OPINION | Renting during the pandemic: Real estate industry must do better
Words by Rafal Alumairy
Real estate agents and landlords have far too much power in negotiations with tenants. In the middle of a global pandemic, we can’t leave tenants at the mercy of landlords without stronger rights. Without robust state oversight on tenancy negotiations, tenants will be screwed.
So everything’s fine and you feel like thing’s aren’t perfect but things are finally starting to go okay – you’ve moved out of your parents’ house, you’ve got a good job at a café, you live in a stable sharehouse with four people that you don’t hate. You each pay $1,000 a month for a total of $5,000 to rent your house. Your to-do list is dwindling for the first time. You got 78 likes on your last Tik Tok. Things are good!
NOT SO FAST. Corona is here and you got stood down, baby. You’re a casual who has worked for your employer for only nine months, so you don’t qualify for JobKeeper payments. So you go to wait in line at Centrelink with hundreds of other people and now you’re waiting for weeks for your application to be approved. Two of your housemates are international students who have gone home, another decided to move back with their parents, you can’t find anybody to fill their spots. You can’t possibly pay the usual $5,000 of rent with barely any income in the household, and you’re worried about where you’ll get the money for food and other essentials. Until the world opens up again, you ask your real estate agent for a temporary rent reduction.
If you are a renter who has lost income during the coronavirus pandemic, you might be very angry at your realtor – I know I am. You might have lost your job or part of your income and need your rent to go down by a bit – in some cases, by a lot. Prime Minister Scott Morrison told us to sit down and have a chat with our landlords, see if we can’t come to some kind of agreement and everything would be okay – we’re gonna get through this together. Solidarity! Community! Family! Come on, Aussie, Come on! Right?
Renters have been overwhelmed with stubborn landlords, unhelpful property managers and frequently, real estate agents that will not respond to rental reduction requests at all.
Isn’t there any government assistance?
Actually, there is! We’re incredibly privileged to live in a wealthy country with a stable government that does listen to expert advice during a crisis, and the Australian government have come in with a quality safety net for most Australians.
First, JobKeeper is $1,500 a fortnight for people who work at companies who have lost a lot of business, so those people can stay employed even if they don’t have a lot of hours.
Second, Centrelink payments have doubled for most people. So if you’re not eligible for the JobKeeper payment, you can get “Jobseeker” (unemployment benefits), plus the coronavirus supplement of $550, plus rent assistance if you’re eligible. For most people on jobseeker, that’s about $1,100. The extra coronavirus supplement is also being given to people on Youth Allowance (if you’re under 22) and students on Abstudy or Ausstudy.
This whole thing is pretty reasonable, casts a pretty wide net, and kudos to Scotty for doing a good job on this one.
The problem is, the net doesn’t catch everybody. If you’re on a disability support pension, you don’t get the coronavirus supplement, even if you’ve lost work due to coronavirus. Disability rights groups have asked the government to include the DSP in the supplement, but they haven’t yet. So they’re in the lurch.
If you’re an international student, you’re not eligible for any of these payments, and if you’ve lost income due to coronavirus and were not able to get home, you may be in a lot of trouble.
Even for people who are eligible for the government payments, not everybody is getting them at the same time. The coronavirus supplement for Centrelink was only paid from the 27 April, and even today not everybody has gotten it yet. Approval takes about two weeks. JobKeeper applications are administered by your company, so the application and approval times will vary.
So lots of people are in a pretty desperate financial situations, particularly with their rental payments.
Okay so there’s a rental crisis. Shoot. What is the government doing about that?
The only legal action on residential rents by the Federal Government was to declare a moratorium on evictions. All tenants are still responsible for 100% of their rent payments during this period, even if they’ve lost 100% of their income.
While this scheme is successful in protecting the government from thousands of people going homeless on their watch, it doesn’t do a good job of protecting tenants from being thousands of dollars in debt, through no fault of their own, a prospect which is scarier to many than eviction.
The moratorium is supposed to give tenants a stronger bargaining position from which to negotiate a rental reduction. The Prime Minister and his government idealistically believe landlords and tenants will come to the table, negotiate in “good faith”, come to some reasonable agreement and get past this crisis, because we’re all in this together. After all, who else is a landlord going to get to rent their property in the middle of the pandemic?
But “good faith agreements” are not so likely when one side has all the power, and very little reason to compromise. The government has provided no guidelines on how tenants are supposed to “negotiate” a reduction or what the landlords should ideally agree to.
While it may be difficult for a landlord to replace a tenant if they leave, there is a deadly virus roaming the streets and a lot of tenants will not be inclined to move right now. Where would they go?
A landlord would be in a better financial position if they stood firm on their rental rates, forced their tenants to plunder all their remaining income and assets to pay them; or would still be in a better position even if they waited six months, then evicted the tenant and took them to court for the full rate of rent owed, rather than relent now and offer a temporary reduction; Landlords have zero incentive to offer a reduction or freeze on rent.
Rent Strike Australia thinks the best way to get a deal for tenants is participating in a rent strike until landlords agree to certain things such as a temporary rent amnesty for the duration of the pandemic. They encourage tenants not to engage in individual negotiations with landlords, but to strike with them, withhold all payments, so that all tenants can engage in “collective bargaining” – so that all renters can get a better deal at the same time, instead of having to battle the system alone. This includes people who haven’t lost their jobs or income.
Rent Strike Australia acknowledge that many landlords are working class and middle-class people rather than billionaires, and subsequently support a mortgage strike as well. They suggest the banks can do more than absorb the costs for landlords during the pandemic.
What’s the actual situation on the ground for renters? Have they been able to get rent reductions?
To be clear, there are many reasonable landlords who have accepted requests for rent reductions, and this is great for both tenant and landlord and their ongoing relationship. There are many success stories here – but not enough.
Tenants who have requested rent reductions are getting the cold shoulder. Landlords and real estate agents across the country have doubled down on their current rent requirements, and built a barricade of legalese, financial hardship forms and automated emails. There have been misleading rent “reduction” agreements, where the reduction is really a deferral, and tenants are expected to pay back the full amount at a later date. Real estate agents have issued eviction notices despite the moratorium and refused reasonable requests for reduction even from people in severe financial distress.
One renter on a Rent Strike group reports that while they are withholding rent to pay for food and other essentials, an automated email was sent to them advising that they are in breach of their tenancy agreement and VCAT proceedings may proceed against them.
A particularly common story for tenants in distress is not receiving a response at all. REIV (Real Estate Institute of Victoria), an organisation which represents the real estate industry, defend real estate agents and their difficult role in this crisis. Their President Leah Calnan says real estate agents are being slammed with requests, hence delays are to be expected. But despite those delays, tenants are still expected to pay their full rent on time.
Calnan also suggests tenants should try calling their real estate agents rather than just emailing, and in this way exhaust every possible avenue of communication. Many tenants, who are distrustful of the system, are hesitant to engage in official business over the phone, because of their desire to get everything in writing. (if this is true for you, consider downloading a phone recording app. Recording phone calls in Victoria is legal as long as you are one of the people speaking on the phone call)
My own real estate agent caused me some angst recently. I lost my second job due to coronavirus, which is a bit less than half my total income, but luckily I was able to keep my main job by working from home. I requested a temporary rent reduction five weeks ago, and while I had a back-and-forth with my agent, never received an answer to my request. Ten days later, one agent asked me to pay half the rent while I waited for the negotiation, which I obliged. I still did not receive an answer.
I applied for some cheaper places to rent. Another week passed, and my real estate agent advised me that they were giving bad references to the places I was applying and could I please pay my rent. I told them again that I was waiting for a verdict on the rent reduction and still did not receive a reply on the request. I asked them to stop giving me bad references, and they refused. I was forced to stop applying for other properties. I couldn’t leave, but I couldn’t afford the current rate of rent.
Five weeks later, still without any response to my rent reduction request, my real estate agent emails me to advise that if I don’t pay the full balance of my rent, I would be put on a tenant blacklist, my bond would be withheld, and I would receive bad references for any properties I applied to in the future. (Please note that blacklisting tenants during the coronavirus period is illegal). I’m happy to report that a day before the publishing of this article, I finally received a response from my landlord offering me $200 off for two months, and an apology that I requested from the real estate agent.
The conduct of many agents is unacceptable. Some agents have suggested tenants access their superannuation to pay their rent, a move which ASIC (the government agency which monitors the finance industry) has said is illegal because it is providing financial advice without a licence.
Another renter in a Rent Strike Facebook group had a similar experience. They are living in a duplex divided into two sharehouses, a total of one landlord and eight occupants. Only three of the eight occupants are still working. A real estate agent advised them that 100% of the rent is still payable, and that if they did not continue to pay the entirety of the rent despite the lost income, their future rental references were threatened.
Others have sent deeply personal requests for financial information, one agent asking a tenant how much they spent on Netflix each month, and others requested detailed transactions listings from tenants rather than just a statement of balance. One renter on a Rent Strike Facebook group reported that their real estate agent contacted their former employer from a year ago, as well as the former employers of housemates, despite the fact that this information was not submitted on the current financial hardship application.
Calnan says that it is within the tenants’ rights to redact parts of their statements if they are irrelevant. She also defends the practice of sending financial hardship forms, which many people have found unreasonably intrusive. She points out that it’s part of the job of a real estate agent to present the tenant’s case to the landlord, and without supporting documents it would be difficult to do so.
Tenants are realising that real estate agents who are just doing their jobs are only working in the interests of the landlord, and the reality of how little power they have.
One half of a pair of newlyweds felt the immediate effects of the coronavirus right after they were married: they lost a substantial part of their income as well as their honeymoon savings. They applied for JobKeeper but are still waiting for their application to be processed. They spoke to their real estate agent about a rent decrease two months ago and were told to find a cheaper property, which they did, and the couple then requested to break the lease. The real estate agent did not respond to the request to break the lease and waive the fees. The landlord offered a 25% reduction on the rent, which would have to be paid back at the end of the year. This would mean their tenancy agreement would be extended three months, to the benefit of the landlord. The tenant told me their opinion of the deal; “Obviously this is not really a deal for us as much as it is for them.” They have since engaged a lawyer until they receive a response about the lease break request.
A spokesperson for Tenants Victoria suggested that now that there is a legal framework for the crisis in Victoria, real estate agents will be able to respond in a timely manner the way they haven’t before. But the problem is not just confusion due to the crisis – the crisis is forcing us to see years of lack of tenant rights and overall mistreatment of renters.
An anonymous renter in the inner North was able to secure a lease privately with her landlord, but experienced significant frustration while trying to deal with the real estate agent. “I’m not sure what they do, but it definitely isn’t to advocate for tenants in any way… I’m sure the real estate [industry] is currently under the pump … but it is really becoming clear through the stories being shared on the Rent Strike groups how common this sort of story is, and how badly the industry needs tighter regulation and oversight.”
Real estate agents act this way because it is, at the moment, the very nature of their jobs, which is to get as much out of the tenant as possible on behalf of the landlord. The New Daily reports that real estate agents have been “swapping tips” on rejecting rent reduction requests on a real estate agent Facebook group. They report that the group has 11,000 members, and a real estate agent referred to one tenant requesting a rent reduction because they lost their job as sounding like “a spoilt brat kid” and an “entitled twit”. Other Facebook posts referred to “shitty tenants”. One agent’s response to a thread about ASIC’s crackdown was
“Easier to just say, shove it up you’re a** and issue the 1B termination”.
These stories join an anthology of tenants protesting the dealings they’ve had with real estate agents, who act on behalf of their landlords. Threats, manipulation, and coercive behaviour are extremely common in these stories.
What about the landlords though? Landlords are people too!
The feud has been bitter on both sides. While many tenants are in serious financial hardship and need relief, many landlords are saying they can’t afford the relief that is requested, because they have a mortgage to pay. Some landlords may have lost employment themselves. My own landlord is an investor who owns multiple properties – I know that he can afford a temporary rent decrease. But Calnan notes that 78% of landlords in Victoria only own one rental property – they are what the media likes to call the “mum-and-dad” investors. Regular people have been encouraged for decades to invest in property, being tempted with tax incentives like negative gearing, so it’s fair enough that a lot of these regular people have chosen to become landlords.
But the situation is certainly not equal. Landlords, while many of them may be facing a difficult financial situation, have an asset they can make money from in the future, or sell if necessary. While some landlords may be struggling financially, it’s unlikely they are facing homelessness or poverty like many tenants. In addition, there is a mountain of assistance provided to landlords which cannot compare to the anthill provided to tenants. While a landlord may be paying more in the long term if they offer a rent reduction and utilise a mortgage deferral, they are given a lot of room to breathe so they do not fall into crushing debt because of their property investment. This situation is manageable, while a tenants situation often is not. Given this imbalance, landlords should pitch in.
Who else is pitching in?
The Big Four are offering most landlords mortgage deferrals for up to six months. So that means for six months, they don’t have to pay their usual monthly payments, so while their tenant is in a crisis, the landlord doesn’t suddenly get deeply into thousands of dollars in debt. Landlords have pointed out that a mortgage deferral is just them waiting six months to pay the money – not only do they still have to pay that six months of money, but they are also paying an additional six months of interest on that money as well. Some have suggested that banks do more to help, by reducing the interest rates for affected landlords.
The Federal Government is pitching in with coronavirus payments to people who have lost work, meaning the renters who are on JobKeeper and Jobseeker are using taxpayer money to pay the landlord’s mortgage.
The Victorian Government is offering a 25% reduction on land tax for landlords who haven’t paid their land tax yet, on the condition that they provide a rent reduction for tenants. This isn’t a huge reduction, but it is costing Victorian taxpayers $420 million. It means an individual landlord can save possibly thousands of dollars on that tax, and therefore potentially offer tenants hundreds in reductions. They’re also pitching in $80 million of taxpayer money for affected tenants to pay their rent.
Tenants are pitching in – reaching into their savings, sometimes their superannuation, sending proof of financial hardship, they’re experiencing high levels of financial and emotional stress but still paying a high percentage of their income on rent.
So, landlords should pitch in too. While the livelihoods of landlords are not negligible or unimportant, it seems extraordinary to expect working class people who need to use their rent money for food and essentials to sacrifice their living essentials for the sake of the landlord’s portfolio. The landlord’s situation cannot be 100% take and 0% give. The idea that we can live in a society where an investor can reap nothing but benefit but absorb none of the risk is a discredit to us all.
The Victorian Government should do more to ensure landlords fulfil their civic duty in the context of this global pandemic. Adequate supports for landlords to make sure they can stay afloat during this difficult time are important, but the first focus of society right now should be to make sure that the most vulnerable people do not get crushed.
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