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Calls for rental subsidies for tenants, rent pause criticised

Maja Garaca Djurdjevic
Maja Garaca Djurdjevic
31 March 2020 2 minute readShare
Calls for rental subsidies for tenants

Property experts have urged the government to implement immediate rental subsidies for tenants, warning that property owners, too, are experiencing financial hardships.

The call follows the Prime Minister’s announcement of a six-month freeze on evictions of tenants who are unable to pay rent as a result of COVID-19.

Property and investment researcher, UniSA’s Peter Koulizos said that while looking after tenants experiencing significantly financial hardship is important, the government is forgetting Aussie property owners.

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“One-third of Australians rent their home. So, while the government is trying to support struggling tenants, it’s overlooking the impact on landlords, many of whom need to pay mortgages, or rely on rental income as self-funded retirees,” Mr Koulizos said.

He opined that simply asking landlords and tenants to negotiate individual arrangements to withstand the crisis is not enough.

 

One solution, Mr Koulizos said, is to initiate immediate rental assistance for tenants so that landlords do not experience flow-on impacts to their own mortgages or income.

“This assistance could be a percentage of the rent that tenants are currently paying, up to a certain limit, and varying according to the city in which they reside. But the point is to address the problem in its entirety and to keep it fair,” Mr Koulizos said.

‘Deferrals not the answer’

While banks have responded to the issue by offering six-month deferrals in mortgage payments, the finance and investment expert, UniSA’s Dr Reza Bradrania said they’re still not considering the full picture, with mortgages continuing to accrue interest and add to the overall expense.

Dr Bradrania also cautioned that self-funded retirees are likely to feel the brunt of changes to the rental market.

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“Older investors who have paid off their mortgages and are using rental incomes to live as self-funded retirees are at particular risk right now, as they will not be receiving any of the same supports that old-age pensioners will receive,” Dr Bradrania said.

“These people rely on rental income to fund their retirement, but with no rent coming in, they’re in a very precarious position.”

Clear directives needed 

Late on Sunday, the PM announced a six-month moratorium on evictions, in a bid to help individuals and small businesses survive the economic impact of the coronavirus pandemic.

While Mr Morrison confirmed details will be announced shortly, the CEO of the Real Estate Institute of Queensland (REIQ) aired her disappointment with the lack of details provided. 

“What we need is urgent action with clear directives right now for both commercial and residential tenants because there are far too many unanswered questions both businesses and people are still anxiously awaiting clarity on,” said Antonia Mercorella, CEO of the REIQ. 

“With the real prospect of unemployment rates rising to a record 15 per cent, the pandemic has people more than in a state of panic. The inability to maintain stable and secure shelter is just one of the many social issues people are facing due to the crisis.” 

She warned that for property owners, it’s no easier. 

“It’s not just a matter of pressing pause on mortgage repayments to set and forget for six months. Many mum and dad investors can barely cover the various costs associated with owning an investment property even with rent coming in so may not have any other choice but to sell their properties.

“It puts many at risk of bankruptcy.” 

Also unhappy is the Real Estate Institute of Australia’s (REIA) president, Adrian Kelly, who warned that it “ignores the tenancy arrangement”, thus raising more questions than it answers.

Mr Kelly said: “We need to address the support of agents so that what the Prime Minister wants, in terms of landlords and tenants — finding a solution to get through the crisis — can be achieved.

“Estate agents will work very hard to facilitate the role between landlord and tenant, and to do this they need income.”

Calls for rental subsidies for tenants, rent pause criticised
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Maja Garaca Djurdjevic
Maja Garaca Djurdjevic

Maja Garaca Djurdjevic is the editor of My Business. 

Maja has a decade-long career in journalism across finance, business and politics. Now a well-versed reporter in the SME and accounting arena, prior to joining Momentum Media, Maja reported for several established news outlets in Southeast Europe, scrutinising key processes in post-conflict societies and enabling citizens to influence decision-making.

You can email Maja on [email protected] 

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