Banning letting fees

Generally I would expect that costs will be recovered one way or another, but it depends on the market situation.

@EricCrampton:

A tax incidence primer. Twyford is right that changes in letting fees will be eaten by landlords (at least in places where supply is constrained.) General principle: the inelastic side of the market bears the burden of a tax.

But for that same reason he is wrong about the extra money for students. Market is tight in Wellington and not Christchurch so we expect the benefit of the subsidy to go primarily to landlords in the tight markets.

It is hard to argue simultaneously that the change in letting fees will be eaten by landlords and that the benefits of the student subsidy did not go to landlords.

Banning letting fees seems to be fiddling at the edges of the housing situation.

62 Comments

  1. PartisanZ

     /  March 23, 2018

    “Fiddling at the edges” is what ‘managers on behalf’ do …

    • That’s why 80% of home owners use them I suspect

      • PartisanZ

         /  March 23, 2018

        I was referring to our government traveller … ‘managers on behalf’ … but there certainly are distinct similarities with Real Estate & Letting Agents … Yes? (And Used-Car Salesmen!)

        You mean “rental property owners” surely, not “home owners”?

        Houses on ‘properties’ that are not necessarily “homes” at all, but mere tradeable commodities, investment portfolio assets and repositories of speculative capital gain …

        My God … the ‘housing market’ perfectly reflects the nature of this nation as a whole …

        Epiphany – Now I understand the staunch resistance to anyone thinking outside the orthodox ‘square’ … like Maori or ‘Socialists’ … even ‘Market Socialists’ …

      • Blazer

         /  March 23, 2018

        Blindingly inaccurate statement…

        • Corky

           /  March 23, 2018

          Tell that to tenants when their rents rise. I use a Property Manager…so do most people I know. I hate dealing with renters. Whether Travellers figures are correct, I don’t know. But, from my experience, it would be over 90%.

          • Kitty Catkin

             /  March 23, 2018

            Another case of your having ‘been there, done that.’

            We once had a YNZer called Oliver who had been, done or seen an incredible number of things. I suppose that every blog has one.

            • Corky

               /  March 23, 2018

              Talk about the pot calling the kettle black. I’m thinking back over the bs you have posted.

              The truth is I own three rental properties, and have shares in another two. Now, can I prove that? No. One thing I can prove is A2 shares. I mentioned these a few times on this blog way before they became a superstar investment. That’s a fact.

              As for you, lots of wind, lots of bluster and lots of nothing.

              Oliver was another bs artist. You may remember he was caught out over security protocol and security clearances.

            • Kitty Catkin

               /  March 23, 2018

              Oliver was indeed another bullshit artist like you, good that you recognise this.

              I have never pretended to have been anywhere that I have not been, done anything that I have not done or met anyone whom I have not met. I don’t ramble on about things I know nothing about and use words whose meanings I don’t know.

            • Corky

               /  March 23, 2018

              Ramble on.. A2 sorts the wheat from the chaff. You are chaff, Kitty. Light weight; no substance.

            • Kitty Catkin

               /  March 24, 2018

              [Deleted]

            • Kitty Catkin

               /  March 24, 2018

              That’s a ridiculous simile in this case. Find a better cliche.

              A2 shares have gone down quite a bit.

            • Kitty Catkin

               /  March 24, 2018

              Anyone can buy these shares, it doesn’t show great perspicacity on your part.

  2. Blazer

     /  March 23, 2018

    even a small step in the right direction…is a good ..step.

    • It’s retrograde – you can guarantee that it will be added in the next rental increase and even were an increase not due.

    • PartisanZ

       /  March 23, 2018

      Agreed … it seems a fairly obvious move … an example of social responsibility legislation?

      Work for the Landlord; Paid by the Landlord.

      Might have some interesting unintended consequences? Some rental properties coming onto the market … and being sold?

      Then the question arises: Sold to whom?

      • alloytoo

         /  March 23, 2018

        The owners will simply increase the weekly rent by about 2% to recover the cost over a year (typical lease period).

        This of course means that renters will end up paying the letting fee every year instead of up front.

        Phil Twyford: Making rental accommodation less affordable for the people.

        • PartisanZ

           /  March 23, 2018

          I disagree, the taxpayer will cover it as increased Accommodation Supplement …

          And the closed loop of ‘tinkering at the edges’ shall be complete.

          The FIIRE rages on …

          • alloytoo

             /  March 23, 2018

            So a renter who pays tax will be hit twice.

            Nice one Twyford.

            • PartisanZ

               /  March 23, 2018

              A renter who pays tax is being hit twice NOW …

              Nice one Rogered & Ruth … Michael & Bill …

        • Yes, the dumb, the incompetent, the lack of experience, failure to understand human nature is strong in this Twyford man

  3. Squirrels.
    I see squirrels
    Where are those thousands of ‘affordable’ houses he promised ?
    Maybe its different when he has to deliver

    • Blazer

       /  March 23, 2018

      Rome wasn’t built in a day…by George.

      • PDB

         /  March 23, 2018

        Rome wasn’t destroyed in a day either so there’s still hope for the country.

      • alloytoo

         /  March 23, 2018

        Rome wasn’t build by George at all……..

  4. Patzcuaro

     /  March 23, 2018

    The letting fee is a cost of being a landlord, like rates and insurance, none of which are directly recovered in domestic rentals.

    • alloytoo

       /  March 23, 2018

      Rates and Insurance may not be a line item in the rental agreement, but rest assured they are being recovered by domestic rentals.

      • Patzcuaro

         /  March 23, 2018

        Yes but as part of the rent rather than an extra charge.

        • Callum

           /  March 23, 2018

          What happens though is stable tenant will generally pay it less often. Since the landlord doesn’t know how stable the tenant you put the rent up on worst case scenario. Good stable tenants then pay for bad ones.

          • Alan Wilkinson

             /  March 23, 2018

            Exactly. Twyford is an idiot and makes the market less efficient.

            • Blazer

               /  March 23, 2018

              ‘the’ market is an…illusion and has never been…efficient.

            • Alan Wilkinson

               /  March 23, 2018

              Crap. It will become less efficient.

          • Patzcuaro

             /  March 23, 2018

            I imagine that a sensible landlord would be inclined to hold rent increases if they have a good tenant.

            • Alan Wilkinson

               /  March 23, 2018

              Yes, they will try to compensate for the inefficiencies Labour introduces. But Labour will also limit future rent increases so trying to reward a good tenant will carry future costs. As usual the wrong people will be hurt.

            • Callum

               /  March 23, 2018

              Rents won’t jump straight away, but next time you need to pay a letting agent to find your tenant that cost will be recovered in the rent set for the new tenancy.

  5. David

     /  March 23, 2018

    Letting fees go to the property managers not landlords so it wont make a jot of difference to rents, property managers may try and increase their charges to landlords but its pretty competitive out there.
    Its really just Twyford pretending he is actually doing something given he has literally achieved nothing so far…much like the rest of his cabinet.

  6. Alan Wilkinson

     /  March 23, 2018

    An idiot interferes with the market. Expect more. Expect the unexpected consequences.

    • PartisanZ

       /  March 23, 2018

      Are you saying the rental housing market is NOT subject to the regulations imposed on the housing market Alan? The regulations which, according to you, radically affect the supply of housing? Rental housing … House ownership … both are pretty dependent on housing supply surely?

      So we’ve seen the consequences of a regulated market that’s unregulated in one or two areas which favour landlords …

      Any unexpected consequences of sound, socially responsible regulation in those areas surely can’t be any worse …

      • Alan Wilkinson

         /  March 23, 2018

        How do letting fees favour landlords? They just pay someone to find, vet and manage tenants. Those tasks still have to be paid for, ultimately by the tenant as landlords have no other income source.

        Most likely the replacement payment mechanism will be less efficient or the market would have already adopted it.

        Were letting fees too high because of market manipulation by agencies? That was a job for the commerce commission, not a hapless minister.

        If the clowns had any clues they would be trying to make the market more efficient instead of this sort of idiocy. One obvious way is to make vetting for shit tenants easier and to make getting rid of them easier, quicker with less opportunity for them to wreck the place. Instead Labour will probably make all that worse and increase costs and inefficiencies.

        • PartisanZ

           /  March 23, 2018

          Interesting, isn’t it, that a National government didn’t “make vetting for shit tenants easier and … make getting rid of them easier, quicker with less opportunity for them to wreck the place” … The Nats must have been “clowns” too?

          But I do see your point.

          I think the “replacement payment mechanism” is already embedded in: Accommodation Supplement … maybe WFF as well … ?

          I’m ever hopeful something can be done to improve the housing situation, but I suspect this will be an exercise in “robbing Peter to pay Peter back” …

      • Alan Wilkinson

         /  March 23, 2018

        Markets do fail but that article is a horrible analytical failure to find sensible examples.

  7. NOEL

     /  March 23, 2018

    “Letting fees
    Sometimes a letting fee is charged by a letting agent or solicitor to grant or assign a tenancy.
    Letting fees are allowed under tenancy law (Residential Tenancies Act) but only letting agents or a landlord’s solicitor are allowed to charge this fee.
    Who can be a letting agent
    A letting agent is someone who has the authority to act as the landlord’s agent when granting or assigning a tenancy. They usually will continue to act as the landlord during the tenancy, but in some cases they may only carry out the task of signing a tenant up and then the landlord will take over once the tenancy starts.
    A letting agent is a person who makes a living from renting or managing properties. They are usually a person who works for a property management company.
    Some examples of people who aren’t usually letting agents are:
    • private landlords renting out their own properties
    • a person who is part of a trust (a trustee or beneficiary of a trust)
    • a person who is the director of a company that owns a rental property.
    What is a letting fee for
    A letting fee covers the cost of putting a tenancy in place. It covers the cost for time involved by the letting agent for things like:
    • holding open homes
    • reviewing applications from prospective tenants
    • preparing tenancy agreements and conducting the initial property inspection
    Letting fees can vary, but are normally one week’s rent plus GST.
    The tenancy agreement must state whether there is a letting fee. If the tenant signs or agrees to the tenancy, they must pay the letting fee.”

    So letting fee disappears from the tenancy agreement to be replaced with what?

  8. Blazer

     /  March 23, 2018

    property managers charge 15% of rents….so make a good earn with a reasonable…rent roll.

    • David

       /  March 23, 2018

      Are you on drugs they charge a max of 8% mine charges me 6%.

      • Blazer

         /  March 23, 2018

        a typical example…’Quinovic Property Management, one of the prominent names in the business, charges 8.5 percent commission on rent and other money collected; a $10 monthly administration fee; $30 property inspection fee; $5 handling fee for payment of rates and insurance; 10 percent commission on any other account paid; $500 if the property is put on the market; and $60 an hour for attending Tenancy Tribunal hearings or mediations.’…add ons bring the total up…4 inspections=$120,admin fee=$120…and so on.

  9. David

     /  March 23, 2018

    Cool, letting fees will simply be renamed ‘key money’. The let is free, but getting a set of keys costs 2 weeks rent.

  10. Corky

     /  March 23, 2018

    Heard a property owner on ZB. He’s done his sums and it’s not worth him continuing renting property because he’d have to up rents. He owns 30 properties in the Wellington region.
    His solution? He will level the homes and landbank to protect his investments. That seems a little radical and risky to me. But he must have thought it through.

    Labour you have big problems. National….shut up! Let this play out.

    • Blazer

       /  March 23, 2018

      lets pray that just after he levels them a land tax on unutilised land…is not..introduced!

      • Alan Wilkinson

         /  March 23, 2018

        He’ll just build expensive houses on it and sell into the top of the market as everyone else has to. Cheap rentals gone. More big homes for wealthy immigrants. That was Labour’s policy objective wasn’t it?

        • Blazer

           /  March 23, 2018

          will he now….!Caught in the middle of a market correction could be quite…nasty.

          • Alan Wilkinson

             /  March 23, 2018

            Sure. Which of course would be a self-induced recession that would end Labour’s chance of reelection.

        • Gezza

           /  March 23, 2018

          Sounds like they might be hovels in Thugtown though.

          • Alan Wilkinson

             /  March 23, 2018

            Who knows, G. Could well be. Put up a liquor store and fast food outlet with some pokies instead.

    • PartisanZ

       /  March 23, 2018

      @Corky – ” … it’s not worth him continuing renting property because he’d have to up rents …
      His solution? He will level the homes and landbank to protect his investments.”

      Wow! If that ain’t the description of a ‘rental housing’ economic sector that is financially frail and ethically bankrupt, and a property market eskewed beyond moral comprehension, I don’t know what is! That is one fucked-up situation …

      “landbank to protect his investments” strongly implies there is significant capital gain, hence income, to be made simply from retaining the property (in the soil) upon which the homes stand … No tenants required … Hence, in the same way that government regulation has (according to Alan et al) created a housing shortage, government regulation or lack of it has created a situation where sitting on unused land doing nothing is more productive than either having tenants in houses or realizing the financial value of it … better than money … except of course if its “unproductive Maori land” …

      I can’t quite get my head around how fucked-up this is!

      “There is nothing in principle which stands in the way of the return to nature [and natural ethics], or the opening up of nature for man except property in the soil … To speak here of property as one does of property in an article of use is to renounce thought. A temporary beneficiary of a mysterious dispensation, such is man in relation to the soil.” (Warner)

      • Corky

         /  March 23, 2018

        ”Wow! If that ain’t the description of a ‘rental housing’ economic sector that is financially frail and ethically bankrupt, and a property market eskewed beyond moral comprehension, I don’t know what is! That is one fucked-up situation …”

        i know this may be hard for you to understand, but here goes: It’s his property. He does what he likes with it. He has acquired his real estate honestly. He must pay taxes twice; to local bodies and central government. And he must accept property depreciation because of poor tenants. He must also accept government regulations that define what is acceptable for rental housing….his fucking private property.

        Then you come along and have the cheek to moralise about his decisions. If you have a problem with this situation may I suggest you buy these properties and provide rental properties for those in need.

        Wont happen,will it? Socialism doesn’t work that way. Something Aotearoa is starting to understand with our present band of ( loud mouthed) merry socialists.

        • PartisanZ

           /  March 23, 2018

          You appear to be advocating for “those in need” not having housing provided?

          I don’t know exactly what your friend’s ‘housing stock’ is, but socialism built much of the housing stock that private owners now benefit from for both rental income and capital gains after its sell-off to landlords and speculators …

          So no … Socialism doesn’t work that way. Damn right it doesn’t. Not even Market Socialism, which provided much of NZ’s low-cost housing stock via State Advances Corp.

          Under socialism ‘the people’ as represented by their elected government own and can rent out – as well as some live in – that housing stock for years and years, decades and generations and utilize the income; the social dividend, as well as providing for those in need …

          Privatized, like all State Assets, the government can only sell them off once … “In excess of 31,000 former state houses exist, which are now privately owned after large-scale sell-offs during recent decades.” – Wiki – although as ‘private stock’ they can be sold repeatedly on the ‘open market’ for speculative gain … eventually putting housing affordability out of reach of a significant portion of the population … probably a majority nowadays?

          Nah … I’ll stick with how fucked-up it is thanks …

          • Corky

             /  March 23, 2018

            Suit yourself. I wasn’t holding my breath. Oh, those state homes in private ownership…just a small fraction of the housing rental stock in private ownership.

            • PartisanZ

               /  March 23, 2018

              Yeah, but if you count the State Advances funded low-cost & group housing that the State made possible … it makes up a much larger proportion of our rental stock … I shouldn’t say “our” should I? “Their” rental stock …

              Why people think some mystical economic ‘article of faith’ called ‘The Invisible Hand’ is going to work shit this complicated out is beyond me …

              I guess its because in the ‘thought absence’ created by the assumption of Invisible Hand – a stunned pause of decades or centuries – his minions Self Interest, Greed and Irresponsibility [rebranded ‘Freedom’] can pilfer, swindle and exploit to their hearts content

    • Gezza

       /  March 23, 2018

      His solution? He will level the homes and landbank to protect his investments. That seems a little radical and risky to me. But he must have thought it through.
      Bet he doesn’t. A lot of right wing whingers ring ZB. All bluff n bluster.

    • David

       /  March 23, 2018

      I wish idiots like that would shut up, what sort of an investor would knock his houses over and kill his income and wait for land prices to rise, dumbass keep your bloody tenants and when the land price rises sell the damn house which is still sitting on the land made more expensive by the idiot lefties.
      He must have inherited his houses with logical thinking like that.

      • Corky

         /  March 23, 2018

        Look, its’s not something I would do. His point was, from past experience, when tenants can’t pay their rents they abuse his rentals and do a runner. He will have to increase his rents and he believes that will cause more of such problems.

        I don’t consider him an idiot. It’s easy for us to wax lyrical from the sidelines. Our investments aren’t on the line. Having said that, I think after he cools down he may reconsider. Labour is only going to be in power for three years.