Your Guide to Dealing with Rent Arrears

Are you one of the 30% or more Australians living in rented accommodation? If so, how are your finances right now?

The current nationwide rental crisis has hit tenants hard. The August 2024 Rental Pain Index reports that nearly 70% of renters across the country are experiencing rental stress. This represents a significant portion of individuals and families struggling to meet their rent payments.

If it’s leaving you spending 30% or more of your household spending on rent, you’ve entered into rental stress territory.

If you fall into this statistic and are now in rent arrears from unpaid rent, don’t do nothing. Ignoring your rental debt will only make things worse. Instead, you must act fast and take advantage of the help available.

Australia's Rental Crisis

First, let’s take a quick look at why we’re experiencing a rental crisis.

Part of the wider housing crisis, the current rental situation is driven by unsustainable rent increases, population growth, and a shortage of rental properties. Recent data reveals that the national median weekly rent is $600 for apartments and $620 for houses.

The Australian Financial Security Authority (AFSA) reports that over 90% of personal insolvencies now involve renters, despite renters making up just 21% of the population. These renters have faced above-inflation rent hikes alongside growing debt levels and diminishing savings, leaving many in financial hardship.

Additionally, Roy Morgan’s August 2024 report shows that “real” unemployment stands at 9.1%, a broader measure than the ABS' July unemployment rate of 4.2%. Roy Morgan’s figure includes people actively looking for work but not captured in the official figures. While part-time employment has increased, many Australians are still struggling to secure full-time work, leaving them vulnerable in the current rental market.

For low-income earners, single-parent families, and older Australians, these pressures are particularly severe, pushing them closer to insolvency and deepening the rental crisis.

The Reality of Rent Arrears

When a significant portion of your income goes to your rent, you have limited funds to pay for other essentials, such as food, utilities and healthcare. This means something’s got to give, and not paying rent often becomes the relief.

Currently, approximately 43% of Australians are in a situation where they’re struggling to pay rent owing (Finder). It’s important to note that even if you're only one day late paying rent, you’re considered in arrears.

Rent arrears are considered a priority debt. This means they hold higher legal priority over other types of debt and have severe consequences:

• Impact your credit history - While landlords don’t usually report rent arrears to credit bureaus, a collection agency may report you. This can negatively impact your credit score, affecting your ability to get further credit.
• Termination of tenancy - If your rental payments are overdue by a specific number of days (check your state or territory regulations), you could receive a termination of tenancy notice. You may be evicted if your rent remains unpaid or you fail to enter a payment arrangement with your landlord by the new stated date.
• Affect your ability to rent in the future - People with a flawless rental payment record will likely be picked before you. Many property managers use TICA, Australia’s largest tenancy database, to do checks when mulling over applications.

Help with Rent Arrears and Eviction

Don't stick your head in the sand if you’re already in arrears or struggling to pay.

Avoiding the problem of overdue rent won’t help your situation; it can worsen it. The underlying stress is also a killer for your health and relationships.

Instead, take advantage of the help and support available to you:

• Centrelink Rent Assistance - As of 20 September, recipients have seen a 15% increase in maximum rates. This amount automatically applied to those already receiving Centrelink payments. If you’ve fallen into arrears, you can also apply for an advance payment of your benefits. But note that you will need to pay it all back by reducing future payments.
• Crisis loan for rent arrears - This is a one-off, non-taxable payment for those who have experienced an extreme circumstance (such as family and domestic violence or prison) and are in severe financial hardship.
• State/territory assistance - Each state and territory has its own bodies delivering rent assistance. Some examples include:
  • QLD - Rental Security Subsidy and Rental Grant
  • NSW - Rent Choice and Rentstart
  • ACT - Rent Relief Fund
  • VIC - Housing Establishment Fund
  • SA - Private Rental Assistance Program
  • NT - Affordable Housing Scheme
  • WA - WA Rent Relief Program
• Not-for-profit organisations - Many NFPs across Australia support individuals and families in rental stress, including charities that help pay rent arrears. Here are a few:
  • Anglicare - Rental Arrears Assistance
  • Wesley Mission - Tenancy Assist
  • The Salvation Army - Financial Assistance
  • AskIzzy - Bond or Rental Assistance + more
• National Debt Helpline - This 24/7 helpline is a free service that provides assistance, guidance and financial counselling to people facing financial difficulties, including issues like rental arrears and eviction.
• Tenant Advice and Advocacy Services - Each state and territory has tenants' advice and advocacy services that offer renters information, advice, and support. They can help you understand your rights, deal with eviction notices, and assist in landlord negotiations.

Get Support from Financial Insolvency Experts

Specialist financial experts can also provide valuable assistance when you're facing rent arrears or other financial difficulties, including:

• Assessing your current financial situation
• Helping you create a realistic budget that prioritises essential payments and looking at ways to reduce your household spending
• Advising on what help and support is available
• Negotiating with landlords, property managers or rental providers
• Ensuring you understand your rights and responsibilities as a tenant

If your financial situation is more complex, they can also guide you through other more formal insolvency options, including:

• Debt Agreement - Under a Part IX (9) Debt Agreement, you agree to pay your creditors, including arrears owing, a set amount over a period of time (generally 3-5 years).
• Bankruptcy - While this option is often considered a last resort, bankruptcy can provide financial relief if you cannot pay your debts, including arrears owing. By eliminating your debts, you can enjoy a fresh start.

But while these can be effective, they’re not without risks.

If you are planning to apply for new rental properties while in a Debt Agreement, be aware that landlords may perform a credit check and see that you are in a debt agreement. This could make them more inclined to decline your application, as they may view it as a sign of financial risk.

This means seeking expert advice is crucial to help you make the right decision.

Don’t be Disheartened—Help is Available

While experts say that Australia’s rental crisis has shown modest signs of easing and rental reforms have already been introduced, the reality of rental stress and arrears will likely remain a real issue for the foreseeable future.

But don’t be disheartened. Help and support are always available when you know where to look. There’s no need to suffer in silence.

By proactively engaging with resources and professionals, you can navigate the complexities of rental arrears and work toward maintaining 100% paid rent, housing stability and financial well-being.

If you’re struggling with rental arrears due to the current rental crisis, contact our team of debt solution specialists today on 1800 534 534 for professional, non-judgmental support and advice.