Experts decry 'grotesque' $688m construction stimulus as renters snubbed again

Housing policy researcher Chris Martin has been furious about the federal government’s response to the emerging rental crisis during the pandemic.

The eviction moratorium announced by the Prime Minister Scott Morrison in early April, the UNSW City Futures Research Centre researcher says, should have been the bare minimum.

With eight million renters in Australia, direction on how to negotiate a rent decrease for the potentially millions who had lost income was totally absent, and Mr Morrison insisted tenants would still have to pay rents on reduced incomes.

And now, as the burgeoning rental crisis fades from attention, the $688 million HomeBuilder scheme has been announced.

“It is grotesque,” Dr Martin says. “Public funds could be spent getting tradespeople to work on social housing – building new, or repairing old – to make assets that generate a public good over the long term.

“Instead they’ll be spent on making someone’s $750,000 reno a $775,000 reno. Grotesque.”

The new scheme is a $25,000 grant for those building a new home or making substantial renovations to their existing home, if the home isn’t worth more than $1.5 million.

The value of the renovation or building works need to be between $150,000 to $750,000 and the yearly income of the residents must not exceed $120,000 for singles and $200,000 for couples.

Across Australia, many renters feel abandoned. While the eviction ban gave some respite, others say a lack of leadership has left them with rental arrears a landlord is refusing to forgive, with the clock to eviction slowly ticking down. Barring an extension, eviction proceedings will begin again in NSW in less than a fortnight.

Melbourne renter Joshua Badge had a high-profile fight with his property manager and landlord, which played out on Twitter and ended with a rent reduction without any debt accruing. But he knows he’s one of the lucky ones.

“We’re not in the situation of the people who are going to be in a debt trap, who will be kicked out if they don’t pay their arrears,” he says. “It’s really clear the government solution has been to protect people with money and assets over everyone else.

“It’s lining the pockets of investors and landlords with public money.”

This situation is being described as a debt bomb by some. If JobKeeper ends and JobSeeker reverts to its lower level in September, it would only compound the problem.

Thousands could be kicked out, with rent debt and no way of finding a new home. But Treasurer Josh Frydenberg on Wednesday acknowledged that this could be an issue, and said the government would revisit JobKeeper in July.

“The way the government has responded to the situation has been deficient in a number of respects,” Mr Badge says. “The ban made sense because we needed to keep people healthy and safe in their own home. But it was never the broader solution.

“They threw in a half measure and left it at that.”

In Perth, renter and soon-to-be home owner Nikki Ravindran feels powerless as she moves to negotiate with her property managers.

She and her partner have been saving to buy a new home, and will have one built by a developer in about six months.

But her lease is almost up and she’s going to have to fight with her property manager to get a periodic agreement: they can’t afford to pay rent and their mortgage if the home is completed before the agency-standard 12-month lease is up.

Ms Ravindran lost all her income during the pandemic while her partner lost about half. She felt the lack of guidance on how to negotiate with landlords and property managers through the COVID-19 crisis has left her in a weak position.

“One hundred per cent,” she says. “I’ve seen it on the media and it’s always about home owners. We’re not home owners yet, so as renters we just don’t feel like we have any legs to stand on.

“If you’re renting, you’re on your own. We don’t have the government to help us.”

University of Sydney urban planner and policy analyst Nicole Gurran said cash for home owners was the easy path for the Coalition to take and was an extension of the status quo.

“I’m extremely disappointed that the first announcement about supporting the construction sector sends resources to home renovations that would have likely happened anyway,” she says. “I know the politics [tends towards] supporting comfortable home owners.

“Decades of Australian housing policy decisions have been made in a way that’s advantageous to home owners and property investors … at the expense of low-income renters, first-home buyers and the social and affordable housing sectors.”

Professor Gurran says the money would be better spent on improving the quality of private rental and low-income housing so residents wouldn’t freeze through winters and sweat through heatwaves, or defusing the debt bomb that could make thousands homeless in weeks.

“It’s such a lost opportunity. I’m so speechless, I’m so shocked and horrified by this,” she says. “To see money funnelled to people who have the resources to undertake major renovations right now is the final insult.”

Economists agreed the measures were questionable.

AMP Capital’s Shane Oliver says the thinking may be to ensure the viability of the construction industry so JobKeeper to tradies could be cut and therefore reduce the government’s bill for the program.

Mr Oliver says the government’s scheme could also depress home values, because it would discourage young people from buying existing homes and with immigration – Australia’s biggest driver of population growth – near zero, very few would be interested in buying older houses.

“You’d have to expect in the back of their minds to bring immigration back,” he says.

Industry Super Australia chief economist Stephen Anthony says politics aside, demand-side stimulus such as putting cash into the hand of renovators was poor policy.

“It doesn’t do anything on the supply side of the economy and what it does do is jack up prices and unimproved values,” he says.  “And a decade of loose monetary policy has made that worse.

“Now it’s all well and good for people with resources, but for everybody else, [the young] and key workers and people who do essential jobs, they’re totally priced out.”

Mr Anthony says providing funding to institutions to build lower cost housing would be a smarter policy because it would increase affordability over time.

Elsewhere, the policy has been panned by critics but cautiously welcomed by the housing industry. In academic circles, increasing the supply of social housing is considered the best long-term way to fix affordability and improve outcomes for poorer Australians.

Apart from the eviction ban, the Prime Minister’s contribution to a solution to the rental crisis has been suggesting landlords and tenants should work together to find a resolution that worked for both parties, and that the eviction ban “doesn’t mean there’s a moratorium on rents”.

The issue was left unresolved by the national cabinet, and cast to the states and territories to separately find a solution. Some still have not introduced any measures, including a ban on evictions.

“I think, ultimately, no-one should have to play chicken with their landlord to get a rent reduction in what is still a pandemic situation,” Dr Martin says. “And there should not be any confusion that people in hardship will get their rent reduced – not merely deferred.

“I remain of the view that the better approach would be a mandated rent reduction that shared the costs of the pandemic recession.”

This left the door open for landlords to ask for the deferral of rents, which the head of the Real Estate Institute of Australia says isn’t tenable.

President Adrian Kelly told Domain in April he didn’t support deferrals, because those who couldn’t afford rent could struggle with the debt later.

“I have a personal view that if a tenant can’t pay the rent and they get to the end of the six months and they have a large debt, I don’t think that will be able to be dealt with in a practical way,” he said at the time.

“The last thing we want to see is a tenant or a property owner who has lost employment with children and a family to feed is for them to come out of this crisis with a really bad financial situation.”

Mr Kelly reiterated those comments on Thursday.

“Nothing’s changed,” he says. “Exactly how it’s going to play out is a part of the problem.”

Dr Martin says this expectation that tenants should continue to pay their rent, even though they had lost some or most of their income, demonstrated a sense of entitlement, especially considering landlords were statistically much better off than renters.

“By insisting on continued rent payments out of individual tenants’ reduced incomes, or the public purse, or out of their super – at least until ASIC warned them off that – they are selfishly putting themselves ahead of really precarious households,” he says. “The situation is unjust and tenants are right to be angry about it.”

The Queensland government alone initially planned to ban rent debt in its support package but rescinded it after coming under fierce lobbying from landlord and agent groups.

“In public statements by the [some] Real Estate Institutes, it is clear that in negotiations over rents, agents are pushing hard for mere deferrals, not real reductions,” Dr Martin says. “So while tenants’ lost wages are gone for good, many landlords are insisting that their rent is not gone for good – it’s going to come back after the moratorium.

“A rent deferral is a time bomb for individual tenants, and if it is happening on a wide scale there is a looming problem for the sector and for governments.”