Uncertain Times For Both Renters And Landlords
With more than three million rental properties across the country providing a home for eight million Australians, the coronavirus crisis and its implications for jobs has sent shivers through society, the property industry and government.
The prospect of tenants becoming homeless and landlords losing an income stream has prompted calls from real estate peak bodies and industry professionals for the Australian Government and State counterparts to offer rent support to those who lose their livelihoods.
Real Estate Institute of Australia (REIA) President Adrian Kelly said his national professional association for real estate agents was in talks with banks, financial institutions and government, including federal housing minister Michael Sukkar, to discuss ways of alleviating tenant and landlord financial stress.
“We have a responsibility and a duty of care to look after the interests of both our tenants and also that of our property owners, many of whom rely on rental income to pay their own mortgages,” Mr. Kelly said.
“Under normal circumstances, if a tenant can no longer afford to pay their rent, we undertake the process of eviction, however, we are in unchartered waters.”
“If a tenant is unable to pay their rent, due to a loss of income, the situation is further exacerbated by the fact they may need to self-isolate for a period of time.
“A larger problem on the horizon is in the case of a property owner who cannot afford to make mortgage repayments because their tenant can’t pay their rent.
“We already have property owners, particularly in Melbourne and Sydney, whose tenants are an overseas student, currently locked out of the country.”
While no support package details have yet emerged, the Federal Government is clearly concerned and is preparing to place the onus on landlords to assist where necessary.
“Further work will be done on identifying how relief can be provided for tenants in both commercial and residential tenancies to ensure that in hardship conditions, there will be relief that will be made available and ensuring that tenancy legislation is protecting those tenants over the next six months at least,” Prime Minister Scott Morrison said.
Mr. Morrison conceded that may have an adverse effect on landlords but says they will need to make sacrifices.
“Now I know that will mean something for landlords, just as the decision taken this week means something for banks, just like the decision taken as the Commonwealth Government means something for our balance sheet.”
The Morrison government has models it can look to as the world struggles with the myriad impacts of the coronavirus pandemic.
In New Zealand, more than 1.5 million tenants in about 600,000 properties are about to get huge support from the Government, with landlords to be banned from increasing rents and their rights to evict tenants being severely limited.
In the United Kingdom, the government has announced a radical package of measures to protect renters and landlords affected by coronavirus.
Landlords will not be able to start proceedings to evict tenants for at least a three-month period. Recognising the additional pressures the virus may put on landlords, a three-month mortgage payment holiday will be extended to landlords whose tenants are experiencing financial difficulties due to coronavirus.
In the United States, renters and landlords are not so fortunate, with the vast majority of the country yet to pass any protective measures.
Stress and strain
As the economy grinds to a halt and jobs are shed, rent stress would eventually lead to downwards pressure on the rental market, according to Mark Trowell, CEO of yabonza Property Management.
“It’s a very fluid situation with a lot of uncertainty but we are already starting to receive calls from tenants and landlords about their obligations, should job losses lead to an inability to pay the rent,” Mr. Trowell said.
“Small and medium size businesses are the lifeblood of the economy and most at risk, so the focus needs to be on supporting those industries most affected by the pandemic.
“If we can support this 30 per cent of the economy, we will go a long way to shielding people from the worst possibilities in terms of housing and security,” he said.
With the demise of tourism and travel, the 60,000 properties previously rented out through short-term arrangements on platforms such as Airbnb could now be entering the rental market in search of long-term tenants.
“Having so many short-term lease properties coming into the general rental market is going to place downward pressure on rents,” Mr. Trowell said.
Landlords are also now more cognisant of reducing their expenses, and it is yet to be seen what impact this will have on tenants and the businesses that supply landlords, such as maintenance, renovations and property agents.
Peter Koulizos, Program Director Master of Property at The University of Adelaide, said a balance needed to be struck between supporting landlords, who were often cash poor but asset rich, and tenants facing a loss of employment.
“Generally speaking, if the tenant is looked after, so is the landlord.
“The ability for a landlord to negotiate their loan repayments with the bank would be welcomed if the tenant is unable to pay their rent, while for tenants access to social security benefits without the usual waiting period would be very beneficial in the event of a lost job, with interest-free loans from the government another possibility to avert the worst financial impacts of the COVID-19 crisis,” Mr. Koulizos said.
In Perth, REIWA President Damian Collins said the whole industry needed to come together to find a reasonable solution for tenants and landlords.
“What we need is for the government to provide emergency rent assistance to those affected and the banks and landlord insurers to commit to working with landlords affected by the coronavirus outbreak to ensure both the tenants and landlord feels safe and secure during these stressful times.
“At the end of the day, if the owner cannot afford their mortgage, the tenant will end up homeless regardless, so all participants need to be considered in any package or changes” Mr. Collins said.