Housing Minister Twyford proposes all but rent controls

Housing Minister Phil Twyford thinks that the only way to keep rental rates in check is to significantly increase the supply of housing. That makes sense. But he still intends to introduce rental ‘reforms’ – that is, impose restrictions on rent increases and the costs of letting.

There are already signs that some landlords are quitting the business, or seriously considering it. Putting more pressure on them may make rental supply tighter rather than better.

Stuff: How Phil Twyford plans to address the renting crisis

New Housing Minister Phil Twyford has several plans to make life easier for renters, but has ruled out rent controls.

Instead the new minister is clear that in his view the only way to seriously keep rents in check is to greatly increase supply.

But that doesn’t mean he wants the Government to stay out of the equation: he thinks it has a serious role to play in both increasing supply and softening the rough edges of the private market.

By the end of this year, Twyford wants to introduce legislation to reform the Residential Tenancies Act, our main tenancy law.

The key parts of these proposed reforms will be:

  • an end to letting fees that are charged to tenants,
  • a requirement that rents can be raised only once a year instead of every six months,
  • an end to no-reason terminations,
  • the required inclusion of a formula for how those rent rises will be calculated on every tenancy agreement.

That sounds like coming very close to rent controls.

National’s Housing Spokesman Michael Woodhouse new rules on landlords could easily see them exit the market and reduce the supply just when it is needed most.

“Certainly the best thing not to do is to make it harder for landlords to offer their properties,” Woodhouse said.

“We wouldn’t be following these punitive policies for landlords that they have introduced or said that they would introduce, that are making people like Andrew King from the Property Investors Federation say it’s just getting too hard for the overwhelming majority of landlords who only own one or two properties with things like capital gains tax and ring fencing, or the unknown costs from the Healthy Homes Guarantee bill.

“These are not all sophisticated profit-driven landlords – these are nurses and doctors and teachers.

But Twyford doesn’t believe many landlords will be literally leaving their homes empty, meaning the sum total of housing available shouldn’t significantly change.

The biggest potential problem isn’t landlords leaving their properties empty (they wouldn’t be landlords then, they would be bach or crib owners).

In the short term another Government MP  is also keen to help.

Wellington Central MP Grant Robertson is advising any tenants who believe their rent has risen well above the market rent in their area to consider taking their landlord to the Tenancy Tribunal.

The real risk is precipitating an exodus of landlords from the housing market altogether. In particular, as more baby boomer landlords reach or near retirement they may decide there is something simpler and safer to do with their retirement investments.

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24 Comments

  1. David

     /  January 30, 2018

    I am agnostic on the abolition of letting fees, as a landlord I dont particularly like them and its just a revenue stream for property managers.
    Could live with making it harder to cancel tenancies as well, you sign a tenant on for a year they should be able to have that stability and the obligations need to work both ways.
    The calculation formula is plain stupid, market rent is market rent and here in Christchurch where rents have been flat for a few years while insurance and rate costs have climbed a lot as a landlord you just have to suck it up, Twyfords proposal would be stupid in flat markets.

    I dont see it as a put off but I do property full time, I get frustrated with one off landlords who dont use a property manger, dont do maintenance and are bloody amateurs which gives everyone a bad name. My places all exceed insulation standards, all have heat pumps, all maintenance is attended to immediately and if you want good stable long term tenants give them a nice place to live because it makes business sense.

    • Blazer

       /  January 30, 2018

      there is not much at all landlords ‘suck up’.There’s always capital gain to offset stagnantrents.As you know you would be out of business without the Govt gift of billions in accomodation supplements.Property managers getting a letting fee and a % deal have an incentive to churn..tenants in some cases.

      • David

         /  January 30, 2018

        None of my tenants would be eligible for the accommodation supplement Blazer. Never bought a house that wasn’t cash flow positive so any capital gain is irrelevant and is more a pain because it makes buying further properties harder. Finding new tenants is a costly pain and only an idiot would churn for letting fees, the house would inevitably be empty for a fee weeks and their is always maintenance to do between tenants.

        • Blazer

           /  January 30, 2018

          the fact that none of your tenants are eligible for the accomodation supplement does not alter the fact that….that subsidy distorts the market…you know that much vaunted free market.I guess none of your tenants get WFF..either.

          • David

             /  January 30, 2018

            If there was a free market then one would be able to build the needed houses and rents and prices would be stable or perhaps even fall as prices for other goods and services can do on a truly free market with many participants. I could quite easily build 10 houses on existing sites I have but council won’t allow it.

            • Alan Wilkinson

               /  January 30, 2018

              Yep. Our little town is surrounded by vast expanses of unused land and has no accommodation for workers to service the tourist trade. There are exactly zero houses for rent in the area and have been for months.

            • Gezza

               /  January 30, 2018

              I remember you mentioning this problem when I was up there. You get a massive tourist influx (& thus temporary servicing jobs) in Summer don’t you, Alan? How much extra housing would be economically worthwhile without full-year occupancy?

            • Alan Wilkinson

               /  January 30, 2018

              With present costs, delays and requirements obviously none. So we pay unemployment, sickness and domestic purposes benefits instead and fund state housing in places where there are no jobs.

            • Alan Wilkinson

               /  January 30, 2018

              Just did an exercise on funding a simple two bedroom cottage and the costs would be north of $300k without the land. Hard to make anything economic.

            • Blazer

               /  January 30, 2018

              b/s Al..less than 1/2 that.What do you think David?

  2. David

     /  January 30, 2018

    Its good that Twyford is now pretty much exactly going to do nothing…same gameplan as TPP, Pike River, Dope, Climate Change etc etc from our thankfully do nothing government because the guy has the potential for completely stuffing things up.
    The real estate market is a fickle beast and change in one area tends to affect another area and its always the people at the bottom that end up suffering and then there is yet more government intervention in the form of taxpayers cash to alleviate the problem governments caused. Twyford has been bleating for a few years and now its his responsibility there really is very little he can do unless he wants to tackle the RMA and overide local councils with Labour Mayors, Ardern is too focused on baby and wants a quiet stress free pregnancy.

    • Blazer

       /  January 30, 2018

      a very long ..fact free post..Make investing in RE the same as any other asset class and rents and prices would be way more…affordable.

      • Gezza

         /  January 30, 2018

        I think the argument is that once the rental profit margins drop and capital gains become a liability, landlords may divest themselves of their properties, and shift their dough to high return investments, probably offshore. More low-end tenants are probably not an attractive proposition for many, & although it might see more properties on the market for home buyers & slow house price rises, we still seem likely to be stuck with a long-term shortage of housing stock.

        We’ll have to see what the picture looks like in 2 years.

        • David

           /  January 30, 2018

          Perfectly put. And of you take out foreign money and some landlords you don’t get that investment in existing stock and the money recycled into new ones.

  3. Blazer

     /  January 30, 2018

    the typical landlord has no stomach for real risk…and they have more chance of flying to..Mars than investing off shore.

    • David

       /  January 30, 2018

      I invest in currencies, gold, oil, shares and ETFs and othrr landlotds I know are risk takers too.
      Residential property is now at a tax disadvantage thanks to Key.
      Al is spot on with his 300k and could well be a bit light

    • David

       /  January 30, 2018

      “the typical landlord has no stomach for real risk…and they have more chance of flying to..Mars than investing off shore.”

      There are punitive taxes on offshore investing, the FIF taxes are significant and make local investing far more sensible.

    • Alan Wilkinson

       /  January 30, 2018

      Better start building your $150k houses, B. You’ll do well.

  4. oldlaker

     /  January 30, 2018

    If landlords quit their rentals, the houses will presumably be bought by other landlords, or bought by owner-occupiers. The number of houses available for occupation, one way or the other, remains the same. I’m also surprised no one mentions immigration as a reason rents have risen. Or the fact Labour and NZF promised to cut it but haven’t said anything about it since the election.

    • Alan Wilkinson

       /  January 30, 2018

      The number remains the same – a shortage. But a bigger shortage for renters. And the would-be owner occupier won’t be building a new house because he got the existing one.

      • Blazer

         /  January 31, 2018

        Auckland short by apx 30,000 homes….empty homes apx-33,000.