The onset of the COVID-19 pandemic impacted the financial stability of a large number of NSW renters, all at once, threatening a wave of potential evictions. In response, the NSW Government introduced a range of protections and supports for renting households, including at various times freezes on evictions and frameworks for rent reductions. While these protections were in many ways inadequate, the fact that there was broad community support for government intervention to sustain tenancies tells us several things.
- The community understands that evictions are harmful, and should be prevented where possible.
- It is both possible and beneficial for the NSW Government to intervene to support renting households to sustain tenancies through periods of crisis and financial hardship.
- Our existing tenancy laws are lacking in the protections they provide to renting households in periods of crisis.
NSW tenancy law as it stands is not crisis-resilient. What changes are needed to make our renting system more crisis-resilient?
Shifting when we intervene in crisis
Why is it only when society-wide crises occur that renting households are provided with support to sustain tenancies? Crises such as job loss, injury or illness, marital breakdown, death of a spouse, and many more, can be as destabilising to individual households as the COVID-19 pandemic. Crises such as bushfires, floods, and storms can disrupt entire communities or regions similarly and will only get worse and more frequent as climate change progresses. If we can acknowledge eviction as the traumatic, costly and destabilising event that it is, then we should work to build a renting system that is set up permanently to support renters sustain their tenancies through periods of crisis, whatever that crisis may be.
Shifting how we intervene in crisis
Adequate government investment into social housing would go a long way to improving the circumstances of renters across the board. Not only would the close to 50,000 renting households on the waiting list be able to access secure housing, but a strong social housing stock would also help put downward pressure on rent prices and upward pressure on standards, in the private rental market.
But beyond that much-needed investment, there are some changes that could be made to NSW tenancy law, to ensure the renting system provides adequate support for households in crisis and financial hardship. We need support for households temporarily unable to pay rent, not eviction.
At the moment, when a renting household experiences a crisis and struggles to pay rent, more often than not the first and only tool reached for is a termination notice. If the renter is ultimately forced to move, that leads to significant costs to all parties involved and to the broader community. If they scramble to pay off their arrears, that might look like taking out a loan, increasing their credit card debt, or forgoing paying other bills - all of which can compound the renter’s financial hardship and cause immense stress.
But what if there were an alternative — a different way to engage with a renting household in crisis and support them through that crisis, rather than force them out of their home and further into hardship?
During much of the COVID-19 pandemic, the moratorium frameworks introduced as emergency measures specifically for the pandemic — encouraged landlords to reduce rents for impacted households , acknowledging that many renting households would be facing financial hardship as a result of the health crisis and would be unable to afford their rent. In many other sectors (e.g. banking, telecommunications, utilities and more) frameworks for addressing ‘hardship’ already existed. They are a permanent feature of provision of service, and are generally governed either through industry Codes of Practice, or by law or other regulation. Why isn’t there a similar permanent hardship framework built into our renting system?
A permanent hardship framework for renters experiencing crisis
Imagine a system where, if a renter experiences a crisis like illness or injury, marital breakdown, death in the family, job loss, or a natural disaster, and their financial circumstances suffer as a result, they are able to request a period of rent variation to allow them to get back on their feet, rather than being forced to leave their home. It’s worth noting that renters who are evicted for breach for arrears are at a much higher risk of eviction into homelessness, and the costs associated with such an eviction are substantially higher. In all cases, the harm and trauma of the crisis for the renting household is compounded by an eviction.
In our recent report, Eviction, Hardship and the Housing Crisis, we propose a permanent hardship framework for renters should include the following elements:
- Provisions for temporary rent variation (rent reduction) in circumstances of hardship
- A mandated minimum rent variation (rent reduction)
- A rent relief hardship fund to offset the costs of a mandated rent variation
- Appropriate restrictions on eviction for renters experiencing hardship
- Eligibility criteria that recognises the range of circumstance in which hardship variation should appropriately be applied
- Easy access to hardship provisions, with prescribed timeframes for determining and applying a hardship rent variation
- Resourced advocacy and other relevant supports, including e.g. independent advice for renters, and access to a financial counsellor as part of the process
“But what about the landlord?”
How would the introduction of a permanent hardship framework impact landlords?
In the report we look at a few options that could be explored to make sure landlords don’t themselves end up in financial hardship as a result of complying with an obligation to provide a rent reduction to a renter in crisis.
There are a few different ways in which relief could be provided. We outline a few options in the report.
Direct government funding of rent relief
Rent relief for landlords who pass this on to residents in hardship. This option is essentially the model implemented during the moratoriums. During the 2020 moratorium eligible landlords could claim relief via a discount on land tax. However, a majority of NSW landlords were ineligible as they don’t pay land tax. During the 2021 moratorium the NSW Government provided relief through the Residential Tenancy Support Package. Up to $4,500 per tenancy was made available to landlords to pass this on as a rent reduction to their tenants. The NSW Government could fund a similar permanent landlord ‘rent relief’ fund to allow landlords who have varied rent due to legal obligations relating to hardship to apply for reimbursement for reduced rent up to a certain amount per tenancy.
A mandatory landlord insurance scheme, with essential coverage for hardship variations
Many professions require insurance: lawyers and doctors both need insurance to practice, so that they’re protected if something goes wrong. Businesses require insurance to function. Why shouldn’t landlords have to have insurance in order to rent out a home? If landlord insurance was mandatory, and it was compulsory for landlord insurance providers to cover cases of rent reduction due to renter hardship, landlords would be able to simply make a claim on their insurance if their tenant is eligible for hardship protections and the landlord is required to provide a rent reduction.
A mandatory bond scheme for landlords
Renters pay a bond to cover any potential damage to the property when they enter into a tenancy agreement. Why not also mandate that landlords pay a bond too? When renters pay bonds, they’re paid into the NSW Rental Bond Board (Bond Board). The Bond Board already acts as an independent custodian of tenants bonds, and the bond money held generates significant revenue — around $60 million annually. This is used by the NSW government to fund a range of tenancy related services (including, in part, the Tenants’ Union!). Interest generated by the addition of landlord bonds could help fund a rent relief fund (as outlined at 1). This would allow the landlord to apply for relief (or reimbursement) for all, or at least part depending on the model adopted, of any rent reduction provided in line with new hardship obligations introduced in a permanent hardship framework.
There are other benefits of landlord bonds, too. Many people who rent have at some point or another needed repairs to be made, and struggled to get a response from their landlord, or have been told “sorry, the landlord just can’t afford it right now”. Agents are often put in the tricky situation of trying to mediate between tenant and landlord in such circumstances. If landlords had to pay a bond at the beginning of each tenancy, mechanisms could be put into place to allow agents to access those funds to arrange for repairs, where the landlord is uncontactable, or simply prefers not to have to be hassled.
What would this look like in practice?
We outline a number of different models in the report (and this blog), but what would the framework actually look like in practice? Let’s assume a permanent framework is adopted with mandated rent variation (reduction), and that like the 2021 NSW moratorium relief of up to $4,500 per tenancy if provided to landlords — facilitated by direct government funding of the relief fund from existing funds, or from revenue generated from the introduction of a landlord bond scheme. From the perspective of a renter in crisis this might be what the process would look like:
- I’ve badly injured my back and can’t work my hospo job for the next 12 weeks. I live alone, and my rent is the median Sydney rent for a one-bedroom apartment, $450 per week.
- I contact my landlord or agent to let them know of the circumstances and request a rent waiver for the 12 weeks I am unable to work. This will allow me to meet my other needs using my savings, and prevent me from falling into debt.
- The landlord or agent asks me for some basic evidence, and then counter-offers a 50% reduction over the 12 weeks. I point out that I’ve checked and I’m eligible for protections under the new introduced hardship framework within tenancy laws. The framework requires (mandates) a minimum rent variation. But with the $4,500 subsidy available via the government’s rent relief scheme, if we agree to an arrangement of 4 weeks at 50% rent, followed by an 8-week total rent waiver, the landlord will be able to be reimbursed for 100% of the lost rent. We agree to this arrangement.
- From the time I make the request until the period of the hardship arrangement comes to an end, there are restrictions on the landlord’s ability to evict me for breach for arrears but also restrictions against ‘no grounds’ eviction. This means I can stay safe at home through the period of crisis I’m experiencing..
- As I’ve been provided leeway through the period of crisis, I’ve avoided either the costs associated with eviction, or the potential financial blowout of struggling to pay rent and making financially unsustainable choices like taking out loans, not paying other bills, or forgoing expensive medical treatment.
- Once the hardship variation period comes to an end (e.g. 12 weeks), I’m able to go back to work and go back to paying my rent as usual - and the landlord and agent haven’t had to go through the costly process of formally evicting me and finding a new tenant.
This is just one example of what a hardship framework could look like — there are a range of ways a hardship framework for NSW renters could be helpfully implemented.
Building a crisis-resilient renting system
It’s in everyone’s interests for the NSW renting system to become crisis-resilient. Replacing eviction with common-sense and compassionate alternatives will reduce evictions and by extension the substantial costs to all parties that are associated with eviction. As we emerge from 2 years of the COVID-19 pandemic, let’s take this opportunity, take our learnings of the past couple of years, and build a fairer NSW renting system that is better equipped to support people through crisis.
For more detail on the proposals regarding a permanent hardship framework, read our short policy briefing or download the full report: Eviction, Hardship and the Housing Crisis.