Portable bonds and interest off ‘dead’ money among proposed rental shakeup

West Australians should be able to take their bond with them between rentals and earn interest on it when it is sitting dormant, a think tank is urging.

The McKell Institute’s WA branch has called on the Cook Government to follow Victoria and New South Wales and legislate a “portable bond” that stops renters from needing to pay thousands for a new bond when they’re moving rentals.

The institute argued that not needing to pay for a new bond could save renters an upfront cost of about $3000, which is the standard four-week bond rate at Perth’s current median advertised rent of $750 week.

The old bond is eventually returned to the renter pending any issues with their previous rental, but the institute argued the impost of finding thousands of dollars for a new bond while their old bond was locked up was prohibitive.

“For many West Australians, moving for work or a new home means finding thousands of dollars for a new bond while the old one is still tied up. With the median Perth rent at $750 a week, that is a real cost, and it falls on the people the state most needs to attract and retain,” McKell Institute WA executive director Jessica Bukowski said.

“The double bond is an up-front barrier that makes it harder for people to move for work, and to move closer to the jobs and communities they want to be part of.”

According to the institute’s Make it Portable report released on Monday more than 60,000 tenancies end each year with the typical lease lasting less than two years.

It said with WA’s rental prices jumping 6.9 per cent per annum since COVID-19, the impost of an upfront bond payment has also grown significantly.

Bukowski said any extra financial burdens can impact highly mobile workforces that are in demand in WA.

“WA is competing with every other state, and internationally, for tradespeople and essential workers, and many of them, particularly younger workers, are renting,” she said.

“A rental system that asks people to fund two bonds just to move makes WA a less flexible place to work.

“A portable bond, delivered alongside a modernised bond lodgement system, is a practical, modest-cost way to help workers move to where they are needed.”

The institute is also calling for modernisation of the bond payments system, which would also allow the renter to earn interest on their “dead money” while it is sitting dormant.

The institute modelled potential returns on a $3000 bond, predicting it could earn more than $5000 in returns if invested in like a conservative superannuation option or $14,000 in a higher-risk option.

Currently, landlords and real estate agents pass the bond on to Bonds Administration, which is operated by the WA government.

Bukowski said renters should have the option of paying their bond to the Bonds Administration directly.

“A renters’ dividend would return it to the tenant, and give them something to show for their years in the rental market. WA could be the first state to deliver it,” she said.

Both Victoria and New South Wales introduce portable bond schemes this year while South Australia has funded one.

The idea has the support of the Real Estate Institute of WA with president Rob Mandanici calling for a scheme in the organisation’s pre-budget submission.

“We are also suggesting a bond portability scheme to allow tenants to transfer their bond between eligible tenancies in exchange for a small fee, similar to the new scheme recently introduced in Victoria,” he said.

Commerce Minister Tony Buti was approached for comment.