The Liberal federal government and NSW state government are applying a neoliberal economic model to structure the COVID-19 pandemic response (with a thin patina of social responsibility). The onus to preserve household security for tenants has fallen heavily onto individual landlords and tenants. Landlords are suspicious that tenants are taking advantage of the situation, and, due to a lack of power, tenants are having great difficulty persuading landlords and agents to negotiate rent reductions and hold off on evictions.
After decades of encouraging competition between landlords and tenants, the government has turned around at lightning speed and now wants landlords and tenants to cooperate and negotiate. This is not in the nature of free-market economics, where the powerful take advantage of everyone else and the way to make money, by and large, is to exploit those with less power. This is why we need legislation to protect tenants. For example, under common law the landlord is under no obligation to undertake repairs in rented premises and the tenant rents the property as is.
While the pre-existing affordability crisis in housing has been improved marginally by the COVID-19 supplement to JobSeeker (formerly Newstart), the April 2020 Anglicare Rental Affordability Snapshot National Report shows that the private rental market continues to fail to provide homes for people on low incomes. On the weekend of 21 to 22 March, 69,960 properties listed for rent across Australia (’the snapshot day’) were sampled, and an average of just 3 per cent were affordable and appropriate for households on government income-support payments (before the COVID-19 supplement). For households on the minimum wage it was 22 per cent. Anglicare’s results show that ‘finding an affordable and suitable home to rent in the private market if you are on a low income is extraordinarily challenging’. Allowing the market to set rental prices continues to produce poor outcomes for those on low incomes.
In addition, Anglicare recalculated household incomes to reflect the COVID-19 supplement and analysed the changes in affordability. The results show a marginal increase in affordable properties. Families where both parents are receiving the JobSeeker payment would discover an increase in the number of affordable properties, from 1 per cent to around 11 per cent. For single people, including those with children, the number of affordable properties was between 1 per cent and 3 per cent. For single people on JobSeeker, the number of affordable properties increased from a total of nine nationally to 1.5 per cent of properties.
However, people on the Disability Support Pension, the Age Pension and temporary visas have been excluded from any increase to their payments. While the increase to JobSeeker payments is welcome, this analysis shows that the government needs a plan beyond random and temporary benefit increases to ensure that people have access to adequate and suitable housing. The impact of the withdrawal of the COVID-19 supplement in September will be devastating, very likely producing another jolt to the housing market.
The government’s response to COVID-19 is causing chaos in the rental market. At the end of March, Prime Minister Scott Morrison called for a moratorium on evictions, but state governments delayed putting in place measures to enforce it. The NSW government announced measures to implement the moratorium only in May. Landlords are required to negotiate with households that have lost at least 25 per cent of their income before they can seek a forced end to a tenancy, but that is the tip of the procedural iceberg.
Before the moratorium was implemented, tenants decided to move out or were evicted at an increased rate. According to an article on domain.com.au, economist Trent Wiltshire said that ‘there had been increased churn in the rental market, due to weeks of uncertainty around government support for tenants and landlords’. As the economic slowdown leads to further job losses, households continue to consolidate, reducing rental demand, while supply is increasing.
A recent St. George Bank Property Monitor survey revealed that, by early April, as many as one in six Australians had changed their living arrangements. People were moving in with family or friends, taking on additional housemates or moving to more affordable properties. The potential for overcrowding is thus a health risk during the pandemic.
Figures from NSW Fair Trading show that residential bond refunds rose 7.5 per cent in March, and increased 17 per cent compared to March 2019. New bond lodgements only grew 3.2 per cent over the year. Tenants across more than 26,500 rental properties had their bond refunded in March, with a significant jump in those moving out after less than 100 days in a property. The number of renters being evicted from or vacating homes has spiked during the pandemic.
Chris Martin, of the City Futures Research Centre at the University of New South Wales, said that COVID-19 and its economic impacts, such as job losses and reduction of working hours, were the prime suspect for the spike. He noted that the number of homes vacated could increase as more tenants grappled with reduced incomes. ‘Too many tenancies are still vulnerable to termination’, he added, noting that if rent negotiations failed tenants still faced eviction.
The complexity of the NSW COVID-19 eviction moratorium is causing headaches for tenants and landlords. From 15 April there is an interim 60-day stop on evictions for rental arrears where the tenant is in financial hardship due to COVID-19. This will be followed by six months of restrictions on rental-arrears evictions for tenants financially disadvantaged by COVID-19.
After the interim sixty-day stop on rental-arrears evictions, a landlord will be required to enter into negotiations on rent reduction in good faith with the tenant. If they do not reach a mutually agreed outcome, tenant or landlord can seek assistance from NSW Fair Trading. Only after negotiations have failed can a landlord seek to terminate the rental agreement. The NSW Civil and Administrative Tribunal (NCAT) will have discretion to assess whether it is fair and reasonable to evict in the circumstances of each case.
For tenants to be protected by the sixty-day stop on evictions and the longer six-month restrictions, a household needs to be able to demonstrate that one or more rent-paying member of the household have lost employment or income as a result of the impact of the COVID-19 pandemic, or had to stop working or reduce their working hours because of illness or to care for a family member ill with COVID-19. The household will also have to show that, as a result, the weekly household income has been reduced by at least 25 per cent after tax.
There is also an extension of notice periods to ninety days for evictions on a range of other grounds from 15 April. This includes end-of-fixed-term ’no grounds’ evictions (section 84), termination for other breaches (section 87, breaches apart from rental arrears) and evictions for longer-term tenancies (section 94).
The regime is unnecessarily complicated and in fact increases conflict. Each side presents their case in relation to rent reduction. There are no guidelines as to what constitutes a reasonable reduction or what evidence may be needed to demonstrate good faith. The tenant feels that they need to provide an excessive amount of personal financial information and is under suspicion of taking advantage of the landlord. The landlord is concerned about maintaining their overextended debts and there may be problems with their landlord insurance. There are no procedures as to how landlord and tenant should document their agreement, although NSW Fair Trading has provided some suggestions.
If landlord and tenant can’t agree then they can apply to NSW Fair Trading for assistance with negotiating. As with Centrelink, it is not clear that Fair Trading has the resources to cope with a sudden increase in demand for its services. If this fails the landlord can institute eviction proceedings and the tenant is required to prove that it is not ‘fair and reasonable’ to evict them. Presumably this means that they need to prove their loss of income due to COVID-19 at NCAT, increasing demand on the tribunal. After years of cuts to tenancy advice services, the public service and court amenities, the abrupt increase in demand for all these services means that many tenants and landlords will miss out on assistance and the pressure will fall on NCAT to sort out these problems. Given the size of the economic impact of COVID-19, this will be no mean feat.
The Tenants’ Union of New South Wales reports that it is hearing from many tenants that their landlords are declining to enter into negotiations on rent reduction because of their insurance requirements. Its advice is that the landlords’ inability to claim back possible loss on their insurance does not nullify the requirement to negotiate with tenants in good faith.
Many landlord-insurance policies do not allow property owners to claim back lost rent or else they cannot claim these losses until the tenants are evicted. According to the Insurance Council of Australia, cover for loss of rent is not always included in a landlord policy and may be added as required at extra cost. Landlord insurance covers the full default, though it does not cover part payments or part non-payments. Rental default is a fairly uncommon reason for claiming. The situation could lead to mortgage defaults for property owners and millions of dollars in losses.
In addition, some landlords are insisting on rent deferrals rather than rent reductions, according to the Tenants’ Union. ‘[This is] putting tenants impacted by COVID-19 in a difficult situation where they accrue a debt to be repaid as soon as the moratorium lifts or they are forced to break their lease to avoid rent they cannot afford’, said senior policy officer Leo Patterson Ross.
Strangely enough, governments do not appear to have considered the complexity of the situation between landlords and tenants. Insurance, mortgages and rental default are all factors in this jigsaw, where there is little or no advice to guide landlords and tenants in their negotiations. It highlights the ways in which neoliberal policies are completely inadequate to deal with such a situation—allowing the market to decide just leads to chaos.