As Australia endures another wave of COVID-19 lockdowns, the ACT Government’s landlord land tax credit scheme has been extended until 30 September, but many mum and dad investors are not taking up the offer.
Real Estate Institute ACT CEO Michelle Tynan says the land tax credit model is not working and is leaving some small investors carrying the financial load, while others are choosing to get out while the property market is hot.
Since 1 April 2020, the government has provided a land tax credit to landlords of residential properties who have reduced rents by at least 25 per cent for tenants impacted by COVID-19.
The credit is equal to 50 per cent of the rent reduction, capped at $1300 per quarter, which equates to around $100 per week.
The scheme planned to save struggling tenants around $200 per week; however, Ms Tynan said the offer was rejected by many landlords who could not afford to reduce the rent on their investment properties.
“The scheme was a bit clunky,” she said.
“With the current COVID-19 situation, I think it’s time to look at other measures to see how we can better maintain that tenancy without expecting landlords to keep carrying those debts.”
Ms Tynan said the current complicated scheme was “a road to disaster for landlords” who are also feeling the effects of COVID-19.
She says, while the ACT has fewer renters requiring assistance than other Australian states, there has to be “a more viable way to keep people in their homes”.
“COVID-19 rent assistance schemes in other states paid the rent shortfall directly to landlords rather than having landlords now holding debts that could take years to get back,” Ms Tynan added.
With the current booming market, some mum and dad landlords are taking the opportunity to sell their investment properties, many of which are being snapped up by first-home buyers, taking more rental properties out of the marketplace.
“Around 72 per cent of investors in the ACT are mum and dad investors with one property, who rely on the rental income to pay their mortgage,” Ms Tynan said.
“A lot of that 72 per cent are self-employed or tradies, and this is their self-funded retirement.
“With the current market conditions, for those a bit concerned, it’s a good time to sell.
“We have seen a sharp increase in the number of investors leaving the ACT market.”
The loss of investment properties is adding to Canberra’s growing rental crisis.
Independent Property Group‘s property management general manager Grace Hooper says the ACT Government needs to explore changes to the current scheme.
“We believe the challenge is around the criteria, and very few of our properties qualify,” she explained.
“Many landlords also feel the eligibility criteria, coupled with the current process, is confusing and convoluted.”
Ms Hooper said the property industry was trying to help solve the rental crisis by providing the government with fresh ideas to assist both tenants and landlords, and to reduce the number of people getting further into debt.
Independent has more than 3500 properties under management and she said very few of their landlords had taken up the scheme.
“Many landlords have also been COVID-19 affected which puts extra strain on their financial situations and their capacity to significantly reduce rental prices,” she said.
Both Ms Hooper and Ms Tynan agreed Tasmania’s scheme, which is designed to assist tenants, with funds going directly to landlords, wouldn’t be any more costly for the ACT Government.
“We believe this proposal is a good way forward,” Ms Hooper said.
The Tasmanian Government’s COVID-19 Rent Relief Fund and Landlord Support Fund offered support of up to $2000, or four weeks’ rent, per fund to eligible tenants and landlords, with additional payments available until 30 June 2021. The scheme also allowed for scheduled repayments for tenants in rental arrears due to the pandemic.