Why landlords shouldn’t be forced to bear the cost of a recession alone

Degraves Street

Pedestrians walk in Degraves Street in Melbourne. Source: AAP Image/Julian Smith.

Last week, a self-employed colleague was told that he was no longer required.

In addition to his current home, my colleague has two rental properties.

The first rental property is a larger home which he purchased last year with the intent of moving the family. In the meantime, while he had renovation plans drawn up and obtained council approval, he rented the property out.

With a sizable mortgage, he’s desperately hoping that his tenant continues to pay the rent.

The second rental property is a commercial office which he doesn’t actually own.

A couple of years ago, he leased the property as part of a larger business plan which didn’t come to fruition. He did the only sensible thing available to him and sub-leased the building to a tech company.

This week he received a letter from his sub-lessee advising that they wanted to terminate the lease — leaving him high and dry.

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My mother is a self-funded retiree. Over the years, she and her husband have staunchly refused to accept any form of government assistance, proudly preferring to live on a modest self-funded basis.

Last year her husband died, but with one or two rental properties I was confident that she would be OK.

She is completely reliant on her rental income, and if her tenants fail to pay, she will be forced to break the habit of a lifetime and turn to the government for assistance.

– – – – – – – – – –

This week is my last week of self-employed income, and my wife has been unable to find work.

In order to mitigate the highs and lows of self-employment we have worked away over the years on a back-up plan: you guessed it, property!

For the foreseeable future, we are very heavily reliant on rental income. Of course, trouble always comes in threes, and last week was no exception.

A few days ago, we received an email from the Strata manager telling us that we needed to pay $9,000 by the end of the month for roof repairs (asbestos removal is expensive)!

Landlords are ordinary people too

The current popular narrative that landlords are fabulously wealthy plutocrats, who delight in exploiting the downtrodden while remaining immune from life’s vicissitudes is a fiction.

The above stories are in fact typical of many, if not most, landlords.

Most landlords are ordinary people with ordinary vocations, who have simply sought to provide for themselves and their families by investing in Australia’s favourite asset class.  Many have borrowed money, while others rely on their properties to provide them with incomes on which to live.

The federal government’s efforts to make landlords the whipping boy has the potential to backfire massively: think bankruptcies, a massive property price collapse, followed by many more bankruptcies.

The government’s dishonesty is revealed in the fact the government is not insisting the banks forego their interest payments, while landlords are expected to both pay the banks and provide a free ride to tenants.

A pandemic is serious, with serious consequences from which none of us is immune.

But is it serious enough that we as a society are prepared to tear up our legal system rendering contracts valueless?

With such a decision, Australia rapidly becomes a high-risk sovereign nation in which no one is prepared to invest — a situation which inevitably means that those at the bottom suffer the greatest.

NOW READ: Kmart consolidation, local first and goodbye cash: What retail could look like when the recession has passed

NOW READ: Will COVID-19 crash our property markets?

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