Balance needed in tenancy reforms

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The Government’s planned tenancy law reforms could contribute to an exodus of landlords from the rental market and result in higher rents, critics are warning.

Monday, August 27th 2018, 2:00PM 1 Comment

by Miriam Bell

The Government's proposed tenancy reforms are prompting renewed debate about pets in rental properties

Housing Minister Phil Twyford this morning announced a set of proposed rental law changes, which include limiting rental increases, removing no-cause terminations and stopping rent “bidding”.

The Government has been talking about reforming tenancy law as part of its mission to address housing market problems since it took office last year.

That means most of the proposals have been well-heralded, but critics are pointing to problems with the planned reforms.

NZ Property Investors Federation (NZPIF) executive officer Andrew King says some of the changes proposed could result in landlords having less control of their rental properties.

He points to the proposal to increase the tenancy termination notice period from 42 days to 90 days in all circumstances, including the sale of a property, as a particular concern.

That change will mean problem tenancies are significantly harder to deal with, King says.

“But it also makes it much harder to sell a property as the pool of buyers is diminished and the value of the property is potentially diminished.

While King says the language used in the proposed reforms seems less dogmatic and more conciliatory to landlords, the problems caused by bad tenants should also be addressed.

Around 80% of Tenancy Tribunal time is taken up with tenants not paying rent so the NZPIF believes there needs to be stronger rules around rental payments to dissuade tenants from not paying.

This could involve the ability to charge interest on outstanding rent, the ability to charge tenants’ credit cards or exemplary damages if they don't pay their rent, and faster access to the Tenancy Tribunal for rent arrears cases, King says.

In addition, the NZPIF would like to see other changes – like making tenants responsible for damage they cause - which would make providing rental property easier, cheaper and less risky.

King says that if landlords feel they have lost too much control over their properties, many will exit the rental market which will only make the existing shortage of rental properties worse.

“But the NZPIF is looking forward to being part of the discussion on how to improve the rental industry and is keen to ensure that the focus is on improvements for both tenants and landlords.”

Other critics also highlighted the likelihood of unintended consequences from the proposed reforms.

Auckland Property Investors Association president Andrew Bruce says that, for landlords, it is death by a thousand cuts with the proposed reforms being just the latest cut.

He is concerned about landlords potentially being forced to take tenants with pets as well as the 90 day notice period when it comes to selling a property.

“If you look at it in isolation, nothing stands out as being a showstopper but, when taken along with all the other changes to housing policy, it makes being a landlord much more difficult – especially when it comes to managing rogue tenants.”

The current environment is unfriendly to landlords, Bruce says, and, as a result, he knows of many landlords who are looking to get out of the residential rental market.

National Party housing spokesperson Judith Collins says that it is naïve to think that Government price controls will stop tenants paying more for rent.

“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.

“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.”

However, Property Institute chief executive Ashley Church believes that on the face of it many of the proposed reforms don’t seem unreasonable and are unlikely to lead to an increase in rents.

While Church is also concerned about the impact of enforcing a 90 day notice period in property sale situations as well as the pet provision, he says the devil is really in the detail.

“It all depends on how discussion over the detail of the proposed reforms goes and then how they are instituted and enforced in reality.”

In his view, good landlords won’t need to worry about most of the proposals and he adds that getting rid of rent bidding seems a pragmatic approach to take.

Read more:

Tenancy law reform proposals announced 

Tenancy law reform needed – housing stock take 

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