Striking right balance on rents

The national cabinet has been an essential all-terrain vehicle for swift decisions during the pandemic. One of its misses, however, was in relation to residential rents. The national cabinet came up with a mandatory code for landlords and commercial tenants, with rents waived in part and deferred in part, in line with the loss of business income. Some retail tenants had simply refused to pay; landlords resorted to hardline tactics to enforce leases. For residential tenancies, however, the national cabinet opted for a temporary ban on evictions and a pause on rent increases for six months. “We won’t have anyone thrown out of their homes,” Scott Morrison said a fortnight ago, with the proviso people were still responsible for their rents. Rather than impose a national scheme, the Prime Minister said the nitty-gritty would be worked out by states and territories.

The governments of Victoria, NSW and Queensland have announced packages to protect tenants as well as land tax relief for landlords. But in Queensland property owners are upset over the Palaszczuk government’s lacklustre response. The government has promised a six-month eviction moratorium for tenants experiencing financial distress because of the pandemic. If landlords and distressed tenants can’t negotiate a short-term reduced rental arrangement themselves, there will be mandatory conciliation through the Rental Tenancies Authority. But tenants will not have to pay back the discounted rent at the end of the period and there has been no income-loss eligibility threshold set by the government, as there has been in other states.

The Real Estate Institute of Queensland is calling for a minimum income reduction threshold for tenants to meet before they qualify for the protection measures, such as the 25 per cent income reduction in NSW and 30 per cent in Victoria. The institute argues the Palaszczuk government should introduce a requirement for tenants to repay rental arrears after the crisis is over, and to enforce a 25 per cent income-loss hardship threshold. Most landlords are “mum and dad” savers, the quiet Australians who were targeted by Labor’s misguided assault on negative gearing at the federal election in May last year. The proposed changes are due to be passed by the state’s parliament on Wednesday.

Although the government claims evidence of financial hardship would have to be provided in a dispute, as they stand the measures are tilted against owners. Landlords must be able to recoup unpaid rents when the crisis has passed. As well as protections, tenants must have obligations, as in other states. One is to demonstrate incapacity to pay. Another is eventually to make good the shortfall in rent. Landlords have bills to pay, mouths to feed, banks to satisfy. No one benefits if the rental market collapses, as the national cabinet has recognised. We hope this is merely a drafting oversight and that, before the legislation is presented, wiser heads prevail. COVID-19 is leading to some out-there policies, but this one will needlessly extend misery for those building up an asset base for retirement.