Real estate industry experts are warning that without significant support both tenants and landlords will be in increasingly dire financial situations throughout this COVID-19 (coronavirus) crisis. As the national cabinet meets tonight, many people are hoping that much more will be offered in the rental assistance package, otherwise, they might not be able to afford to keep a roof over their head.
“If they decide not to fund rental assistance and leave it up to the landlord and renter to sort out, it will cause anarchy,” said Real Estate Institute of Australia president Adrian Kelly.
Prime Minister Scott Morrison recently announced the JobSeeker allowance would double, offering relief to vulnerable renters.
“[However] incomes must be below $1075 a fortnight to be eligible for the [extra] $550 a fortnight supplement and therefore, only those with incomes of less than $42,450 a year would be eligible,” Real Estate Institute of Western Australia’s president Damian Collins said. “An income of $42,450 may be enough if you own your home outright. For those renting, it will mean that many will not be able to afford to stay in their properties.”
Further assistance for renters is expected to be announced tonight (Tuesday) night, but little is yet known about what that support will look like.
Mr Kelly said the main focus for industry bodies was ensuring renters had somewhere to live. They were backing calls to stop evictions for non-payment of rent due to COVID-19 and were also looking for assurances that tenants and landlords would be supported financially. “Our focus right now is on our tenants. There’s eight million of them across the country in three million properties,” Mr Kelly said. “Lots of them are living week to week, paycheck to paycheck.”
He said extra financial assistance for renters would have positive effects on the property market. It would enable landlords to pay mortgages and real estate agent fees and even for tradespeople to do repairs, gardening and other maintenance work.
“For each $1 they spend, it flows through five times,” Mr Kelly said.
Real Estate Institute of NSW chief executive Tim McKibbin said it made more sense to assist tenants with rental payments than to ban rental evictions: “I think it is very important that we enable tenants to meet their obligation, rather than solving the problem by simply saying you can’t evict a tenant, that then has flow-on effects right down the money chain.”
Mortgage repayments have been suspended in Italy, France, Spain and the UK, while the US announced a halt to foreclosures and evictions, with some able to pause repayments for up to a year. In Australia, the big banks announced home-owners in financial difficulty could defer mortgage repayments for up to six months.
While some large landlords may be in a position to offer lower rents, the bulk own one investment property and are heavily mortgaged, Mr McKibbin said. He said others, mainly retirees, relied heavily on rental income to meet bills. To this end, landlords may be able to defer their mortgage repayments until their tenants can begin paying rent again. It is hoped further assistance will be announced in tonight’s package, incentivising landlords to take it easy on their tenants in the coming months.
Many households would have no choice but to defer mortgage repayments, said Nigel Stapledon, a real estate research fellow at the University of NSW. In his view, even being extremely frugal and using government payments won’t be enough to make ends meet for some people. He said investors also faced reduced rental income or having no income at all, with demand for rentals likely to fall off the back of slower population growth and some tenants returning to the family home or other shared living arrangements.
“There are no winners out of this. If you’re renting and you lose your job, you’re in dire straits,” he said. “[Meanwhile] a lot of landlords are going to be faced with either lower rents or losing their tenants.”
John Gilmovich, president of the Property Owners’ Association of NSW, said relief strategies so far had ignored property investors.
“Property investors are expected to take the economic hit as well as deal with logistical issues that have no precedent,” said Mr Gilmovich.
Concerned tenants not yet affected by COVID-19 have begun making requests for rent reductions or temporary suspension of rental payments, Mr Gilmovich said. He said financial institutions and governments needed to take urgent measures to provide relief and guidance.
“Measures such as short-term mortgage repayment suspensions, land tax freezes and support to cover property running costs such as rates and utilities need to be addressed. Other nations have already implemented this. Why can’t we? If this issue isn’t urgently addressed, property investors will be trapped between a rock and hard place and forced to make tough commercial decisions during a pandemic, and this will have extensive long-term impacts for the broader community.”
We will update this article further as more news surrounding the assistance package is announced.