What you need to know about rent bidding

Right now, a rental crisis is unfolding across much of regional NSW.  With so few properties available to rent across many parts of the state, there are often dozens if not hundreds of applicants for every property, and renters are becoming desperate to find a home. We are hearing directly from renters, as well as from regional Tenant Advocacy Services that some agents and landlords are taking the opportunity presented by such a 'tight market' to encourage 'rent bidding' to maximise income and exploit renters. Renters, for their part, are using everything they have, from offering a higher rent ('rent bidding'), to months of rent in advance, to even using businesses to represent them in their application. We're very concerned about an increase in 'rent bidding', and the role agents and landlords are playing in encouraging it.

What is rent bidding?

'Rent bidding' or a 'rent auction' generally happens when there’s a shortage of available rental properties. Applicants for a property compete against each other, and are encouraged to make an offer to pay rent above the advertised price in order to secure a property. Now, we don’t blame renters for this. There are a number of factors that can force renters into a situation where they see no alternative but to offer a higher rent when applying for a property (to 'rent bid'). For instance, a person with a physical disability in a regional area may already face issues finding a disability-accessible rental property. The number of appropriate properties may already be quite small, and in the context of the current rental crisis there are only one or two properties available that meet the person’s needs. They may feel so desperate to secure this property they offer above the asking price to ensure their application is considered, regardless of whether they actually have the means to pay the higher rent.

Similarly, renters who experience discrimination in the private rental market – such as LGBTI+ households, Aboriginal and Torres Strait Islander households, single mothers, households with pets, and more – may feel additional pressure to rent bid. Discrimination is a widespread problem in the private rental sector and is most obvious at the point of applying for housing. Renters who regularly experience discrimination may be more inclined to offer above the rental asking price out of a desire to counteract the additional barriers they already face when applying for properties.

We understand the circumstances that can drive renting households to offer a higher price, but we don’t think allowing rent bidding to flourish is in the best interests of renting households. By engaging in rent bidding, many households may find themselves locked into rental contracts that are actually unaffordable. More broadly the more widespread this practice becomes, the greater the impact on the rental market. Rent bidding puts direct upward pressure on rent prices, which hurts all renting households.

That being said, banning renters from rent bidding alone is not the only answer – all this would accomplish is the punishment of many desperate households and move the pressure to some other way to "stand out" like offering rent in advance. The blame for the problem lies with a rental market in crisis, and with agents and landlords engaging in unethical and unlawful behaviour by seeking to capitalise on this.

Rental crisis across regional NSW

Many areas of regional NSW are experiencing unprecedented low vacancy rates as a result of the COVID-19 pandemic. The Real Estate Institute of NSW April 2021 vacancy rate survey saw continuing drops in the vacancy rates across much of regional NSW, including Albury, the Central Coast, Coffs Harbour, New England and the South Coast. We analysed vacancy rate data available through SQM Research, across a range of postcodes in the Greater Sydney area and in regional NSW, from January 2020 to April 2021, to see how COVID-19 has impacted vacancy rates across the state. There is a clear and growing disparity between vacancy rates in Greater Sydney and regional NSW. Much of regional NSW is in dire straits.

These numbers and figures have a very real human cost. Many renters facing eviction are struggling to find alternative accommodation and are extremely concerned about homelessness. Renters are reporting numerous unsuccessful applications and no available properties in the area left to apply for. Local Tenants’ Advice and Advocacy Services have seen a dramatic increase in the number of tenants calling them for advice about what to do if they can’t find alternative housing. Many tenants are worried once an order to vacate is made they’ll be forced to move in with family or friends, sleep in their car, or worse.

In the context of these 'tight markets' we're aware there has been an increase in the number of real estate agents and landlords actively soliciting rent bidding from prospective tenants. An agent may respond to a prospective tenant who has applied for a property asking whether they would be willing to offer a higher rent in order to make their application more competitive, or tell the prospective tenant that another person has sent in an application offering above the asking price and offer them the opportunity "to match or beat the price". We have been provided with a number of screenshots of correspondence from agents pre-emptively encouraging prospective tenants to offer a higher rent if they wish to be successful in their applications. In our view, this is deeply unethical conduct, that in the worst case preys on a renting households’ genuine fear of becoming homeless. It is also - almost always - unlawful.

We are also seeing high rates of properties in regional areas being advertised without a price listed, or listing “offers above $X”, “price on application”, or listing a price range. For us, this is a strong indication that agents and landlords may be actively encouraging rent bidding among prospective tenants. Our analysis of the two main property sites, Domain and RealEstate.com, for advertised rental properties across various regional parts of NSW in May of 2021 found worryingly high rates of ambiguously listed rental properties. For instance, of the 811 advertised rental properties in South Coast & Illawarra on Domain, 74 listed no price and 165 listed a price range. That’s over 20% of all advertised properties in the area. In the Northern Rivers, we found 11% of advertised properties either listed no price or a price range; in the Central Coast, 8% and in Broken Hill, 9%.

So while this behaviour on the part of landlords and agents is clearly unethical, why do we say it is unlawful?

Rules around rent bidding in NSW vs other jurisdictions

There is no explicit prohibition on rent bidding built into NSW tenancy law, as there is in both Victoria and Queensland. However, the solicitation of rent bidding on the part of real estate agents violates the Property and Stock Agents Regulation 2014, the Real Estate Institute of NSW Code of Practice. It is also a breach of Australian Consumer Law, which also covers agents and we'd also argue all landlords. See below for the relevant sections of the Regulation and the Code which apply in NSW, as well as what the rules say in Victoria and Queensland.

NSW

Property and Stock Agents Regulation 2014

3. Honesty, fairness and professionalism

(1) An agent must act honestly, fairly and professionally with all parties in a transaction.

(2) An agent must not mislead or deceive any parties in negotiations or a transaction.

Real Estate Institute of NSW Code of Practice

(Note: this Code of Practice only applies to members of the Real Estate Institute of NSW, which is not every agent, and may not even be a majority of agents.)

Fair Conduct

2.7 A member must act fairly and honestly and to the best of his or her knowledge and ability with all parties in a transaction.

2.7.1 A member must not mislead or deceive any parties in negotiations or a transaction

VIC

Under the new rental laws, a rental provider (landlord) or agent must only offer a property for rent at a fixed price. Any advertisement or offer of a property for rent must include a fixed price, and it is unlawful to:

• advertise a property for rent with a price range

• request or solicit bids for rent.

Rental providers and real estate agents must not ask for or invite offers of rent higher than the advertised price. But they can accept a higher, unprompted offer made by a prospective renter.

QLD

Rent bidding is illegal. A rental property must be advertised at a fixed price; failing to do so is an offence. A property manager/owner must not:

• advertise a rent range

• put a property up for rent auction

• ask for offers

However, a prospective tenant can offer more than the amount advertised and the property manager/owner may accept their offer.

A tenant who believes a property manager/owner has induced them into a rent auction may contact the Residential Tenancies Authority (RTA). If the property manager/owner has engaged in deceptive or misleading behaviour the RTA may refer the complaint to the Office of Fair Trading or the Australian Competition and Consumer Commission.

Australian Consumer Law

Section 18 of the Australian Consumer Law says that a person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.

When an agent solicits a higher rent, in most cases this violates the requirements within the Property and Stock Agents Regulation 2014 that agents must act honestly and fairly, and not mislead or deceive any parties in negotiations or a transaction. It also violates Real Estate Institute of NSW Code of Practice rule that agents must act honestly, and must not mislead or deceive any parties. For both agents and landlords rent bidding is a breach of the Australian Consumer Law. If an agent advertises a property at a particular price, but then encourages prospective tenants to offer higher amounts in their applications for the property, this is dishonest and deceptive. Similarly if they falsely represent that a higher offer has been made by another applicant. The agent is advertising a property for a price that they know they actually will not accept, or prompting a higher offer on the basis of misleading information.

If you believe an agent or landlord has encouraged or solicited rent bidding during an application or viewing you have been involved in, you should consider reporting them to Fair Trading via their complaints page. You'll need to provide some evidence of how their conduct was misleading and deceptive. Fair Trading can remind them of the enforceable professional rules of conduct they are expected - and required - to adhere to, and look at potential penalties if they do not change. Businesses that receive 10 complaints in a month are listed on the public register, but businesses with just 6 complaints over 6 months are assigned an officer from Fair Trading to monitor their compliance more actively. Of course, as a renter, especially in a regional area, if you have not yet locked in a new property you may have to first consider if reporting this behaviour to Fair Trading will have any consequences for the success of your future applications.

If you have experienced an agent or landlord soliciting or encouraging rent bidding, please contact the Tenants' Union to tell us about it as we are intending to raise this issue with Fair Trading.

What needs to change?

In NSW we think it would be useful to introduce provisions in our tenancy law - like those they have in Victoria and Queensland - that would allow landlords only to advertise or offer rental properties at a fixed price, and ban them from inviting rental bids or soliciting offers of rent higher than the advertised price.

There are a range of other changes that, if introduced, would also curb rent bidding. For instance, strengthening minimum accessibility standards for rental housing would create more options for people with physical disabilities. Standardising rental application processes, in particular prohibiting some of the invasive and inappropriate questions that some applications currently ask, can address discrimination. Both of these changes could alleviate the pressure for renters to offer higher rents in order to secure a property.

However, for as long as the rental crisis continues, people who are desperate for a home will likely continue to do whatever it takes to secure housing, including possibly resorting to rent bidding. The only way to properly address this is to increase the available stock of genuinely affordable housing across NSW. A significant increase to social housing stock would provide positive pressure on market housing by alleviating the pressure on the private rental sector. This could possibly introduce real competition and higher standards - effectively challenge the private market to do better especially in terms of housing available for low- and moderate-income households. 

The current problem of 'rent bidding' in regional NSW is yet another symptom of a failing housing system. Left unchecked it will simply push more renters out of the market and into inappropriate or unsafe housing arrangements, or homelessness.