Less than one in 10 renters impacted by COVID-19 were granted rent reductions

author-avatar By on August 06, 2020
Less than one in 10 renters impacted by COVID-19 were granted rent reductions

Photo by Sandra Lemming on Unsplash

Fewer than 10% of renters who lost income thanks to coronavirus received a satisfactory rent reduction, new survey data shows.

Better Renting surveyed almost 1,000 renters from across Australia between 29 April and 15 June, and found over three in five renters (63%) reported losing some or all of their income due to the pandemic.

Of those who lost income, 50% asked for a rent reduction but only 9% received a satisfactory rent reduction

Better Renting's data suggests that those that did ask for a reduction often received little support, with about half receiving no reduction, or a trivial amount, and about one in five were offered a rent deferral.  

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Base criteria of: a $400,000 loan amount, variable, principal and interest (P&I) owner-occupied home loans with an LVR (loan-to-value) ratio of at least 80%. If products listed have an LVR <80%, they will be clearly identified in the product name along with the specific LVR. Monthly repayments were calculated based on the selected products’ advertised rates, applied to a $400,000 loan with a 30-year loan term.

“I have no idea how we would ask for a rent reduction. We are on a month to month lease and are already worried about eviction, as it has been on the cards for some time," one such renter, Jasmine from Victoria, said. 

“Anticipating that the request would be knocked back we did not even consider making the attempt," another unnamed renter in NSW said because it would not be worth it. 

One renter, 'Wanita' from Western Australia, asked for a reduction, but was only offered a trivial reduction. 

“(We) Let the landlord know that due to the events we could only pay so much….They offered a $5.00 a week rent decrease,” she said. 

Inequality made worse

The coronavirus crisis has pushed many renters into hardship, with Better Renting's survey finding 16% had resorted to skipping meals to save money, while nearly half (44%) said they struggled to pay rent and bills. 

According to Better Renting Executive Director Joel Dignam, coronavirus has made housing market inequalities worse, with high rents pushing more and more people into poverty. 

“It’s a terribly stressful situation for renters. For most renters, having an eviction notice land in the letterbox is their worst fear," he said.

"Many tenants who are out of work and out-of-pocket due to the coronavirus crisis face dire circumstances if eviction moratoriums are lifted in September and October.”

[Read: Unit rental prices see largest fall in over 15 years]

There has not yet been any news as to whether the initial six-month eviction moratoriums announced by the Morrison Government in late March will be extended, although Victoria is reportedly considering it in the wake of stage four restrictions being implemented.

However, this hasn't stopped all evictions.

The New Daily recently reported that eviction notices are still being issued across the country.

“Australia was in the grip of a housing affordability crisis before the pandemic hit. Rental costs have been rising faster than wages for decades, now many renters find themselves spending more than 50% of their income on rent," Mr Dignam said.

“With so few landlords giving rent reductions, and so many renters losing income, we are worried about a situation where renters are getting into debt and possibly losing their homes.

“The survey shows renters are worried about what happens next if JobSeeker is cut in September or if bans on evictions are lifted.

"We call on the Federal Government to keep the current rate of JobSeeker so renters aren’t pushed into poverty."

While many people have been adversely affected by the COVID crisis, studies show those who rent are particularly worse off. 

Analysis of data from the Australian Bureau of Statistics (ABS), Australian Taxation Office (ATO) and the Productivity Commission by The Conversation found 2.5 million Australian households rent privately, and just over half are in the bottom 40% of households by income.

About one-third of renters meanwhile are low-income households paying more than 30% of their income in rent - and that was before COVID-19 struck.

Now, the most recent unemployment data shows a 7.4% unemployment rate in June, which could rise to 10% by the December quarter. The most hard-hit sectors, like retail and hospitality, mainly employ younger Australians and renters. 

JobKeeper and JobSeeker deadlines have been extended but the payment will be reduced, and Australian Council of Social Service (ACOSS) CEO Dr Cassandra Goldie has also called for the government to scrap the proposed decrease.

“The decision to reduce the JobSeeker Payment in September will hurt millions of people just keeping their heads above water. It means from 25 September, a person on JobSeeker will lose $300 per fortnight or $150 per week, and face the prospect of a further cut just after Christmas," Dr Goldie said.

“People need financial security and certainty at this anxious time. Today’s announcement gives them neither.

“This decision will also have flow-on effects across the entire economy. Millions of people will have less to spend on the essentials in local businesses, which in turn could lead to further economic pain and unemployment."

Need somewhere to store cash and earn interest? The table below features introductory savings accounts with some of the highest interest rates on the market.

What needs to be done?

Better Renting's report, 'Rent due: renting and stress during COVID19', offers four recommendations:

  • Keep the rate of JobSeeker;
  • Implement the measures in the National Statement on Renting and Coronavirus*;
  • Abolish unfair evictions; and
  • Invest in social housing

"With these changes, we can enable more renters to occupy homes that are stable, affordable, and healthy," the report said. 

"In times of crisis - and in normal times as well - this will make the Australian community safer and more resilient. We can and must improve conditions for people who rent their homes."


*On 18 June 2020, an open letter was sent to members of the National Cabinet calling for more support for renters, signed by over 70 organisations. It calls for measures to:

1. Stop evictions for rental arrears or where the tenant is not at fault;

2. Support renters to terminate an unaffordable rental contract;

3. Require binding arbitration where a landlord and tenant cannot agree on a rent reduction;

4. A temporary freeze on rent increases;

5. Direct financial support for renters who would struggle to afford even reduced rent; and

6. A requirement for banks and insurers to offer genuine relief to those landlords who have reduced rent.

Disclaimers

The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered which includes retail products from at least the big four banks, the top 10 customer-owned institutions and Australia’s larger non-banks:

  • The big four banks are: ANZ, CBA, NAB and Westpac
  • The top 10 customer-owned Institutions are the ten largest mutual banks, credit unions and building societies in Australia, ranked by assets under management in November 2020. They are (in descending order): Credit Union Australia, Newcastle Permanent, Heritage Bank, Peoples’ Choice Credit Union, Teachers Mutual Bank, Greater Bank, IMB Bank, Beyond Bank, Bank Australia and P&N Bank.
  • The larger non-bank lenders are those who (in 2020) has more than $9 billion in Australian funded loans and advances. These groups are: Resimac, Pepper, Liberty and Firstmac.

Some providers' products may not be available in all states. To be considered, the product and rate must be clearly published on the product provider's web site.

In the interests of full disclosure, Savings.com.au, Performance Drive and Loans.com.au are part of the Firstmac Group. To read about how Savings.com.au manages potential conflicts of interest, along with how we get paid, please click through onto the web site links.

*The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate.

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author-avatar
William Jolly joined Savings.com.au as a Financial Journalist in 2018, after spending two years at financial research firm Canstar. In William's articles, you're likely to find complex financial topics and products broken down into everyday language. He is deeply passionate about improving the financial literacy of Australians and providing them with resources on how to save money in their everyday lives.

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