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A buyer-seller contract cannot be interfered with to such an extreme without consequences

Rent will soon again need to be paid. But all is not well with residential tenancies.

As we come out of our first wave of COVID-19, the protections introduced to stop tenants being evicted due to non-payment of rent have been hailed a success by those who developed them. Measuring success by a single criterion, however, will never provide the full picture of strategy’s effectiveness or impact. It is fair to say that arguably the most crucial stakeholder – the people who own the actual properties – are highly unlikely to describe what we have seen unfold as a success. A comprehensive examination of the residential tenancy landscape is needed, one that identifies what must be done better next time, and what needs immediate attention. The Government needs to move with urgency on these critical matters to ensure that residential tenancies are managed fairly when another storm hits.

The immediate question that came to mind when the protection rules were announced back in March was ‘why?’ Not why do we need this or why can tenants not pay, but why is this ruling so incredibly non-specific, virtually putting out the welcome mat for it to be abused by those who can pay their rent but choose not to. It has taken months to get some sort of answer to this, and the answer is that Tasmania does not have a tenancy tribunal or similar, like other states, which can provide a timely dispute resolution process so, rather addressing this deficient pronto, the Government decided that this very foreseeable risk of abuse was tolerable. So obviously work to be done here.

Now we understand the why and are beginning to see the consequences of these rushed, short-sighted, and grossly unbalanced rules, we need to look forward. Is the assumption that all will return to the previous status quo? I certainly hope not, because it will not. Action must be taken to ensure that Tasmania’s rental environment is better placed for when something of this magnitude happens again.

The Government has come out with its Residential Tenancies Amendments (COVID-19) Bill 2020 which, if enacted, will see the Minister granted the power to respond to subsequent waves by rapidly implementing protections of their choosing again. What we have not yet seen is the Government’s statement that it is working with haste to establish a tribunal or similar that will ensure future protections only apply to those who genuinely need it as they can prove direct hardship. We have also not seen action, or even talk, or any sort of master plan (that is fundamental to risk and emergency management) around housing in disasters. Did we have a plan that addressed housing in a health pandemic or if half the state were flooded or burnt to the ground? If not, why not, and let us map these essential strategies now.

In addition to preparing for whatever tomorrow may bring, there are a raft of legacy issues that will soon come to the fore. A single buyer-seller contract cannot be exclusively interfered with to such an extreme degree without a deluge of unintended consequences following. Some of these will kick in instantly when the protections first lift, others are likely to linger for many, many years, due to irreparable damage. Importantly, there has been silence as to why rental property owners alone have been forced by the Government to be the only no-questions-asked loan provider. Why was the burden not truly shared? I fear the response is simply because they could, it was easy, it ticked the box, and because owners do not have a legal team that would laugh at such a concept like the large companies do.

At the top of the impact list we have property owners holding significant distrust towards the residential tenancy framework given the Government’s proven ability and appetite to make a contract meaningless, hardship provisions when sought by property owners mostly useless, and the Residential Tenancy Act 1997 unrecognisable in an instant. Building in the ability for this to happen again in an instant only worsens this, and no recognition that there could have been a fairer way to spread the burden does nothing to make rental ownership appealing.

Some property owners will sell up, having been too badly mentally and financially burnt by what they have seen or directly experienced. Great, some may say. But let us unpack that. Less private rental means increased demand on the Government to provide social housing and those funds will need to come from somewhere. Less private rentals will mean less competition, which will do nothing to stabilise or reduce rental prices. And the trickling of housing to the for-sale market will likely see values hold or dip, not plummet, which will mean that first home buyers will continue to struggle to purchase. Then we will have even more large conglomerates and overseas buyers swooping in, especially given those looking to buy may be struggling with employment issues and banks are nervous to lend when income is not secure. There is a very real risk that rental property will move from being owned by locals who are working hard to not be reliant on government funds in their retirement, to the hands of much bigger players who are better placed to weather unimaginable storms.

We will undoubtedly see rental property owners being much more selective in the decision on who to offer a lease. As income stability will be an essential selection criterion, those in the hardest hit sectors – such as tourism, travel and hospitality – are likely to find it harder to secure a rental. And those who have abused the protections will find their chances worse than slim-to-none as word of deceit and entitlement spreads fast and wide, again adding more weight to the public housing list.

Taking a preventative approach, we may also see evictions occurring as swiftly as legally possible at the first sign of a possible disaster, especially in the case of tenants who are already unreliable. We will also see vacancy rates rise – safe and secure homes left empty – as the risk of providing a service without being paid, without being able to access it should your own family need it, and without being able to inspect it even through video, being considered too great. Short-stay accommodation may carry greater appeal too, were ‘no pay, no stay’ is the only option.

It is highly likely that eye-watering chunks of the rent already owed, and which continues to accrue, will never be seen again for various reasons. And if there was a pause on mortgage payments, loans have grown significantly due to the interest that never stopped piling on. Bigger mortgages mean a longer wait to retire. Insurance companies are notorious for swiftly managing their risk. It will be unsurprising to see rent arrears exclusions in policies and premiums hiked up to counter any payouts that have occurred. Owners may seek to maximise rents to offset these government-induced losses, penalties and costs.

The impact of targeting private rental owners alone has and will continue to be dramatic. The Government needs to carefully consider and communicate its view on private rental ownership. Every action is being closely watched given it has a direct effect on the community’s willingness to invest in housing as part of a plan to decrease their reliance on the Government. If the position is that that only owner-occupied dwellings, hotels and similar, and public housing is needed to provide enough rooves, then so be it; take whatever action on private rentals you desire without fear of making ownership so unappealing that it ceases to exist. Conversely, if the view is that private rentals are a critical part of the housing offering, be careful about how unattractive this is made through short-sighted, discriminatory and unbalanced treatment.



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