What can we learn from our tenants?

Just this month, the Commissioner for Residential Tenancies in Victoria released our first report, titled Renting in Victoria: Snapshot 2020. The report is not only a great snapshot of current rental statistics, it’s a valuable clue to some serious issues and a wonderful resource for landlords and agents to be better in this space.

The report is jam-packed with many, interesting collated facts in a very easy-to-read format. I’ve absorbed it and distilled some of the information that speaks volumes about our rental market and some of the inefficiencies our public system tackles on a daily basis.

The first fact that surprised me relates to the household sizes represented by renters. One person households are the highest proportion.

This fact begs us to consider the vulnerability of this segment.

The second fact relates to property investors and their relative experience as landlords. Many people assume that landlords are nasty, rich individuals with limited care for those who reside in their properties. While the number of multi-property owners is growing, an enormous proportion of landlords are represented by one-investment-property investors.

Not only does this suggest that their experience in navigating property challenges is probably limited, but they are more likely to rely on a managing agent for support, knowledge and instruction.

…which leads me to the next point.

Professionally managed rental properties only account for 67% of all private rentals – leaving a residual of 33%. This suggests that one third of landlords don’t see value in paying a professional to manage their property.

In fairness to this contingent, there are plenty of lousy property managers out there.

I always wonder why, when I call an agency for a property manager, so many receptionists ask me if I’m a tenant or a landlord.

How is that relevant?

The subconscious behaviours, and existence of bad culture in so many real estate businesses cannot be under-estimated.

These next points from the report highlight a common issue that is not surprising. Far too many landlords shun their responsibility as property owners and landlords when they resist maintaining and servicing their property. Little do they realise the problems that this attitude can exacerbate;

• Disgruntled tenants who struggle to respect a property that the owner doesn’t seem to respect,
• Further degradation of the property as a result of a small issue being left unattended,
• A tribunal hearing that could have been avoided by adopting some common sense,
• A property manager who feels frustrated by their lack of care,
• A limitation to rental expectation based on the condition of the property,
• A significant expense or claim for overpayment of rent if a tenant wins a case against them in the tribunal.

Sadly, many of the findings in the report centred around a sense of disregard or disrespect.

However, there are some incredibly passionate, thoughtful property managers out there who do an amazing job. A recent interview with Hayley Mitchell of Geelong Property Managers revealed how grateful to her tenants this amazing property manager is. She prepares hampers for her tenants each Christmas. Another local property management firm, Judge Realty has recently collaborated with a health service provider and has launched a mental health support service for his clients.

In my experience, the best property managers are those who are integrated within the whole business, included as a valuable segment of the real estate business, and/or are personal stakeholders in the success of the tenant/landlord/agency relationship.

The businesses that sideline property management away from the sales function of the business are missing the whole point of successfully offering an important service.

When it comes to evictions, some of the following statistics are quite startling and highlight just how bottle-necked our tribunal system is.

In 19 out of 20 cases, “At Fault” eviction applications that proceeded to a hearing were due to non-payment of rent. Surely we can address this issue more effectively than clogging up VCAT?

And inversely, when landlords have exercised their right to evict a tenant under any of these ‘No Fault’ clauses, nearly a quarter have resulted in a hearing.

This means that the tenant has felt strongly enough about the notice to vacate that they have pushed for a hearing.

Surely a solution could have been brokered for some of these tenants? Whether it be a helpful property manager who quickly finds an alternative property for them, or a thoughtful chat with the owner to see if the vacate date could flex around the tenants’ needs?

Some of the best tenant-landlord experiences I’ve had over the years have been strengthened by a considerate property manager who thinks proactively about balancing both the landlord’s and tenant’s needs.

This fact was interesting and it led me to think about some of the reasons why bonds seem to have increased for many leasing arrangements.

A very common reason is “pet bonds”. Plenty of property managers incorporate a higher bond arrangement into the lease in an effort to give landlords an assurance that pet related damage will be covered. This type of approach is not entirely permitted, but it does seem to happen a lot.

The tenure of a renter’s stay is intriguing. For all of the tenants who have clocked up years, (and even decades) in their homes, this chart shows that there are plenty of short tenures too. The median, (mid data point) tenure of just over a year and a half means that many households are packing boxes and moving from property to property.

An important consideration for investors, and a very pertinent topic right now is vacancy rates. Prior to COVID, our Melbourne vacancy rates were reasonably tight by any measure, and regional rates even more so.

Since COVID, our city vacancy rates have spiked, but even now they aren’t at the same levels as the early 2000’s.

A hot topic has also related to rent reductions and the concerns that many aspiring investors have had during the eviction moratorium initiated by our State Government in response to COVID-19 and tenants’ inability to meet their rental payment obligations.

As this chart below shows, the percentage share of leases discounted is relatively tight. While it’s impacted some landlords harshly, the broader impact has been far less than initially feared.

Like many things, COVID-19 has put a spotlight on our need to look at housing and the provision of our service in this segment of our industry.

How can we do things better?

Engage Victoria and the Department of Justice and Community Safety have developed a website and also invite people to share their renting story.