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As the real estate industry becomes increasingly reliant on third-party rental platforms to process rental applications, a new report warned about its “discriminatory impacts” on prospective tenants.
Consumer advocacy group Choice’s latest report showed the rental application process has increasingly been taken over by third-party rental apps or what is described as RentTech. These include platforms such as 2Apply, Snug and Ignite.
Proponents of these rent tech applications claim their offering helps prospective renters apply for properties in a faster and more efficient way as it allows potential tenants to create central profiles and upload documents, rather than manually apply for rentals directly with real estate agencies or landlords.
However, Choice argues tenants are paying a high price by using these platforms, which are making renting “much harder” despite their claims.
According to the report, the scarcity of rentals is forcing people to provide extensive personal information to rental platforms in order to secure properties, despite concerns regarding data retention, profiling of applicants, bidding for rentals, and unnecessary fees.
“Finding a home as a renter is already an incredibly difficult, draining experience. Our research found third-party rental platforms are taking advantage of people’s basic need for a roof over their heads to collect excessive data and profit,” CHOICE consumer data advocate Kate Bower said.
Data showed 41 per cent of surveyed renters said they felt pressured to use a RentTech platform to apply for a place to live. Meanwhile, 59 per cent of landlords who used RentTech said it was required or recommended by their agent.
Notably, six out of 10 people who rent said they were uncomfortable with the amount and type of private information requested in their rental application to these third-party applications.
“People who rent deserve a guarantee that their personal data is safe and isn’t being used to exploit or harm them. Unfortunately, our research found that renters are seldom granted this assurance,” Ms Bower noted.
Given these circumstances, the report highlighted that tenants are faced with an ultimatum: giving up excessive amounts of personal information or not being able to apply.
And as more landlords and rental agents rely on RentTech platforms, leaving tenants with little to no choice but to use them, the report revealed that the platforms are passing on processing costs to renters.
“Third-party rental platforms are for-profit businesses which often force or pressure tenants to pay additional fees, including fees to pay rent, penalties for failed payments, and even the costs of their own background checks.
“In the midst of a cost-of-living and rental housing crisis, people who rent shouldn’t be footing the bill for RentTech they don’t even want,” Ms Bower noted.
According to the report’s analysis, the option to pay for your own background check increases your chances of being accepted, with 25 per cent of surveyed tenants revealing they paid for a tenancy check.
Concerningly, data also showed that tenants are shouldering additional costs not just during the application process, but also during their tenancy.
Leo Patterson Ross, chief of Tenants’ Union NSW, says that with the use of rent payment platforms rising rapidly in the rental market, costs are being transferred from the property manager to the tenant.
He added that renters are most often the most vulnerable to these costs because they’re the “easiest target”.
The survey’s findings showed 34 per cent of people who rent said they’d offered to pay a higher rent than was advertised to secure a rental, while 20 per cent had been asked by a rental agent to pay a fee to lodge an application (18 per cent said they’d actually paid the fee to apply).
Mr Ross noted that the late fees charged by these platforms “are the thing that really drives financial hardship for people”. For example, rental payments application Rental Rewards charges a failed payment fee of $15.
“The payment apps aren’t responsive to people’s changing situations,” Mr Ross explained. “Something might have gone wrong the day before and you had an emergency to pay for, or you were just moving money around between your accounts.”
The report also revealed that third-party rental platforms offer screening tools to landlords and agents based on various criteria such as income, employment status, lifestyle and are leaving renters vulnerable to “exploitative and unfair automated systems” with limited legal protections.
“Automated decision-making systems are becoming an increasingly common part of rental application systems. A sore lack of regulation in this market means these automated decision-making systems could increase barriers and discrimination for renters, and potentially exclude them from housing,” Ms Bower said.
A separate investigation by Guardian Australia published on 17 November on Snug revealed that the firm is using the data it collects from prospective tenants “in obscure and potentially discriminatory ways”.
In response to the allegations, Snug released a statement to deny the investigation’s findings which it called “highly speculative, unsubstantiated and contain highly suggestive assertions which are likely to mislead the public about the actual service Snug provides.”
The growing case for greater rental proptech regulation
In light of the concerning data, the advocacy group has urged the government to take several steps to safeguard renters from the risks posed by rental technologies.
These include updating the Privacy Act, conducting a federal inquiry into automated decision making, implementing an economy-wide ban on unfair trading practices, and modernising residential tenancies acts across states.
“As the risk of data misuse and data breaches continues to grow, so too does the risk to consumers. The government needs to act quickly and strengthen Australia’s privacy laws to ensure they are fit-for-purpose and protect consumers effectively,” Ms Bower concluded.
There has been a notable increase in scrutiny of third-party rental platforms, even more so at a time when the country is facing a rental crisis.
Last November, Tasmania, Western Australia, South Australia and NSW regulators said they were considering taking action after an ABC investigation into real estate websites that pressure rental applicants to pay for their own background checks.
According to the report, 160 real estate agencies have used the 2Apply platform to field applications for over 1,700 properties across capital cities and most major regional centres, with the platform urging rental applicants to “stand out from the pack” by paying for their own background checks.
While tenants can say “no” to shouldering the costs, declining to pay can hurt their applicant rating at four out of five stars.
Rental application platforms, including realestate.com.au and snug.com, were also called out for charging a fee for a background check against data company Equifax’s National Tenancy Database.
In response to the issue, the software group behind 2Apply, Inspect Real Estate, and News Corporation’s REA Group — which owns realestate.com.au, Snug, and Equifax — all denied claims of illegal activity, stating that payments they received for background checks complied with all relevant laws.
