” says Leo Patterson Ross, Chief Executive Officer Tenants’ Union of NSW.
“Many renters are being told that a rent deferral is all they can get but this option is not providing a relief, the rent is not being reduced, just put off till later. Rent deferral shouldn’t be seen as a default and it is also not in the spirit of the law for tenants whose income have been significantly affected by the crisis. A deferral only option will not apply in Tribunal, something that might be feasible is a partial waiver and partial deferral.”
The Tenants’ Union of NSW has created a rent reduction calculator available to people in NSW looking at negotiating rents.
The calculator lets you put in a range of information about your rent and income situation and then allows you to check what different scenarios of reduction including waiver of rent or deferral look like for you.
“It is important that you consider if a deferral is actually viable, does it actually work for you both in the short term and later when you are paying back any deferred amount,” says Mr Ross.
For renters who are worried about accruing rent debt in this period, the Tenant’s Union of NSW and Marrickville Legal Centre highlight the newly passed two-week rent cap on the break fee if you choose to end your fixed term tenancy.
“If you’ve been financially impacted by COVID-19 and your landlord or agent won’t negotiate with you about an affordable rent, you can apply to the Tribunal to end your fixed term tenancy,” writes Marrickville Legal Centre, a not-for-profit community legal centre based in Sydney.
“The Tribunal can end your agreement and does not have to make you compensate your landlord. If you are made to compensate your landlord, the maximum amount is two weeks rent.”
This applies to all tenants who have seen a COVID-19 related reduction in their total household income by 25 per cent or more.
But Mr Ross stresses that this is a process that could take months in the current climate and while it might be helpful for renters who wish to continue living in place, it does not help renters who are looking to move out to somewhere else with lower rent in the short term.
“Renters who want to take advantage of lower rents elsewhere could be better off just paying a break fee four to six week rent rather than going through the process. Most renters are still in a very precarious position even with this new regulation and we’ve also heard of renters being evicted on no grounds when they started a negotiation process with their landlords,” says Mr Ross.
“There is no prohibition on agents or landlords asking for other types of financial information, such as your income or the amount of your savings in the bank,” writes Marrickville Legal Centre.
“However, our view is that the negotiation should be about the tenant’s loss of income and the landlord’s ongoing expenses. This is in line with the code of conduct introduced for commercial tenancies and the sort of information that tenants need to provide when they apply for a property. We do not believe it is fair and reasonable to require a tenant to spend all their savings to pay rent during the coronavirus pandemic.”
Jay from Adelaide shared with ABC that she is already $1,600 in arrears. She has been renting the place for three years and prior to the crisis, she has always paid her rent, always been on time and never missed a payment.
“I’m $1,600 in arrears, which is a lot of money when you look at it,” 27-year-old Jay told ABC.
“I’m willing to pay the money back when I start working, it’s just that I expected a bit more compassion for the ‘now’ while we’re in this pandemic, and a bit of relief. But I’ve not got that.”
“You’ve got a choice, pay rent or eat, and I don’t really think that’s fair.”
“The thought of going to get another loan to pay those arrears scares me,” she said, her voice faltering.
“Because I can’t. I can’t do that. I am worrying about where this money is going to come from.”