In March, the coronavirus crisis threatened to bring the roof down on the rental market that houses one in three Australians, as incomes crashed and evictions loomed.
A combination of income support, “pausing” repayments on mortgages and a ban on evictions propped up the system and bought all players six months to work out a comprehensive solution.
Now, the support is being wound back.
Within weeks, we will find out what lies ahead for the tenants who can’t pay, the landlords who can’t meet their mortgage or the structure of the housing market that has left millions in such a precarious position.
“I can’t see a solution,” Tenants Victoria chief executive Jennifer Beveridge said.
Renters and landlords knew where they stood in March, as national cabinet deferred making a decision on rent reductions and evictions six times in the early days of the crisis.
The March 29 announcement of a six-month eviction ban for tenants who’d lost substantial income due to the health and economic impacts of COVID-19 came with a suggestion for tenants to negotiate with landlords.
Stressful negotiations on rent
Research shows negotiating to reduce rent was difficult and stressful and negotiated reductions were “hard-won” and generally for just three months or less.
Many tenants were forced to settle for a deferral of rent instead of a reduction.
And a large number of survey participants expect to lose their homes when protection against eviction for arrears related to COVID-19 finishes at the end of September in most states and territories.
Victoria’s second wave has seen protections in that state extended to March.
“We’ve hoped the solution would emerge. It hasn’t,” Ms Beveridge said.
“Maybe the problem is so big and complex we’re just going to find a bigger hole at the end of it.”
Fiona Hallam is in that hole. Her husband was made redundant just before the pandemic struck.
Unable to find new work or access government support, and with his payout worn down by high rent, they’re about to run out of money.
“We don’t know whether we were going to be homeless, we didn’t know if we were going to have some way to eat because we’re paying all this money in rent and we have no income,” she said.
While the Prime Minister implored landlords and tenants to negotiate “in good faith”, there was no legislative backing forcing them to.
States and territories rushed through laws of varying strengths that enforce a broad ban on evictions.
But it didn’t answer the key problem: What do renters do if they ask their landlord for a rent reduction and are told: “No”?
Mrs Hallam has lived the problem.
“They basically just said no,” she said.
“There was no dialogue. They wouldn’t have a discussion with us why they wouldn’t offer that [rent reduction].”
“They did offer us a deferment, which is to pay that lower rent for three months and then pay what the difference is back afterwards.
“But we’re in no position to do that [pay lower rent], we don’t have any income. No income whatsoever.”
Landlords are heavily geared
Eight million Australians rent their homes, mainly from 2.2 million landlords who generally own one or two investment properties.
The tax system encourages people to invest in property through negative gearing.
When people lose money on their investment, such as having mortgage payments greater than the rent they receive, it lowers their taxable income.
Many landlords are heavily geared – in debt – or have lost jobs or other income. They have been unable to afford to offer tenants lower rent and still meet their mortgages as well as costs such as council rates.
It’s for this reason Antonia Mercorella, chief executive of the Real Estate Institute of Queensland (REIQ), welcomes the expiry of the six-month ban on evictions.
“I think it is time,” she said.
“And I believe that most tenants will be ready to transition back to normal residential tenancies laws.”
The government is supporting incomes, through the soon-to-be-reduced rates of the JobKeeper wage subsidy and JobSeeker unemployment benefit.
Landlords, particularly self-funded retirees, have said that during the crisis, they’ve been forced to accept the non-payment of rent that is often their only income.
Many landlords out there feel like they are the forgotten ones,” Ms Mercorella added.
“The focus has been very much on tenants, and certainly we’ve been supportive of tenant protections.
“But it is important to understand that there are many property owners out there who have also been impacted by COVID and they are very much feeling the consequences.
“We are hearing some very tragic and difficult stories of property owners who are in extreme financial distress.”
That position conflicts with the experience of Darwin Community Legal Service tenancy solicitor Shelley Alvarez.
“Renters are a bit of a silent group of people,” said Ms Alverez, detailing the situation in the Northern Territory, where more than half the population rent their homes.
Despite the top-level encouragement for negotiation between renters and landlords, she said it didn’t happen in practice.
“In reality, some tenants got a rent reduction but some were offered a deferral. That’s just a future debt,” she said.
Emergency measures enabled people to more easily exit impossible commitments, but only a small number of tenants used the provisions.
“A lot of tenants … they’re just so stressed,” she said.
‘A road crash waiting to happen’
Co-founder of not-for-profit law firm Anika Legal, Noel Lim, said a key issue was the power imbalance between landlords and renters.
“It’s tough for them to negotiate,” he said.
“We’ve got to get to a fair middle point.
“There are no easy solutions, but we’re finding a way where everyone can make a compromise.”
Mr Lim, who has been working with renters and landlords since the pandemic began, said “huge numbers” of tenants still required rental reductions.
With the market’s twin supports – mortgage pausing and the eviction ban – being unwound at the same time, there will be pain.
“I’d describe the impending situation as a road crash waiting to happen,” professor of urban and regional planning at the University of Sydney, Nicole Gurran, said.
“It’s something that we can absolutely avoid, though.”
A decades-long lack of new social and affordable housing has distorted the market in our cities as people compete for a shrinking number of appropriate properties.
New data suggests that, of almost 35,000 properties available in Sydney, only two would be affordable for an unemployed couple with children receiving the new JobSeeker payment.
“Unfortunately, we have tried to deal with the housing problems in Australia by leaving it to the market, with the idea that somehow the market could sort things out,” Professor Gurran said.
“What we can see is the double vulnerability: Of renters struggling in the private rental market and private landlords struggling when they lose that source of income.”
How safe are houses?
Incentives for property investment haven’t delivered a supply of new and affordable houses to rent, Professor Gurran added.
Instead, they’ve propped up prices in the market for established homes.
One of the biggest issues in the housing market is its perceived safety as an investment, Ms Beveridge said.
“In business, whether you’re buying shares or a franchise, people see there’s a risk. They know there’s the potential it will go up and down,” she said.
“But residential housing investment is just seen as a financial investment.”
She likened it to a term deposit in a bank.
“People need to see the other side of it. It’s a business, but it’s also housing people. Maybe this will give it a kick?”
Emma Allen, who helps clients buy investment properties, said the current flux wasn’t deterring people from becoming landlords.
“People who still have job security and want to take that step in – while there’s less competition – will,” the director of Active Property Investing said.
“Honestly, if someone’s going to invest in property, it’s such a long-term [investment]. We’ll look back at 2020 and say, ‘That was crap’, but there’s a bigger picture.”
She acknowledged a growing barrier was the economic instability from the recession.
“It’s all about people’s personal situations. There were people about to take that step (of buying a property), they’re now sitting back or sitting in the wings,” she said.
“That cloud of uncertainty makes people extremely cautious.”
For renters like Fiona Hallam, the future is also extremely uncertain.
They’ll need to break the lease on their expensive rental home and try to find something cheaper in the same area.
But without employment, they’ll struggle.
“If we don’t get a new place and we don’t get a new job, we’re going to be homeless with no income,” she said.
“Whether you’re renting or not, it doesn’t matter. We all want the same thing. We want healthy, happy families and somewhere safe to live, to call home.”