Is a ban on rental bidding truly the ultimate solution to the rental crisis?

In an effort to tackle the pressing issue of soaring rental prices and record-low housing affordability, multiple state governments have embarked on a warpath against rental bidding or the practice of prospective renters offering an agent over and above the advertised price for a rental property.

States that have fallen in line to stamp down the practice include Victoria, South Australia, Tasmania, and the ACT.

Most recently, the NSW government has taken decisive action to end the practice of rental bidding by introducing rental reforms aimed at improving prospects for the state’s renters.

By requiring owners and agents to notify all applicants if they receive a higher offer, the Minns government hopes to end the practice of “secret” rent bidding.

But experts, including advocates for tenants in the state, raised concerns that the practice would only encourage “rental auctions”.

The head of NSW’s tenants’ union, Leo Patterson Ross, stated to The Guardian that the law could be used by agents to drive up the price on a property by presenting offers with the aim to see counterbids from applicants they were never planning to approve for a property.

Currently, agents in the state are already banned from asking applicants to offer rental rates higher than the listed price, but they are permitted to accept unsolicited offers.

Offering on-the-ground perspective from another state that is targeting to ban the practice, Emma Slape, the chief executive of the Adelaide-based Turner Real Estate Agency, says rental bidding is not supported by the industry in South Australia and hasn’t been for over 10 years.

“These new laws will simply bring private landlords into line with the same position,” she noted.

On that note, she revealed that since the Malinauskas government announced its plans in February to target rental bidding as part of its targeted reforms to the Residential Tenancies Act, there has been “no change in the market as it wasn’t common practice anyway”.

As it wasn’t a major issue here, there will be negligible changes,” she added.

On the contrary, she believes property managers and agents are likely to react positively to the proposed rental reforms.

“Since the banning of rental bidding aligns with the existing industry stance in South Australia, property managers and agents may not experience substantial changes in their day-to-day operations.

“The impact on rental property management is expected to be minimal, as the ban simply reinforces the established practice and promotes fair rental market practices,” she commented.

And although there are concerns about how cracking down on rental bidding can backfire, she argued implementing a ban can have several potential benefits.

“Firstly, it promotes a fair and transparent rental market by preventing tenants from competing against each other by offering higher rents.

“This helps to reduce rental prices from being driven up artificially. Additionally, it creates a level playing field for tenants, ensuring that their ability to secure a rental property is not solely determined by their financial capacity to outbid others,” she explained.

But while she believes that banning secret rental bidding helps “promote fairness”, she acknowledged that challenges can arise from implementing it.

One potential challenge she flagged is that some tenants may still attempt to offer more than a property is worth, even without the presence of a formal bidding process.

“If tenants continue to offer more than a property is worth, it may indicate a previous poor tenancy history and is a red flag. Landlords and property managers should remain cautious in such situations, as it may indicate a tenant’s desperation to secure housing or potentially cover up a history of poor tenancy,” she explained.

Ms Slape said this only highlights “the importance of thorough tenant screening and reference checks to ensure the suitability of prospective tenants”.

With rental bidding not seen as the crux of the housing issue across the country, particularly in South Australia, Ms Slape said the industry needs “to look at the broader picture”.

“The housing crisis has been caused by a supply issue, not poor tenancy laws,” she stated.

She said the focus should be on exploring “ways to encourage investors into the market so that there is more choice, which in turn will create a better balance between landlords and tenants”.

To further improve rental laws in Australia and address the housing crisis, the executive emphasised that a multi-faceted approach is “necessary”.

While supply issues play a significant role, there are several steps that can be taken to better protect renters, ensure effective property management for landlords, and support a fair and sustainable rental market,” she remarked.

Ms Slape offered three key areas where Australia can work towards a rental market that provides adequate protection for renters, supports responsible property management, and helps alleviate the housing crisis by increasing the availability of affordable housing options.

1. Strengthening tenant rights

Ms Slape highlighted how bolstering tenant rights can help protect renters and provide them with more security.

“This includes measures such as longer notice periods for rent increases, clearer guidelines on evictions, and improved mechanisms for resolving disputes between landlords and tenants,” she said.

2. Improve landlord-tenant communication and dispute resolution

Implementing effective communication channels and streamlined dispute resolution processes can help foster better relationships between landlords and tenants, according to Ms Slape.

“This can involve providing access to mediation services and educational resources to ensure both parties understand their rights and responsibilities,” she added.

3. Encourage responsible property management

Lastly, the executive called for implementing stricter regulations and standards for property managers to help ensure that rental properties are well-maintained and managed effectively.

“This can include mandatory licensing or accreditation requirements, regular property inspections, and penalties for non-compliance,” Ms Slape stated.