Second Reading Speech - COVID-19 Omnibus Bill

‘COVID-19 OMNIBUS (EMERGENCY MEASURES) BILL 2020’

Thursday, 23 April 2020

Mr NEWBURY (Brighton):

The effect of the coronavirus health pandemic hit our local communities and suburbs dramatically. By the third week of March people were unable to buy essentials. Shop shelves were empty, and the elderly were forced to wait in queues before dawn in the hope of finding needed goods. As images of the devastation in China beamed around the world and the infection rate in Italy exploded, governments worldwide, including our own, began taking unprecedented action.

The first wave of interventions in our country included the closure of places and businesses where people socially gather. The effects were profound. They were felt in every street and in every suburb. Those closures led to job lay-offs in a way that most have not seen before—lay-offs that had started on the Friday before the closures.

On the morning of the day when the first wave of restrictions came into place— Monday, 23 March—a young woman, Carolina, contacted me. Her husband had been told that morning that his casual job was in limbo. She was already on maternity leave. It was the first time she had contacted a Member of Parliament, and she asked, ‘What options do we have if we are no longer able to afford our rent?’, and further, ‘We are a young family scared of what the worst-case scenario could be’. Her feelings were being felt by Australians all over this country.

Carolina’s story was similar to that of hundreds of thousands of our fellow Australians. Many of them stood in queues that snaked around city blocks as they registered for social welfare benefits at Centrelink. It was so incredibly heartbreaking. Understandably many of those now unemployed were worried about their most basic needs: how to feed their family and how to keep a roof over their family’s heads.

Similar concerns were being raised by small businesses, especially those forced into closure by the mandated restrictions. Small business is the human face of the economy and the economy’s backbone. Small business owners are our neighbours, they are mums and dads who have taken a risk to realise a dream. Many of these small business owners have invested their entire savings or mortgaged their house to first open the front door of their small business. And now their dreams and their financial security were at risk.

Art Lytas, the owner of Little Ox cafe, put the case for government intervention over residential and commercial tenancies early, saying:

The other part of the equation is ordering us to shut down and not doing something by law. You’re now actually pitting the individuals and businesses to go fighting with the landlords.

This conflict forced some to engage legal representation to protect themselves. The lawyer of one longstanding Brighton small business wrote to me to outline what they were faced with:

The Lessor is proposing to force our clients out of the business premises by terminating the lease in 14 days’ time. This offer is being put as a ‘goodwill gesture’ and in our view is so unconscionable that (the company) should be put to shame publicly for this action. The Lessor is clearly acting opportunistically.

Though governments had not caused the health pandemic, it had led to their intervention in our society, the forced closure of business and the mass lay-offs. The calls on government to urgently intervene again and protect those businesses forced to close and help those Australians now without a job were understandable and urgent; the clock was ticking.

The need for government protection was recognised early by the nation’s first ministers at national cabinet. As the Prime Minister acknowledged, the states were:

…working to identify how relief can be provided for tenants in both commercial tenancies and residential tenancies to ensure that in hardship conditions there will be relief that will be available and ensuring the tenancy legislation is protecting those tenants over the next six months…

Not long after, a property management company contacted me to request that intervention be balanced. They said, ‘Shifting the burden to landlords is not the answer’ and that, ‘If rental payments are paused in any way, our industry will collapse’. Landlords were similarly concerned. As retired landlord Annamaria said to me:

Tenants cannot be evicted during this time, but we landlords are still required to pay…failure of which leads to the risk of us landlords having banks foreclosing and taking possession of our properties.

Other retired landlords began to raise similar concerns. Landlord Theo contacted me to say:

We need rents to pay bills, interest on mortgages, and to fund living costs.

Richard wrote to say:

The proposed legislation to prevent eviction of tenants for non-payment of rent is just ridiculous and introduces total anarchy to the system… If landlords do not receive their rent payments and then fail to pay their mortgage the bank will take over the property.

And Phillip wrote to say:

I have given my tenant a 50 per cent reduction in rent without question to try and help, and the response from my tenant was that she would not pay me a cent.

The concerns raised by landlords often came from those in tight financial positions, not those who are too often characterised as rich landlords with deep pockets. In truth these landlords were the retired who were living off the rental of a single investment property or the aspirational families who had saved and bought into the investment market. Young mother Diana put her position bluntly:

I am sure the government would not assume that landlords have to just absorb that expense. We would be hugely financially impacted by this and would be losing our property as a result.

And retired Isabella said:

A lot of landlords are self-funded retirees who rely on their rental income to live.

In recognition of the complex balance, on 25 March the Victorian Liberal Party called on the state government to deliver land tax credits to property owners who provided rent relief to tenants affected by the Coronavirus restrictions. Local property owners had made it clear that relief on tenant rent must by matched by relief on their obligations. As Patrick said:

I am more than prepared to share the load in these grim times, but in this situation property owners are being asked to go it alone. I was hoping for some offsets in land tax.

His calls were repeated by many others. The Liberal policy announcement was an important early signal. In effect it captured the essence of the general observation the Prime Minister had made when he said, ‘There will be a burden for everyone to share’. This ethos led national cabinet to agree upon a set of principles that would underpin government intervention on residential and commercial tenancies. Those principles formed the basis of the measures announced by each state. The Victorian measures, set out in the bill, include:

• A six-month ban on residential evictions, given effect from 29 March 2020;
• A six-month ban for the non-payment of rent for commercial tenancies involving small and medium-sized businesses;
• Pausing rental increases for residential and commercial properties for six months;
• Providing a 25 per cent discount on land tax to landlords who provide tenants impacted by coronavirus with rent relief, with any remaining land tax to be deferred until March 2021; and
• Rent relief for tenants experiencing financial hardship—to be eligible a tenant must have registered a revised agreement with Consumer Affairs Victoria or gone through mediation, have less than $5000 in savings and still be paying at least 30 per cent of their income in rent.

The measures ensure that tenants keep a roof over their head, but they overly shift the financial burden onto the landlord. There is no doubt that we will see the effect of these measures on tenancies and the investment property market later this year, when the moratoriums end.

The government’s intervention in the residential and commercial tenancy market is unprecedented. The intervention overrides the agreements struck lawfully, that were entered into with the best of intentions. But just as the global health pandemic required intervention to protect our health, it also obligated government to intervene on tenancies in a way that balanced both the property owners’ and the tenants’ interests. That balance has not been struck.