Financial counsellors have significant engagement with banks, utility and telecommunications companies; but have not previously had as much engagement as we need with the real estate, tenancy and landlord sectors. COVID-19 has driven and heightened the importance of this engagement between financial counsellors and the tenancy sector to collaboratively address debt and hardship issues, which are a reality for both tenants and landlords.
The fourth instalment in FCVic’s Hardship Forum Series, the Tenancy Hardship Forum provided an invaluable opportunity to interact, and find ways to work together to support vulnerable Victorians. FCVic is grateful to have had the support and assistance of Gil King, CEO of the Real Estate Institute of Victoria (REIV), and Heather Holst the Commissioner for Residential Tenancies in this forum around tenancy and financial hardship.
The Forum provided an opportunity for financial counsellors to meet with representatives from a range of real estate agencies to discuss their experiences during COVID-19, and hear about their plans for vulnerable residential tenants. Financial counsellors noted that several of the clients they had contact with during COVID had some positive experiences with real estate agents, and had received suitable rent reductions. For one client, their a landlord had agreed to waive the tenant’s rent for three months, which was a fantastic relief. However, as the financial counsellors explained, when clients approached them about a tenancy issue, generally, it was because they were not having such a great experience.
When COVID hit, tenants found themselves struggling and were reluctant to approach their real estate agents. Some clients were offered a reduction in rent by their real estate agents, but it was just not enough. Financial counsellors reported seeing cases where a token gesture was made, but a $10 a week reduction was not enough to manage. There were also reports that it seemed as though some real estate agents did not understand how the consumer affairs COVID grants worked, and were reluctant to agree to reduce the rent to enable tenants to set the application process in motion. In cases where financial counsellors were able to negotiate a rent reduction and an updated lease for the tenant, the process took considerable time, which led to increased tenant anxiety during COVID-19.
Real estate agents commented on the hardship experiences of their tenants across Victoria, noting factors such as the loss of an existing job, lacking savings and significant outgoings. A reduction of 50% – 70% of salaries resulted in tenancy hardship and the need for financial assistance. It was reported that the closer to the CBD the more affected tenants seemed to be. Further away from the city, tenants seemed to be in more stable employment and could work from home. The Melbourne CBD was overrepresented by those who worked in hospitality, events, and tourism – the industries most impacted by the pandemic. Younger people closer to the CBD on lower salaries in shared houses were severely affected by COVID-19.
As a result of hardship, some real estate agents saw many young people decide they could not afford their current lease anymore, and they moved home with their parents or found a cheaper property to rent. Some renters’ hardship experiences prevented them from leaving their current housing arrangement and instead made reductions to their other living costs while continuing to pay rent.
Real estate agents praised the Consumer Affairs Victoria website as an excellent reference. Property Managers had been doing quite a bit of ongoing refresher training to ensure that they were up to date with what assistance is available for tenants, and the process for them to apply for rent reductions.
The forum highlighted an ongoing need for estate agents to be trained or educated, whether through REIV or Consumer Affairs Victoria, to access financial counselling services to help property owners and tenants.
Commissioner for Residential Tenancies Dr Heather Holst commented on the crucial role financial counsellors play in supporting tenants and maintaining a housing system that can withstand some shocks – as was seen during COVID-19. Dr Holst spoke about the emergency measures introduced in Victoria to reduce the impacts of the pandemic on renters, including the moratorium on evictions and the rent relief grants. Nearly 63,000 reduced rent agreements were registered with Consumer Affairs Victoria up to the 29th of November 2020.
Significant extra funding has gone to Tenants Victoria for outreach work and VCOSS, and some community legal centres. There is particular emphasis on reaching tenants in multicultural communities, including international students who were hard hit by the COVID emergency.
Dr Holst acknowledged the importance of the rent reduction agreements, rather than deferred rental payments which the Commissioner described as “a debt problem waiting to happen down the track”. People experiencing hardship are not likely to suddenly be able to pay once the repayment date falls due.
Looking ahead, Dr Holst spoke about the transition out of this situation and into the next phase of the reformed Residential Tenancies Act (RTAA) passed by parliament in 2018. The COVID emergency tenancy measures are expected to finish at the end of March 2021. It will be a challenging time transitioning away from a set of protections, but the Commissioner encouraged FCVic as the peak body to feed through frontline information from financial counsellors to her and others, including CAV, to assist future decision-making.
Gil King, CEO of REIV, shared a different perspective of the rental sector during the pandemic, and spoke about the experiences of property managers working at the frontline. He reflected on the initial challenges around the establishment of the rent relief grants, and what he described as “rent strikes” around metropolitan Melbourne, where tenants simply stopped paying their rent.
Mr King acknowledged the hard work of the Dispute Settlement Centre of Victoria, which managed to reduce a backlog of more than 1,000 disputes down to approximately 200-300 cases by the end of November 2020.
Mr King noted the difficulties that COVID-19 had created for the Victorian landlords who rely upon rent for their income. For mum and dad investors, many of them could not afford to provide rent relief. This was acknowledged by FCVic, and it was suggested that discussions take place with some of the major banks around how they can manage mortgage stress and hardship issues with the real estate industry. Financial counsellors are also supporting landlords who are overextended and vulnerable in cash terms because of mortgage obligations and impact of rent reductions.
The Small Business Wellbeing program (part of Partners in Wellbeing, funded by the Victorian Government) is a state-wide small business support service, providing a mix of psycho-social mental health support, financial counselling support, and business advisory supports to small businesses in Victoria. It is a free service, and the financial counsellors involved in the program are able to support small businesses owners, including landlords.
REIV sees property managers as the link between the two sides: tenants and landlords, and each side presents their own challenges. The property manager’s role has changed substantially over the last ten years, with the increased regulation and requirements, and jobs becoming more onerous. Any resources that are made available to property managers to help them in that space would be welcomed by the real estate industry.
There is a great need for a closer alignment between financial counsellors and the real estate industry. The concern expressed by REIV is that so much is pushed onto property managers and real estate agents, and they are not the experts about referrals in this space. The Forum concluded with an openness towards greater interaction in the future.