Auction-style tenders lead to fierce competition among tenants

Tenant’s Union of NSW CEO Leo Patterson Ross said tenants felt exposed to the gap.

“The new law was effective but not definitive,” he said. “It’s really solidifying an auction-like approach that’s quite alien to how we handle other essential services.”

Allowing landlords to accept higher rent offers, Ross said, is “playing on people’s desperation.”

According to the Reserve Bank of Australia, asking rents have risen 9.6 per cent in capital cities and 10.3 per cent in regional areas in the two years to December 2022.

NSW Fair Trading announced this month that it would escalate its enforcement approach to rent bid requirements by screening online listings and attending fined open houses on site.

It said it had reviewed 12,000 online ads since December and found about 1,000 to be in violation of the law. More than 300 agents received “education letters” although no fines were imposed.

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In NSW, a landlord cannot increase the rent more than once a year for those with fixed-term leases of two years or more, or for those with ongoing leases.

But rent-adding laws don’t stop landlords from raising rents to keep up with interest-rate hikes.

And for those with fixed-term leases of less than two years, a landlord can increase the rent if the contract specifies the increased amount or how the increase is calculated.

“Some people [on six-month leases] see fairly rapid rate increases. Before, they probably would have left, but now they don’t really have the opportunity to do so,” Ross said.

The Australian government doesn’t collect data on the type of lease, but a 2018 report by consumer advocacy group Choice found that 8 per cent of renters in NSW were on a fixed-term lease of six months or less.

Queensland had the highest rate of short-term leases at 12 percent. Almost 9 in 10 Australians who rented in 2018 had a lease of a year or less.

Impact Economics and Policy lead economist Angela Jackson said rising home prices meant there would be a whole generation of renters.

“For those who do not earn above average and do not have a significant inheritance or estate, it will be impossible to enter the housing market,” she said. “They have to rent their whole lives.”

The latest census showed that the homeownership rate fell from 70 percent in 2006 to 67 percent in 2021. Rates have fallen more sharply among young people – while 64 percent of 30-34 year olds owned their own home in 1971, that has fallen to just 50 percent in 2021.

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But the home ownership rate among 50- to 54-year-olds has also fallen, from 80 percent in 1996 to 72 percent in 2021.

And things aren’t getting any easier for inner-city renters any time soon, Jackson said.

“[In the past year] Vacancy rates went down, markets started to grow very quickly and that will be reflected in inflation,” she said.

“Rent or mortgage payments make up the largest part of the household budget. If costs rise, it will hit hard and will put a number of households under significant financial pressure.”

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