International Property

New Zealand’s planned tenancy law overhaul gets thumbs down from property investors

The head of an investor group says what is needed instead is better access to a dispute resolution tribunal

PUBLISHED : Monday, 27 August, 2018, 8:03pm
UPDATED : Monday, 27 August, 2018, 8:03pm

New Zealand’s 1 million-plus tenants will be no better off under new rules proposed by Housing Minister Phil Twyford, and in fact “bad tenants could be protected”, according to a leading property investor.

Andrew King, executive director of NZ Property Investors Association, found no favour with proposals to end cancellations of tenancies without cause while ensuring landlords could still get rid of rogue tenants, to increase notice periods landlords must give from 42 days to 90 days, to limit rent increases to once a year and to ease the way for tenants to have pets and make minor alterations to homes.

Instead of addressing these issues, King called on the government to speed up landlords’ access to the Tenancy Tribunal, complaining of a system which he said disadvantaged investors.

“If a tenant is, say, three weeks behind in the rent, it can take up to seven weeks for a landlord to get a Tenancy Tribunal hearing,” he said. The landlord was then 10 weeks out of pocket.

“Giving us faster, quicker access to the tribunal is important, given that around 80 per cent of all cases are brought by landlords over unpaid rent,” King said.

The proposal to end cancellations of tenancies without cause “could make life harder for good tenants and bad tenants could be protected,” King said.

“Say there’s a block of flats and one tenant displays antisocial behaviour. The other tenants often won’t complain in writing because they’re fearful. So the good tenants leave and the bad one is left. This change could protect bad tenants.”

On the extended notice periods, he forecast investment property values to potentially drop compared to non-rented properties.

“This could mean rental properties are valued at less than other properties,” he said, raising concerns about increasing notice periods from 42 to 90 days. “A standard sale settlement these days is around four weeks, but making it three months could put people off buying rental properties. The 42-day period is already a block for buyers.”

Limiting rental increases to an annual basis “could create an expectation the rent would go up. It’s not a great idea, but it’s not the worst one either. It’s better to have small frequent rent increases rather than one large one annually,” King said.

Judith Collins, housing spokeswoman for the National Party, is also against the proposed changes, calling them a “knee-jerk and uninformed decision to reform the Residential Tenancy Act” which she said would cause renters to pay even more and would not solve any problems.

“If Mr Twyford thinks government price controls will stop tenants paying more for rent, he’s being naive. By limiting rent increases to once a year, landlords will be forced to raise rents higher and sooner, meaning tenants will actually be paying the same or more in the long run,” she said.

If a landlord now wants to sell their property, they will have to wait 90 days, meaning settlements of sales will be extended by double. But if the tenant leaves the property before the 90 days is up, the landlord will end up with an empty house waiting for a buyer, she said.

“It is not clear whether the bond can be raised at the same time as the single rent increase – so even more costs could be put on the tenant. On top of this the government has a bill currently at select committee that prohibits the charging of letting fees on rental properties. This has been criticised by the real estate industry and various stakeholders because letting fees are required for agents to work on behalf of the property owner.

“It is likely the cost of the letting fee will be passed on to the tenant in the form of higher rents – a double whammy of rent increases,” Collins said.

The government had shown how its poor policies end up costing Kiwi families – who have seen over NZ$100 added to their weekly bills – and they are going to wear the burden of this as well, she said.

The Council of Trade Unions secretary Sam Huggard said he welcomed the announcement.

“Too many working people are paying too much of their income on housing that doesn’t meet their needs, and too often even makes them sick,” Huggard said.

“The government’s consultation allows working people to tell their stories about the impact of expensive, insecure and inadequate rental housing on their lives. We lose so much money, time, and energy every year because of poor quality housing stock and families having to uproot their entire lives to find somewhere they can afford. Improving our rental housing isn’t just a human rights issue – it’s a health issue, it’s an education issue and it’s a workplace issue too.”