Hardship tenancy support must also protect landlords
EARLIER this week, Prime Minister Scott Morrison released a statement that speaks to providing protective measures for residential and commercial renters over the next six months.
The Prime Minister said that just as the banks and Government have had to shoulder costs on their balance sheets, so too will landlords.
The Real Estate Institute of Queensland (REIQ) strongly challenges the inference that the implications of such measures on residential landlords would in any way reflect the implications to multibillion-dollar companies and Governments.
If the Prime Minister’s statement is accurate, he is asking over two million Australians to cover $9516 each (on average) of unpaid rent over the next six months.
With the average property investor earning less than $80,000 pa, this represents more than 30 per cent of their annual take-home pay during those six months.
In fact, with the average employed renter earning $77,761 pa, they are in the same income bracket as the average property investor and are both equally at risk of losing their job as a result of the coronavirus (COVID-19).
With household budgets already stretched through hikes in private health costs and day-to-day living, these mum and dad investors may have no other option but to default on their loans.
With investment loans representing around 35 per cent of lending on the balance sheets of the banks, any leniency on the payment of rent without the exact same leniency for payment of mortgage will not just decimate the credit rating of investors but that of our banks and in turn, our country as it will lead to record defaults.
Furthermore, it would likely:
1. Bankrupt mum and dad investors;
2. Undermine the strength of our local banking system;
3. Lead to further job losses; and,
4. Decrease the number of homes available to rent as landlords are forced to sell or are foreclosed.
It’s not enough to just defer a landlord’s mortgage obligations as the banks have done with small business loans.
“The rise in property prices we’ve seen in the last few years have not been matched by wage increases, so by removing mum and dad investors’ rental income for any period must correspond with the subsequent waiver of their mortgage obligations for that same period for any protective measures to be sustainable,” says Antonia Mercorella, CEO of The REIQ.
“We welcome measures that support the safety and stability of housing for all Australians and urge the Government to consider the downstream effects of any direct action they take with regard to tenancies. Any relief in hardship conditions should also include protections for landlords.”