The Australian tenants who are charged to pay their rent

For almost two years, Tim* has paid an extra $4.83 a month to pay the rent. That recently climbed to $5.10 when the rent went up.

The real estate agency that manages their home in Melbourne moved its tenants over to a payment app called Ailo in late 2022. Since then, they have paid a service fee – worked out as a percentage of their rent – to set up a recurring bank transfer on the platform.

Tim was “annoyed at having to pay money for basically nothing” but was afraid to say anything to their property manager. “You don’t want to risk [being] on one of their blacklists for being a difficult tenant.”

Created by the great-grandson of real estate giant Ray White, Ailo does offer a free option to pay rent – a method without a fee is required by law in many states – but it’s not automated like paid options, and renters have to enter their bank details anew each month. Ailo is not the only rent-tech platform that makes renters jump through hoops: on the OurProperty app, the fee-free option is paying rent in cash at Australia Post.

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Australia is in the midst of a rent-tech boom. By some estimates, there are almost 60 products on the market that aim to help tenants pay rent more smoothly, screen potential renters, book maintenance appointments and apply for bond loans.

But while the goal may be extra convenience, critics say these apps often “clip the ticket” and put the burden on tenants to hand over personal details and extra cash in a tight rental market where they have little power to say no to their landlords or agents.

Even applying for a property can come with extra costs – although there is pushback in some states. While not mandatory, popular rental application apps like Snug and Ignite advertise background checks to increase the appeal for landlords for $19.95 and $29, respectively. “Show you are a trusted quality renter,” Snug’s website states.

“What frustrates me is these companies have this spiel … [that they are] for renters – but they are very much for landlords,” said the executive director of Better Renting, Joel Dignam, speaking generally about the rent tech sector.

Around one-third of Australian households now rent and there has been a rush for customers among new rent-tech startups. Property managers report getting a deluge of cold calls, direct mail and emails. “There’s a phone call every day,” one Sydney agent said.

The market can be lucrative and some big players offer a near-complete ecosystem – applying for a property, paying rent, moving in and out. Several have tight links to large real estate franchises. “Many of these companies are seeking to capture the entire renting life cycle,” said Monash University’s Samantha Floreani, who is researching the rent-tech market.

Rent.com.au offers features aimed at tenants such as RentPay, RentBond and Renter Resume. According to its 2023 annual report, its renter products revenue of $1.4m far outstripped fees it earned from agents and landlords or even advertising sales. The company’s chief executive, Greg Bader, said “very roughly”,there was now a 50% split between advertising and renter products.

Paying to pay rent has kicked off a rent-tech backlash and a run of bad press for the sector. The chief executive of property management software Kolmeo, Scott Bateman, said if there are costs, they should be borne by the agency that is getting the direct benefit. “There is no case to be made that charging renters fees to pay their rent is fair,” he said. Kolmeo is owned by Paul Little, the owner of the real estate agency Little Real Estate.

The chief executive of the NSW Tenants’​ Union, Leo Patterson Ross, said one concern he has about these products is how little choice tenants often have. A 2023 Choice survey of more than 1,000 renters found 41% said they “were pressured” to use a third-party platform by their agent or landlord.

“It’s not that you get to choose which of the various rent payment platforms you might think is suitable,” Patterson Ross said. “It’s the one that the agent or landlord chooses.”

But the president of the Proptech Association Australia, Kylie Davis, believes the platforms are putting more options in the hands of renters, as well as helping smooth the backend for time-poor property managers.

“What the current debate ignores is that the time of renters is also highly valuable,” she said. “Just because you’re renting … it doesn’t mean your time is free to give away to inefficient, manual processes that are the legacy of former decades.”

Guardian Australia has seen instances where payment apps are written into the rental contract.

Sam* in Melbourne used to have an automatic transfer set up to pay his household’s rent, but in late 2023, his agent informed them that everything would be switched to Ailo. He and his housemates initially tried to ignore the request and continued paying rent by bank transfer. Then when their lease renewed, only Ailo was ticked in the preferred payment section.

“We would have preferred not to do this because it’s also another application [that collects] our personal data,” Sam said. They fill out their bank details manually to avoid the service fee.

An Ailo spokesperson told Guardian Australia: “A lot of what the Ailo platform does to help improve the renter experience is behind the scenes,” adding that approximately 40% of all rent payments facilitated through the platform are “fee-free to the renter”.

“It also helps property managers stay on top of their inbox and manage money,” the spokesperson said.

OurProperty did not respond to a request for comment.

In cases where tenants have refused to move on to a payment app, they can still find themselves in trouble.

Sydney renter Guy Moore refused to move on to a payment app because he had concerns about extra fees and data privacy, but was advised his old way of paying rent would be unavailable. He says the delay meant it looked as if he was in rental arrears and he took his real estate agent to the NSW civil and administrative tribunal in 2023. The matter was settled and orders were made that he be compensated $1,600 over his right to quiet enjoyment, among other issues.

“Certainly, it took a bit of bravery to refuse,” he said. “You worry … that they’ll find a way to kick you out, or that you’ll get blacklisted … You’re very vulnerable when you’re a renter.”

A 2023 decision in the NSW civil and administrative tribunal also found that a tenant had been wrongly reported in arrears after he declined to move on to Kolmeo. Instead, the landlord’s agent only “receipted” rent as having been paid after they transferred it from their trust account into Kolmeo – a process that often took three to four days.

Kolmeo declined to comment on the case.

Some of the major rent tech players are also promoting or moving into credit products, while several payday lenders have created bond loan products – a situation that concerns some tenant advocates amid growing rental stress.

Amelia Klein, a credit and debt solicitor at Redfern Legal Centre, said they see clients struggling to repay bond loans among a range of financial challenges in “a horribly tight rental market”. Many are unaware of interest-free bond loan options offered by state governments.

“If people can’t afford to pay a bond, they can’t afford to pay the interest and the fees that come with these bond loans,” they said. “That can be the start of a debt spiral.”

At the company’s 2023 AGM, Rent.com.au’s Bader said its bond loan product RentBond was the “largest provider of bond finance in the country”. Offered by payday lender Fair Go Finance, it is interest-free for 21 days but rates can then climb to 29.9%. Rent.com.au earns a fee for each approved loan.

Bader said “in a perfect world” RentBond would not need to exist. “We … have a thorough assessment process that takes into account a person’s financial position and affordability,” he said. “We only approve around 10% of all applicants.”

Rent.com.au also advertises a Safetynet loan, which offers a week of rent that is later repaid in instalments, and a product called Scorebuilder through its RentPay platform. Scorebuilder says it helps renters build their credit score as they pay rent – although the importance of a good credit score to securing future loans in Australia is a matter of debate.

Both services are provided with another third-party company, One Card Credit – owned by SkyCredit, which is also behind Fair Go Finance.

In February 2023, Asic issued an interim stop order on One Card Credit’s Scorebuilder and Safetynet loan product because of what it called “deficiencies in its target market determination (TMD)”, which is meant to exclude consumers who may not be able to afford the loan due to financial hardship.

A “significant proportion” of consumers had missed at least one repayment, according to the order, which was lifted just after it was issued after the company amended its TMD.

“Asic was particularly concerned as the loan targets consumers looking to use credit to pay their rent,” the notice said. “Consumers seeking to use credit to pay rent, a basic cost of living, are at a heightened risk of being financially vulnerable.”

Bader said the company worked with Asic to address the issue, and that “some of the wording on our TMD needed to be tidied up”. “It was disappointing but the Scorebuilder product is something the AU market had never seen before,” he said. “We’re trying to work out a way that your time renting will count for something.

“We do see ourselves as advocates for the 32% of the population that rents.”

When Matt* moved into a new house in Perth a few years ago, he and his wife were desperate for a place. The agent told them to do everything through the RentPay app, and they didn’t question it. “We just went, fine, let’s just get it done,” he said.

When he was setting up the app, he noticed the Scorebuilder feature and signed up. At the time he thought “every little bit can help”, given he was hoping to buy his own house in the future. He assumed it worked like paying a utilities bill – if you pay your bills on time, your credit score might improve.

When they went to get a loan for a new car, the broker said they had a problem. There was something called One Credit Card listed under his name. “None of the banks were interested in touching us because we had this credit provider listed,” he said. “It looked like an open credit card.”

He went hunting for where the credit product had come from. As he discovered, Scorebuilder was in fact a credit product and had opened an account in his name with One Credit Card. RentPay discloses the relationship on its website but Matt said he didn’t realise when he signed up on the app.

Bader said he believed the product descriptions provided by Scorebuilder were clear and all relevant information is in the FAQ section of its website. “We have had great take-up of the product with very few instances of confusion,” he said.

Meanwhile, Matt is increasingly unhappy to be using a third-party platform just to pay rent. “I hate dealing with doing financial things … away from the bank,” he said. “It’s frustrating.”

Patterson Ross said while there are genuine efforts across the rent-tech sector to make products that are in the interest of renters, some companies effectively “tenant-wash” their products. “We’re certainly not against the idea that tech can make the renting experience better,” he said. “But the reality often doesn’t stack up, and that’s because they are still operating within an unfair renting system.

“The landlords … actually do have power, because they can go to another real estate agent,” Tim said. “They go for the soft target, which is the tenants.”

* Interview subjects asked to use their first name only for privacy reasons.

• Do you have a story about rent-tech, bond loans or bond replacement products? Email ariel.bogle@theguardian.com