Real rental reform would hand $1 billion back to renters - Victoria

Bond guarantees are a better solution to existing cash rental bonds. Sign the petition to bring real rental reform to Victoria.

  • 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 renters’ cash doesn’t make sense. The very large majority of renters shouldn’t be punished through the requirement to lodge hefty cash bonds upfront.

In September 2017, we introduced the product but still today the Victorian Government refuses to take action to release $1 billion of renters money as part of their current tenancy review.

Our message to Premier Andrews and Minister Kairouz is that the time has come to enable the release of tenants money so they can use it for more productive purposes. In doing so you will also make housing more affordable, you will make the system fairer for renters and you will create economic growth and jobs in urban and regional Victoria.

Other States and Territories are readying the regulations to make this possible. Victorian renters should not be left behind.

Sign the petition to bring BetterBonds to Victoria and find out more below.

Victoria is updating tenancy laws but ignoring big opportunities to benefit renters and landlords

The proposed reforms to the Victorian tenancy laws are ignoring the opportunity to transform the system through digital innovation. The Premier, Daniel Andrews, has announced a list of reforms that include a 14 day automatic bond refund and early release of bonds.

These types of reforms are already outdated, as the concept of cash bonds is no longer necessary to protect the interests of both tenants and landlords.

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.

There is no reason for the Victorian Government to hold over $1 billion of renters hard-earned cash to cover a tiny risk from a tiny percentage of renters.

Snug will provide a bond guarantee from 3% of the value of a bond (plus a first year admin fee), enabling immediate return on bond monies, even during a tenancy.

Renter representative groups should support bond guarantees

Victorian renter groups such as Tenants Union Victoria should support low cost bond guarantees for eight key reasons:

  1. They provide a low cost choice for renters (1/20th of a full bond!)
  2. The rights and obligations of renters and owners are maintained
  3. The tribunal is available if either party disputes a claim
  4. Renters should not fund a bond and tribunal system which primarily benefits owners
  5. They remove a large barrier of entry to the housing market for low-income households
  6. They remove the need for duplicate bonds between tenancies
  7. They could put over $1 billion back into the pockets of renters in Victoria and $4b nationally
  8. Returning cash to renters will stimulate the local economy and create jobs

Tenants (unfairly) fund the government administration of the rental system

The Victorian Government funds the costs for managing rental bonds and the Victorian Civil and Administrative Tribunal (VCAT), 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 Victoria, over 620,000 households have paid over $1 billion in bonds at an average of around $1600 per household 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.

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.

Through bonds, tenants fund virtually 100% of the administrative infrastructure that underpins private investment in rental housing, from which the Victorian Government derives substantial transfer duty and land tax revenue. Total returns from stamp duty on property transfers and land tax are estimated at over $9b in the current budget and a large percentage of this is raised from rental properties.

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.

Snug recognizes the important work of Tenants Union Victoria 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.

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 is working with other State and Territory Governments to introduce BondCover and has recently updated its Terms and Consumer Protections to address concerns raised by regulators and stakeholder groups, including:

  • Introduction of cooling off and cancellation periods
  • 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).

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 Victoria

Economic modeling shows that cash transfers to households generate large economic returns and create jobs. By returning bond monies to tenants, the Victorian Gross State Product could be increased by around 0.2%, which could generate thousands of new jobs in urban and regional areas.

We urge the Victorian Government to enable innovation and affordability and provide choice for tenants and landlords.

Sign the petition to bring BetterBonds to Victoria and return $1 billion back to renters.