Tenants are caught in the crossfire as the real estate and insurance industries dispute who will bear the cost of unpaid rent

'Utterly unjust': why Australian renters and their landlords need certainty on residential tenancies

When Erienne Lette wrote to her real estate agents asking for her rent to be reduced, she wasn’t expecting what came back.

After her income was reduced by 35% until at least 30 June, Lette hoped she might be able to pay less than $360 a week for her studio apartment in Camperdown, in Sydney’s inner west.

Instead, she was warned that only a deferral of the rent, not a reduction would be considered at all. And she was also asked to fill out a form asking, among other things, whether she planned to dip into her superannuation.

Lette provided proof of her reduced income and reiterated that she needed the rent reduced to make ends meet.

She received a one line response from the agent: “But very much able to meet the weekly rent.”

“The power that they have, and the lack of power that we have, is really apparent right now,” Lette tells the Guardian.

Lette, 27, is among millions of renters in Australia who have seen their incomes decimated by the coronavirus pandemic. Like all of us, they are stuck in their homes – but even that is no longer set in stone.

Pathology giants seek 50% rent reduction from hard-pressed Australian GPs amid coronavirus crisis Read more

Despite the prime minister’s declaration on 29 March that national cabinet had agreed to a six-month moratorium on evictions, only Tasmania has passed legislation to enact these protections.

It means that tenants in the private market who are unable to afford their rent are, according to tenants groups at least, at the mercy of individual landlords.

The prime minister, Scott Morrison, has urged landlords – and by implication the property managers who represent them – to “do the right thing”.

Yet not all appear to be doing so.

Asic last week warned agents they face up to five years jail if they ask tenants to withdraw super in order to pay the rent.

Tenants Victoria’s advice line, now an email service during the Covid-19 crisis, is receiving dozens of messages a day from renters worried about losing their home.

Among the record of complaints, seen by the Guardian, is correspondence from a single mother who said she was threatened with eviction after losing her job.

“Initially they demanded full rent regardless and threatened eviction,” she said. “With the eviction moratorium in place they are now offering a $10 per week rent reduction for six months. This is not sustainable especially given how difficult it is to access Centrelink at this time. I have no savings, no family, no support.”

A separate letter to a tenant from an agent in Melbourne’s north states: “Do not ask for a rent reduction or a rent freeze as we will not put these requests forward. Saving for that rainy day? You may need to dip into any savings you have.”

Another, to a tenant who is in rental arrears, provided some unsolicited budgeting advice: “I hope that you are also doing your part in cancelling unnecessary subscriptions such as Spotify, Foxtel or Netflix or any other service that is not considered necessary at this time.”

Initially they demanded full rent regardless and threatened eviction Single mother, Melbourne

The industry has condemned unusual and heavy-handed tactics, including the references to superannuation that drew Asic’s attention, and has broadly warned against tarring all property managers with the same brush.

But it is clear the lack of legislative certainty is having an impact.

In a letter to landlords, obtained by Guardian Australia, one real estate agent, Andrew Pennisi, said they should give struggling tenants “a rent rebate or food shopping voucher” instead of a rent discount or forgiving rent payments.

Pennisi said that “giving a discount or forgiving rent payments will void your landlord insurance”.

Insurance sources say this is incorrect.

Pennisi told Guardian Australia agents are “running without any real guidance from government, except keep tenants in place”.

“We are looking forward to some guidance,” he says.

If the real estate industry and tenants groups agree on one thing, it is that the lack of action at national cabinet on residential tenancies has been damaging.

Last month, Morrison had insisted “there is a lot of work being done together to try and get a consistent approach when it comes to residential tenancies”.

The states and territories had worked towards a plan of incentivising landlords to offer rent reductions by offering them cuts or waivers of land tax.

But progress stalled, as states differed on the extent to which landlords should wear the losses from rent reductions, the duration of land tax reductions and practical difficulties for states where land tax is levied predominantly by local councils.

Casual and migrant workers are at the mercy of an economy that punishes its victims | Van Badham Read more

The announcement of the $130bn jobkeeper wage subsidy program helped take the heat out of demands for support. This week, the national cabinet agreed to a mandatory code of conduct to negotiate commercial rent reductions but gave up on achieving national consistency on residential rents.

Morrison declared residential tenancies were now a matter for each state and territory, and there would be no baseline beyond the moratorium on evictions.

Only the ACT has announced its own scheme to offer rent reductions of up to $200 a week, funded through land tax reductions for landlords.

States now say announcements will be made in due course – leaving open the prospect renters in some parts of the country will get shorter three-month rent reductions.

The Real Estate Institute of NSW says the absence of clear advice from governments, aside from the need to “work it out between themselves”, has led tenants to believe they do not need to pay their rent.

Leanne Pilkington, the REINSW’s president, acknowledges that there are tenants “for whom rent relief will be necessary, should they lose their jobs or have their work scaled back”.

“Equally, there are landlords, typically mum-and-dad investors, who depend on the rental income to repay loans or fund their living expenses in retirement,” she adds.

“The plan of transferring the financial burden being experienced by the tenant to the landlord is utterly unjust.”

Dr Heather Holst, Victoria’s residential tenancies commissioner, says the states need to implement a retrospective evictions moratorium as soon a possible.

“There is a bit of a wait and see attitude, which is very hard for tenants who know that they are spending every last cent of their savings and just wondering if they are going to be able to stay or not,” she told the Guardian.

Holst notes, too, that the boosted welfare payments and the jobkeeper wage subsidy do not begin until late April and May respectively.

“The financial clock is ticking,” Holst says. “Something needs to be done very quickly.”

Do not ask for a rent reduction or a rent freeze as we will not put these requests forward Real estate agent's letter

Holst acknowledges that the lack of policy certainty has also created confusion for landlords, who are also facing the prospect of a battle with their insurer.

Landlords would like to claim unpaid rent under their insurance, but cannot because the insurance policies require landlords to issue an eviction notice before they can be compensated for lost rent.

Nor are landlords covered for any reduction in rent they agree with tenants.

“Obviously that’s just not going to work in the current circumstances,” Holst says.

The real estate and insurance industries are at war over who will bear the cost of unpaid rent, which industry sources estimate could top $10bn.

Insurance companies fear the states and territories might change the law to allow landlords to claim without issuing an eviction notice.

“The state governments are designing the schemes and are really surprised insurers won’t come to the party,” an industry source says. “Why should insurers bend over?”

One large Victorian real estate agency, Nelson Alexander, has asked tenants to lobby their local MP to change the law to allow claims for unpaid rent without issuing an eviction notice.

As the stoush escalated on Thursday, EBM Rentcover, which insures about 160,000 properties, announced it would not be taking on any new business, including from existing customers, after next Tuesday and blamed “a lack information and guidance from the federal government”.

Jobkeeper payment: am I eligible? Here's everything you need to know to register Read more

Some insurers are considering quitting the Australian market entirely, an industry source says.

An Insurance Council of Australia spokesman says the industry supports measures to assist landlords and tenants “negotiate outcomes that help them through Covid-19”.

People like Lette are caught in the crossfire. Back at her studio apartment in Camperdown, she considers herself lucky to still have a job at all.

Lette is also realistic. She says that if her rent is not reduced, she will be forced to consider her options.

Holst, the tenancies commissioner, argues that governments should ensure that a tenant’s debt from rent deferrals does not exceed their bond.

“Otherwise all we’re doing there is deferring eviction,” she says. “People will know if they’re racking up debts that there’s got to be a day of reckoning too.”

When she spoke to the Guardian, Lette was yet to hear back from her agent. But she’s cognisant of the reckoning.

“In terms of wage loss, we’re not going to be back paid for that,” she says. “How are we expected to back pay rent that we couldn’t afford then? It’s only going to become rent we can’t afford in the future.”