On the brink of a crisis

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Proposed tenancy law changes, which come in an environment of rental shortage, are on the brink of creating a low socioeconomic rental crisis.

Tuesday, March 3rd 2020, 5:10AM 5 Comments

by Miriam Bell

That’s one of the major themes to come out of independent economist Tony Alexander latest quarterly survey of people’s views on their respective business sectors.

Alexander says landlords’ survey responses show they have deep concerns about the proposals to end no-cause terminations and roll over fixed tenancies to periodic tenancies.

“Owners are not just saying they will raise rents to reflect various cost rises, but will actively weed out any existing bad quality tenants they might currently have before the legislation becomes effective and it becomes near impossible to remove them.”

If the proposed reforms are put in place, many owners plan to only select proven good tenants, Alexanders says.

“Tenants not in work, tenants with bad credit histories, tenants with young children and, solo mothers, amongst others, will now not be considered.

“The changes could deliver some rental pricing power to the ‘good’ people, but in an environment of worsening rental property availability this will throw even more people at the mercy of state housing services – if they can get them.”

By lifting the average quality of New Zealand rental stock, government policy will price it out of reach of many is a key underlying theme to emerge from the survey, Alexander adds.

Respondents’ comments reflect this, with many emphasising that they feel landlords and their rights over the properties they own are under attack.

“The ugly is the government is putting on anti-landlord regulations. Landlords will increase rents to recoup the costs, will not select ‘trouble tenants’ and sell if the ‘90 days termination’ is removed,” says one respondent.

Many also say they are looking at selling off their lower end rental properties and will focus on the higher end rental market.

“The loss of the 90-day no-fault notice (with associated loss of fixed term tenancies), is a huge no-no,” says another respondent. “It means I am shifting from providing tidy, average rental properties at median rents to top-grade rentals at upper-quartile rents.

“This means I am minimising the risk of anti-social tenants that I can't get rid of, and only taking top tenants with great references and no credit problems. To do this I have sold two properties as too difficult to upgrade for my desired market, upgraded two properties, and am demolishing one property and rebuilding new.

“The advantage to tenants is that they will be getting lovely as-new properties. The disadvantage to tenants is that they will face a much higher bar to get in and be facing higher rents.”

Another respondent, who is a long-term landlord, says they are really concerned about the proposal to stop being able to end a tenancy without giving a reason.

“If you give a reason then presumably you have to provide evidence, which could be very difficult to get legally. I have never needed to do this up till now, and hope I don't in the future, but it gives me some reassurance to know I can if I need to.

“This is unlikely to cause me to quit property. However, it makes me think about ending my current tenancies, renovating my places to a high standard, and being very fussy about who I let them out to.”

Alexander’s survey follows hot on the heels of a REINZ survey which found that a total of 82.1% of respondents disagreed or strongly disagreed with getting rid of the 90-day notice. Further, 45.4% of tenant respondents were against the change, as compared to 40.9% who supported it.

Read more:

Removal of no-cause notice opposed by 45% of tenants 

RTA reforms pile pressure on landlords 

Tags: compliance disputes healthy homes housing market investment Kris Faafoi landlords property investment property management rental market rents RTA supply tenancy reform Tenancy Tribunal tenants Tony Alexander

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