‘We don’t know how many ticking time bombs are spinning’: Australia’s rent deferral debt trap | Lodging

Tenants face a financial time bomb in September when state eviction protections are due to expire and many could be asked to pay off deferred rent or start paying their rent in full again.

But no one has a clear idea how big problem could be or what effect it might have on the economy and the real estate market.

All states have eviction moratoriums in place until the end of September and some have programs to help landlords and tenants negotiate rent reductions for people whose incomes are affected by the Covid-19 downturn.

Some states, like Victoria, have offered renters grants of $2,000 to help.

But there is anecdotal evidence that some tenants find they thought they had negotiated a reduction only to find the landlord had offered a deferral and they are now in debt.

The impending “rental bomb”

At a Senate hearing on homelessness last week, Labor questioned several bureaucrats about the extent of the rental debt, but neither Social Security chief Shane Bennett nor the Bureau of Statistics were able to shed light on the proportion of tenants who were accumulating liabilities, how many were behind on their rent and how many had successfully negotiated a reduction.

“We don’t know how many people are behind on their rent and whether when the eviction freeze ends we’ll have a lot of people with huge debt that they can’t pay off,” the spokesperson said. Plowing on housing, Jason. Claire, said.

“The national cabinet needs to know quickly how many people are in this situation and determine what to do, if necessary.”

Guardian Australia contacted tenant unions and property institutes in the three eastern states, but they too had limited data and did not know how many tenants had negotiated a deferral or had their rents temporarily reduced.

The only exception was the Real Estate Institute of Queensland, which surveyed its 1,200 agencies with property management companies and found that only 6.05% of residential tenants had been classified as “Covid-19 affected” under the State government Covid-19 emergency response regulations.

However, property managers had negotiated an additional 14% of requests for temporary rent reductions beyond the regulations, representing more than 10,800 residential rentals.

The bulk of these temporary rent reduction reviews took place in Brisbane (37.2%), Gold Coast (14.88%), Sunshine Coast (12.09%) and Cairns (6.51%), the majority of tenants requiring a rent reduction of up to $100 per week (69.3%).

The survey did not specify whether these temporary reductions were made in the form of a deferral (and refund) or rent relief.

“I know officers are pushing for deferrals,” said Tenants Queensland CEO Penny Carr.

But she added: ‘We don’t know how many ticking time bombs are unfolding.

The 60-day shutdown on landlords seeking evictions in New South Wales ended on June 14. Photography: Jenny Evans/Getty Images

Queensland has a system where tenants affected by Covid can seek mediation in court, but Carr said some of the rent reductions still leave tenants with 50% of their income earmarked for rent.

Victoria has also set up a mediation system for tenants. Leah Calman, president of the Real Estate Institute Victoria, said 85% had been temporary rent reductions, but there had also been rent deferrals.

But she said there were also examples of tenants who had simply stopped paying their rent. “These owners are in terrible distress,” she said.

It remains to be seen exactly what will happen in October, when most state moratoriums on evictions end.

The 60-day shutdown on landlords seeking evictions in NSW ended on June 14 and there was an immediate increase in the number of cases filed in the NSW Civil and Administrative Court (NCAT).

In the last two weeks of June, 784 applications were filed, compared to 554 in the previous two weeks. The eviction moratorium for rentals affected by Covid continues until the end of September.

Authorities are particularly concerned about the impact that increased homelessness or accommodation uncertainty could have on their ability to cope with the spread of Covid -19.

NSW Tenants Union policy co-ordinator Jemima Mowbray said they were hearing more and more stories of people couch surfing or going back to live with family because they just couldn’t afford the rent .

She said the constant negotiations with estate agents also added to stress levels, especially since tenants were often inexperienced in negotiating.

The so-called ‘rent bomb’ will come alongside likely changes to help for job keepers and job seekers, although the government appears keen to avoid a financial cliff by ending the rent too abruptly. aid in September. the the treasurer will describe additional support on July 23.

Vanessa, who lives in Brunswick in Melbourne, is an example of the kind of stress tenants face. She asked not to use her last name.

When the first lockdown came in March, her work in hospitality came to an abrupt halt. Faced with a significant drop in their joint income, she and her companion approached the real estate agent for rent relief.

They were offering a 20% rent reduction for three to four months, but were only offered a rental deferral, $400 a month until September.

“The process was really slow. We had to fill out a hardship form and he asked all kinds of questions. They didn’t ask us directly about our super, but they wanted to know everything about our finances.

By the time six weeks had passed, Vanessa had managed to find a babysitting job and was back full time, so the couple decided against the postponement.

But she says the latest lockdown has created additional uncertainty for their household income.

The couple hope that in October, when their lease is renewed, they can negotiate a better rent or decide to move.

“We’ve been here three and a half years so we’d like to stay, but we can get a property with the same amenities much, much cheaper,” Vanessa said.

Real estate headwinds

Rents in both central Melbourne and central Sydney have fallen sharply, thanks to Covid-19.

Results from the Real Estate Institute of NSW (REINSW) Vacancy Rate Survey for June 2020 showed vacancies in Sydney rose for the fourth consecutive month and now stand at 4.5%, up 0.4% from May and 1.5% since March.

“Sydney’s inner ring saw the biggest change, from 0.8% to 5.8%,” REINSW CEO Tim McKibbin said.

The central ring also rose, rising 0.6% to 4.6%, although in Sydney’s outer ring vacancies are falling, possibly reflecting an influx into cheaper suburbs.

In May, vacancies in the inner ring hit an 18-year high of 5.1% – a result that was topped in June and shows no signs of slowing down yet.

“Considering more than 20 years of survey results, we have never seen such high vacancy rates. It’s truly astounding,” McKibbin said.

“The rent reductions that will inevitably follow could help tenants but could spell disaster for many landlords.”

Leanne Pilkington, president of REINSW, said she believed rent deferrals were the minority, not the majority and most negotiated rent reductions, often on a monthly basis.

She also said a number of tenants were also choosing to break their tenancy and move to a less expensive location.

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