Finance Consumer Insurers under fire as rental moratorium causes headaches for landlords

Insurers under fire as rental moratorium causes headaches for landlords

As the six month eviction ban takes hold, some landlords are still being pressured by insurers to evict their tenants. Photo: Getty/TND
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Insurers have been accused of leaving landlords between “a rock and a hard place” during the coronavirus crisis.

Renters experiencing financial hardship because of the coronavirus are temporarily protected from eviction after the states enacted varying degrees of the national cabinet’s intended six-month moratorium.

Prime Minister Scott Morrison said landlords should “do the right thing” and negotiate reduced or deferred payments for financially disadvantaged households.

But Real Estate Institute of Australia president Adrian Kelly told The New Daily insurers are punishing landlords who want to do right by their tenants.

This is because most insurance policies only pay out for lost rental income if tenants have defaulted on their lease or landlords have issued them an eviction notice, but not if they’ve agreed to a rental reduction.

Some of the insurance companies are being irresponsible in that they are still forcing real estate agents to head down the eviction path when a tenant can’t pay some or all of their rent,” Mr Kelly said.

“It’s a particularly stressful time for tenants who have lost employment, and it’s not fair for the real estate agent to be stuck in the middle of this.”

Mr Kelly said unless insurers show “compassion” and streamline changes to landlord insurance policies that account for the unique stresses of the pandemic, property owners stand to lose out.

“If [the system’s] not working now and we’re only at the beginning of this economic downturn, then Blind Freddie can see that it’s going to become even more problematic,” Mr Kelly said.

Insurance Council of Australia CEO Robert Whelan told a parliamentary inquiry on Tuesday that individual insurers would need to decide whether to pursue tenants with outstanding balances once the moratorium is over.

“[Insurers would] need to take into account the community expectations and the degree to which they are able to absorb that is up to their own individual decisions,” Mr Whelan said.

Additional support measures required

Consumer Affairs Victoria figures provided to The New Daily suggest most tenants have opted to weather the storm, with both rental bond lodgements and claims down on previous figures.

More than 21,800 rental households received refunds on their bonds in March.

Although this is 9 per cent higher than the previous year, it is down from 22,895 in February.

And the number of bond lodgements (21,822) also dropped 9 per cent in March.

Professor Alan Morris, who specialises in urban and housing studies at University of Technology Sydney, told The New Daily the government’s overall response to the rental crisis has thus far been “ill-thought through”.

Although tenants have been granted temporary relief, he said there’s “enormous anxiety” over how unemployed Australians can afford their rent deficit once moratoriums are lifted.

Some state governments have introduced rental subsidies to assist struggling tenants, with NSW chipping in $200 million for residential tenants, and Queensland and Victoria offering up to $2000 in rental assistance for tenants in financial difficulty.

But REIA’s Mr Kelly said these subsidies only cover three to four weeks’ rent.

He said the federal government should introduce a more comprehensive rental assistance package.

“It not only helps tenants pay rent, it helps the property owner continue paying their outgoings and mortgage, and it helps the real estate agent stuck in the middle,” Mr Kelly said.

For every dollar of rental assistance, it usually ends up being roughly five to six dollars in terms of bang for buck, and that’s public money we’re talking about.”

Professor Morris said the federal government should consider introducing a HECS-style scheme for renters among a renewed push for more affordable housing.

“Some type of system where there’s very low or interest-free loans that could be paid off over 30 years would be very helpful to both landlords and tenants,” Professor Morris said.

“Tenants would be able to draw on a government fund to pay their current rents, and start repaying the loan once they have secured a new job over an extended period, and landlords will also be satisfied.”

He added: “Now’s the time for governments to step into the housing market and do something meaningful.”