An Australian-first ban on rent bidding that extends to prospective tenants could inadvertently cause Victorian landlords to raise prices, the peak real estate industry body says, as advocates call for stronger enforcement.
But the premier, Daniel Andrews, rejected “doomsday predictions” concerning the rental reforms and described the changes to Guardian Australia as “fair”.
Under the plan, the government will close the “loophole” that allowed agents and landlords to accept bids higher than the advertised price from tenants. Tenants will also no longer be able to offer more than four weeks rent upfront.
Penalties – including hefty fines – will be imposed on the agents and landlords, rather than tenants, Andrews confirmed, and the Victorian changes would make the state’s laws on rent bidding the strongest in the country.
In the Northern Territory and Western Australia there are no explicit bans, while in other states it is an offence for agents and landlords to solicit or invite an offer that is higher than the advertised rental price, or to advertise within a price range.
But in those states tenants are able to offer more than the advertised price, and advocates have previously criticised the lack of fines issued to real estate agents breaking the rules in New South Wales.
Andrews conceded there has been “incredible pressure” on prospective tenants to stump up thousands of dollars in the tight rental market, despite rent bidding being banned since 2021.
“There’s now this emerging practice where prospective tenants will offer additional money and offer to pay deposits that are well and truly above the usual month in advance and that’s not fair,” Andrews said in an interview with Guardian Australia.
“You’ve got to make sure that those who have got the least market power have got the maximum safeguards.”
The Real Estate Institute of Australia’s chief executive, Hayden Groves, said tenants were “flying blind”.
“They can see that there’s 50 people lined up at the door when they inspect the property and the asking price is $600 a week, so they think, ‘How can I get this property? I’m going to have to pay $675’, when $625 might have done it,” Groves said.
“The agent or the owner can’t guide them in any way.”
Groves said banning rental bids from tenants won’t fix the problem either.
“Property investors will simply advertise property way above the market rent.”
In NSW a plan to force agents to disclose offers above the listed price to other prospective tenants, which could give them a chance to make higher bids, was dropped by the Minns government in June after it was panned by tenant advocates, homelessness groups and real estate agents.
Chris Martin from UNSW’s City Futures Research Centre said the Victorian government must decide whether it would ignore any applications outside the advertised price or force properties back on to the market.
“Either way, they’re setting themselves up for a difficult regulatory task,” he said.
In 2021-22, Consumer Affairs Victoria provided advice about the state’s rental laws to 99,191 people – but only issued fines or warnings 628 times. A breakdown of fines and warnings could not be provided.
Guardian Australia in March revealed the former NSW government had not issued a single fine to real estate agents caught promoting rent bidding since the practice was banned in 2022. At the time Fair Trading said it was taking “an educative approach” to the new laws, issuing 300 warnings. On Friday, it said it had issued 55 fines and 20 warning notices to agents since December.
Farah Farouque from Tenants Victoria said Victoria had taken a similarly cautious approach to NSW in enforcing its rental reforms.
“Previous data shows that the preferred enforcement action relied on by Consumer Affairs Victoria is predominantly warnings, despite the legislative capacity to issue infringements,” she said. “There’s no culture of ensuring infringements – even nominal amounts.”
But Andrews said enforcement would be bolstered once the new changes come into effect, which he expects will be in early 2025.
The Victorian Greens leader, Samantha Ratnam, said the proposed new rental dispute resolution agency should also be responsible for enforcement action.
“It’s really important to make sure that it’s not just a promise on paper and that it’s meaningful for renters,” she said.
Also included in the reforms is a portable bond scheme and an extension of notices to vacate from 60 days to 90 days.
Landlords will also be unable to increase rent for new tenants within 12 months of issuing a notice to vacate to previous tenants.
