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6 arguments against relaxing rental payments

6 arguments against relaxing rental payments

by Grace Ormsby | March 27, 2020 | 1 minute read

An industry body has hit back at the “fundamentally flawed” notion that the NSW government could legislate to remove the obligation of tenants to pay their rent.

rental payments
rental payments
by Grace Ormsby
March 27, 2020

Amid a number of business shutdowns caused by the COVID-19 pandemic, and a very real economic downturn, the Real Estate Institute of New South Wales (REINSW) has indicated that it holds a real fear that the state government will soon not require tenants to pay rent.

Calling it a “concept fundamentally flawed”, REINSW CEO Tim McKibbin said the removal of such an obligation “merely transfers the difficult financial circumstances of the tenant to the landlord”.

The institute has provided six arguments as to why the government should not consider such a step:

1. Landlords have expenses

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Citing rates, water, strata fees, maintenance and mortgage repayments, the REINSW has argued that if landlords are required to absorb these expenses, “then effectively the government is asking the landlord to provide social housing”.

2. Mortgage holidays not all that attractive

Despite the idea of banks providing mortgage holders with a loan repayment holiday, the institute has knocked back the idea.

It has argued that while it sounds attractive in theory, “the landlord is still paying interest on the loan, and that is compounding each month, paying interest on the interest charged”.

“There is nothing free being offered by the banks,” the REINSW said.

3. Opportunistic way for renters to avoid obligations

The real estate body has argued that when the opportunity to avoid paying rent is made available, “some tenants who do not require assistance may see the opportunity to avoid their contractual obligations”.

“It is difficult to see how a process to expeditiously assess and assist the needy while avoiding the opportunist [could work],” it considered.

4. Landlord wealth is a ‘fallacy’

The REINSW has highlighted that four-fifths of landlords own just one property.

“That property is typically mortgaged and the landlord is either making loan repayments, or alternatively, the property is owned by a retiree who depends on the income for their expenses,” it stated.

“By removing the requirement to pay rent, it puts the landlord in financial stress.”

The REINSW has instead highlighted a need for the government to assist and enable tenants to pay their rent.

5. Cash flow would be better

According to the institute, a better solution than removing the onus of tenants to pay rent would be for the federal government to provide tenants with assistance to pay the rent.

It argued that this would allow the money to move and keep the economy active, citing the flow of money as “the lifeblood of all economies”.

6. What about the landlord?

Finally, the REINSW said that implementing a policy whereby tenants were granted the right not to pay rent “erroneously assumes that the landlord has not lost their job!”

6 arguments against relaxing rental payments
rental payments
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