Bond guarantees are a better solution to existing cash rental bonds.
Bond guarantees benefit renters and owners:
- Keeps cash in the pockets of renters
- Faster and fairer claims with the option of a tribunal if parties don’t agree
- Fast and easy to apply and issue BondCover as well as update housemate details
- Maintains tenancy rights and obligations, protecting renters and owners
Snug developed BondCover after comprehensive research involving hundreds of renters, owners and agents as well as analysis of millions of bond records which showed the very large majority of renters do the right thing. Claims are small and settled directly or following a Tribunal Order so holding a huge amount of cash doesn’t make sense.
We introduced the product but there is resistance so we need your help.
Sign the petition to bring BetterBonds to the ACT and find out more below.
ACT was first, now it has put renters last
- Bond guarantees were permissible for renters in the ACT under the existing legislation so Snug pitched the ACT Government about introducing BondCover in June 2017.
- The ACT Government reasonably wanted to introduce a regulatory framework and legislation was introduced in Nov 2017, with draft regulations expected December 2018.
- Following over 6 months of consultation, the draft regulations were published in April 2018 and regulations introduced 7 May 2018.
- Then surprisingly the regulations were repealed on 10 May 2018, without notice.
This flip-flop approach to bond guarantee policy stifles innovation in housing and delays the return of nearly $70 million to renters in the ACT.
Renter representative groups should support bond guarantees
ACT renter groups such as the Tenants Union ACT, Better Renting and Care Financial Services should support low cost bond guarantees for five key reasons:
- The rights and obligations of renters and owners are maintained
- The tribunal is available if either party disputes the claim
- Renters should not fund a bond and tribunal system which primarily benefits owners
- Bond guarantees put nearly $70 million back in the pockets of renters
- Returning cash to renters will stimulate the local economy and create jobs
Tenants (unfairly) fund the government administration of the rental system
The ACT Government funds the costs for managing rental bonds and the Administrative Tribunal, as well as social support services, from the interest it earners from renters bond money.
Renters should not be responsible for fully funding the cost of the administrative systems and support services that underpin the residential investment market.
In the ACT, over 18,000 households have paid over $64m in bonds at an average of $1740 per household (2015-16) to secure their tenancy. This is an unnecessary cost imposed upon tenants and a highly unproductive use of their funds. Tenants incur an opportunity cost on these funds of at least 2-3% (inflation) and up to 20% where they hold any credit card debt or use other commercial providers such as pay-day lenders or bond loans.
Through bonds, tenants fund virtually 100% of the administrative infrastructure that underpins private investment in rental housing, from which the ACT Government derives substantial transfer duty and land tax revenue. The very large majority of tenants do the right thing and should have the choice to purchase a low cost bond guarantee so that their cash can be put to much more productive and useful purposes, particularly in the case of low-income households.
Snug recognizes the important work of the ACT Tenants Union and other advocacy groups and submits that the public subsidies for these important services should be borne by all stakeholders that benefit from private investment in housing, through consolidated revenue. Raising interest from rental bonds to fund these activities is both inefficient and unfair to tenants.
The ACT Government budget papers show it generates over $300m in taxes from rental properties every year, which add to the cost of renting. Budget details are a matter for the ACT Government, but it would make sense for some of this money to be diverted to support tenancy services.
Renter representative groups need to be better funded
We believe tenant advisory and support services are critical to a healthy housing system and these services should be funded by government and increasingly so with more renters in the current housing system.
BondCover is about housing affordability and choice
BondCover removes the need for renters to deposit large chunks of their cash into rental bonds, making housing more affordable. BondCover provides the same protections for landlords while enabling the Government to return significant amounts of cash to renters.
Snug intended to introduce updated BondCover terms shortly after the 7 May 2018 regulations which substantially listens and addresses the concerns raised by renter stakeholder groups including:
- Cooling off and cancellation period
- Renters and owners must consent to a Bond Claim for Snug to pay out or either party may apply for a Tribunal decision
- Lower pricing from 3% of the Bond Amount plus a first year admin fee
- Interest free payment period of 90 days to pay Bond Claims (low 8% for extended repayments)
- Snug Community Care program which will support victims of domestic violence or those facing financial hardship with lower fees and claim assistance (we’re still in discussions with key beneficiary groups and will publish the program shortly).
We’ve now updated the BondCover Terms (effective 16 May 2018).
In addition, Snug has also worked to develop strong consumer protection policies and processes internally for the benefit of both renters and owners.
Renters have better things to do with their money
The ACT Government holds nearly $70m of renters hard-earned cash, just in case a very small proportion of renters do the wrong thing. This is both unnecessary and unfair to the great majority of renters who do the right thing. Our research into over 2m historical bonds shows that 99% of renters receive a full bond refund or agree to pay for minor end-of-lease costs.
Many renters have credit card debt and some rely on pay-day lenders and other high interest products for both their bond money and everyday expenses. The interest on these products can vary from 15-30%, which is the opportunity cost of renters bond money. The minimum opportunity cost to renters of bonds is 2-3%.
Faster fairer bond claims
In addition to the low cost bond guarantee, Snug’s rental bond claims engine will deliver fast and fair outcomes reducing the cost and hassle of small property claims and Tribunal resources. Our online claims engine will provide to the information, process, precedents and trade costs for owners and renters to resolve claims. In doing so it levels the playing field and reduces the incentive for ambit claims and ongoing disputes.
If both owners and renters do not reach agreement, then they may proceed to a Tribunal determination as is currently the case.
Bond loans are not the answer
Interest free bond loans from Government are not the answer to better renting. They require large amounts of public sector capital and in fact require 20 times more cash upfront so are expensive for renters in the first year and moreover do not resolve the issue of financial stress from paying double bonds when moving.
Loans for cash bonds are cumbersome and are associated with substantial paperwork and red tape. They are outdated and can be replaced by innovative technological and financial solutions, as are being progressed in other States and territories.
Strong social and economic benefits for the ACT
Economic modeling shows that cash transfers to households generate large economic returns and create jobs. By returning bond monies to tenants, the ACT Gross State Product could be increased by around 0.2%, with job creation benefits economy-wide.
We urge the ACT Government to enable innovation and affordability
We commend the ACT Government on recognizing the merits of bond guarantees as an option for tenants and landlords and engaging in wide consultation. We believe that BondCover as now drafted addresses the needs of renters including those more vulnerable in the community, as well as protecting owners.
After nearly 12 months of engagement with Government and stakeholders, we urge the ACT Government to move quickly to support digital innovation by enabling the regulatory framework, allowing providers like Snug to enter the market.
Sign the petition to bring BetterBonds to the ACT.