Nobody wins from rent moratoriums, not even landlords

Jay is an international student at the Canberra University of Technology. When she and her housemate both lost their jobs in March due to the coronavirus pandemic, their landlord reacted in the worst possible way: he refused to reduce the rent, instead increasing it by $15 per week. 

Jay and millions of renters like her are on the frontlines of the economic crisis wrought by the coronavirus. We’re much more likely to be in low-paid or insecure work, and many of us now face an awful situation: on top of losing income, we are at risk of losing our homes. 

The government has offered some relief. Renters in hardship will get a six-month moratorium on evictions. This is a good start, but this health crisis demands stopping all evictions, not just those due to hardship. This is no time for anyone to be forced out of their home.

The moratorium also leaves renters liable for the full cost of rent. Even if renters are not evicted, their debt will keep growing, and many will face a big bill down the track. The JobSeeker and JobKeeper payments may help some people, and some landlords may offer to reduce rents. But many renters will fall deeper into debt and be at risk of eviction when the moratorium ends. 

On the other hand, landlords have defended their inflexibility by insisting that they have children to support and mortgages to pay.

It is frustrating for renters to hear these complaints from people who own multiple properties, have household incomes most of us could only dream of, and have repeatedly supported tax loopholes that benefit only them. 

But this anxiety on both sides of the housing equation tells us something: Australia’s housing system is broken. This system is ripping off renters, but it’s also ripping off some property investors. Too much of Australia’s private rental sector depends upon highly-leveraged amateur landlords who can’t get through a few months without rental income. This is a systemic problem.

So what can we do?

In the long term, part of the solution is abolishing tax subsidies for property investors, particularly the capital gains tax discount. This loophole means that profit from the sale of investment property is taxed at half the rate of income from work. This increases the cost of housing and mostly benefits the wealthiest. Renters and low-income property investors would be better off without it. 

But right now, the government needs to ensure that renters can access binding arbitration when their landlord refuses to negotiate. This will help renters to stay out of debt, and help to get people back into work on the other side of this crisis.

This may seem unfair on landlords, but it’s actually a decent outcome for them. We’ve seen a sudden collapse in incomes and more rentals flooding the market. Tenants in hardship could end their tenancies and lock in a lower rent elsewhere. This would leave landlords with no income while their property is vacant, and little chance of extracting the same rents as they did before the downturn. 

A binding decision for a rent reduction would offer landlords and their tenants more security. It would also mean that people who make money from real estate investments would face the same impacts as those of us who work for a living. It could be complemented by a requirement for banks to defer mortgage repayments without charging extra interest.

For too long, we’ve treated housing as a commodity; it is, in fact, an essential service. The last months have shown the problems with our approach: when crisis hits, renters face homelessness, while highly-leveraged landlords worry about foreclosure. 

Nobody wins from this. As we rebuild from this downturn, let’s rebuild better – and that means building a better housing system for all of us.

Joel Dignam is the executive director of Better Renting and a 2019 Churchill Fellow.

If you would like to contribute to Spinifex please send a note to editorial@thefifthestate.com.au

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