Letting fee change good, other legislation not so good

A landlord who comments here (David) reports on the effects of the ban on charging tenants a letting fee…

There has been some comment about the end of letting fees, which I support, and as I predicted my property manager informed everyone that there is now a fee to commence a new tenancy for the landlord and its approximately half what a normal weeks rent is.

Its tough enough for a tenant to come up with a bond and rent in advance and then have to pay a fee on top of that.

Well done Labour.

But other changes are not so well received.

Other parts of its proposed legislation are not sensible, forcing landlords to accommodate pets, allowing tenants to do minor renovations, allowing tenants to just cancel leases are not well thought through.

Pets can make a real mess of properties.

Allowing tenants to do renovations seems a very odd change.

Longer leases would be really welcome but they only work if both sides are obligated otherwise they are ridiculous, I would love to sign 10 year leases and allow annual inspections instead of the insurance company mandated quarterly and develop longer term relationships with my tenants.

I understand why some landlords would like long term leases (with good tenants).

But that wouldn’t work for student flats. Twelve month leases are common in Dunedin due to the student population.

Rental property letting fees banned

The Government is banning the charging of letting fees to tenants. My initial thought was that this ban would just move the costs, and it will, but it may be a reasonable change – letting fees are incurred by the landlord so are best paid by the landlord. Whether they recover those though increased rentals is up to them, and the best way to do it.

Stuff:  Parliament bans letting fees on rentals

Tenants will no longer have to pay letting fees to agents and landlords, after Parliament voted to ban the practice.

Housing and Urban Development Minister Phil Twyford estimated the change, which comes into force on December 12, could prevent the handover of up to $47 million in payments he said were “unfair” and had “no economic rationale”.

“This will make a real difference to struggling families. There are significant costs associated with moving to a new rental property, which many families are now forced to do every year.

“When moving into a new rental property, tenants can face up to four weeks’ bond, two weeks’ rent in advance – and one weeks’ rent as a letting fee – in addition to moving costs,” he said.

“Letting fees are unfair. They have no economic rationale and there is no relationship between the amount of the charge and cost of the services provided.

“Banning the charging of letting fees to tenants is a good first step in improving the life of renters, while we continue our broader review of the Residential Tenancies Act.”

I don’t agree with all of that, but even if the cost of letting is covered by higher rental charges it may be easier for some to pay a little bit extra a week or month rather than a lump sum up front.

This would work fine for fixed term rentals, which are common for student accommodation. But it could be to the detriment of longer term renters, unless rental charges were lowered (or not raised as much) after the letting costs had been recovered.

But while the law change will now come as no surprise to the industry, it’s unlikely to be welcomed. The Real Estate Institute of New Zealand (REINZ) said in August, it would like to see tighter regulation in the market but had concerns about how the costs of letting fees would be covered if they were abolished.

“Letting fees covered  property inspections, advertising, viewings, background checks on tenants, liaison with landlords and processing the tenancy agreement,” Bindi Norwell, REINZ chief executive, said.

“So actually, they do quite a lot of work. So someone has got to pay for that.”

But as a cost to the landlord it should initially at least be paid by the landlord.

peterwn at Kiwiblog:

I disagree with most of Phil Twyford’s proposals for residential tenancies, but I do concur with his plan for abolishing letting fees paid by the tenant.

My reason is, the letting agent is chosen by the landlord and works for the landlord so it is anomalous that the tenant should pay the fee. The landlord should and is given an incentive to either negotiate fees or dispense with the agent altogether. Some agents structure things to extract a fee each year. Naturally, letting agents and property managers are squealing like stuck pigs over this as if it is the end of the world as they know it.

They say it will cause rents to increase. Rents may well increase – slightly but the amount is small and in any case increases due to shortage of flats etc would be far higher. Tenants would no doubt prefer a slight rent increase rather than having to fork out the fee in addition to initial rent payment and bond. A few landlords could leave the game over this but are more likely to leave because of the other proposals affecting residential landlords which will have far greater adverse effects. My heart bleeds for them.

 

Rental housing market risk

Many people rely on rental accommodation, through choice or financial necessity (they can’t afford to but their own house). People who buy houses and rent them out provide a vital service. The Government cannot provide homes for everyone.

The rental market and landlords have received a lot of attention from politicians over the last few years as housing prices escalated again after recovery from the Global Financial Crisis – property values had already doubled when the Clark government was in power.

A lot of that attention has been negative, in part for political and campaign purposes.

The Government is set to make changes that will significantly affect housing investments. This poses a risk to the whole housing market if it deters too many people from staying in or getting into property investment.

RNZ:  Landlords bail on rental market: ‘It is just not worth it’

Many private landlords are bailing out of the rental market because they are worried about the new government’s housing policies, say property experts.

If too many landlords sell up, and not enough new investors step in, housing values are at risk of dropping, and there could be a shortage of rental housing.

The experts say landlords are being tempted to take their capital gain and run, before harsh new rules undermine the value of their investments.

The concerns have arisen as the government moves to implement dramatic reforms of the housing market.

The looming changes include:

* A capital gains tax on second homes, depending on the outcome of a special tax inquiry.

* The imposition of ‘ring-fencing rules’, which would reduce tax deductibility for rental houses, by ensuring losses cannot be set off against other income.

* An extension of the ‘bright line test’, under which anyone selling a rental home within five years would be deemed a trader and would therefore be taxed.

Property Investors Federation executive officer Andrew King said these planned changes were scaring off investors from the property market.

He said the personal hostility directed against landlords was another issue.

“There’s been a lot of animosity against rental property owners. There is a lot of misinformation about their tax situation, a lot of people think it is easy money when it is not.

“There are also changes to the how the property can be managed, and there are a lot of increased costs.

“A lot of people are thinking it is just not worth it and are looking at getting out.”

If too many do get out of property investment it will create different problems for the Government – and potentially for for people who have purchased high valued property with large mortgages.

The government has dismissed criticism of its policies as anecdotal.

It said its housing policies were aimed at overcoming accommodation shortages.

Landlords are an essential part of providing accommodation – and that’s not anecdotal.

Labour versus “slum boarding houses”

Housing spokesperson Phil Twyford says that Labour will get tough on slum boarding houses but is vague on details.

The next Labour-led Government will legislate a Warrant of Fitness based on tough minimum standards to clean out slum boarding houses, says Labour’s Housing spokesperson Phil Twyford.

“It’s not acceptable for New Zealanders in the 21st Century to be living in the kind of rat-infested dumps that have been exposed in recent media reports.

“National has had nine years to fix these problems and they’re still denying there’s a housing crisis.

“Too many of our most vulnerable people are being exploited by slum boarding house operators, in dangerous and unsanitary conditions.

“The country’s had enough of Nick Smith’s tinkering and excuses.

“Labour will legislate tough minimum standards and a licensing regime that will weed out rogue operators. We’ll also mandate local government’s enforcement role, to be funded by the licensing system.

“Labour will take the first crucial steps to fix the housing crisis. But, cleaning up slum boarding houses is long overdue and will be an immediate priority,” says Phil Twyford.

This sounds like it may be jumping on a bandwagon from an item on The Nation yesterday – Boarding house horrors:

A housing shortage means more people are turning to boarding houses for accommodation, but as Caitlin McGee discovers, experts say rogue landlords are using the desperation of tenants and a lack of regulation to exploit vulnerable people.

Twyford gave no link to Labour policies on this and there is no mention in Our plan to start fixing the housing crisis.

Twyford is short on some key details, like what will happen to landlords who don’t meet ‘warrant of fitness’ requirements, and what will happen to residents who have to find somewhere else to live.

I have found a press release from Andrew Little:  Healthy homes for all

Next week on May 4, National MPs will get the chance to ensure every rental home in New Zealand is warm and dry – by supporting my Healthy Homes Guarantee Bill (No 2).

It is aimed at preventing any more cases like Emma-Lita’s, setting strict guidelines around insulation and heating which all landlords must comply with before they can legally rent out their properties.

It’s about doing what an increasingly callous government has failed to do with its continued protection of slum landlords rather than looking after those in need. And it’s not just our most vulnerable – more middle New Zealand families are renting, locked out of the housing market by soaring prices.

A previous Labour Bill that would have ensured every rental home was warm and dry was rejected by the Government last year. Housing Minister Nick Smith argues he’s doing all that’s needed to improve the “deplorable” state of rentals.

Not so. The Residential Tenancies Amendment Bill requires rental homes to be retrofitted with ceiling and underfloor insulation.  It comes into effect in July for state houses, but not until 2019 for other rental – read private – housing.

Nick Smith believes his Bill is a pragmatic and efficient option to the problem, and that alternatives are too expensive and will not prove to be beneficial.

But hang on. There is nothing in it about minimum standards of heating. A 2014 Household Income Report shows the majority of kids living in poverty live in private rentals. Those are the families who can least afford to heat their homes.

National has accepted the need to regulate private rental properties by requiring insulation. When temperatures plummet insulation only isn’t going to keep you warm. Why not finish the job and require efficient heating too?

No child, no pensioner, no struggling uni student, no New Zealander, should be living in a hovel. Sadly, some are.

It’s inexcusable in this day and age to be renting out something that is so poorly maintained that it becomes a health hazard.

The Government has the opportunity to do something about that come May 4, by supporting my Bill.

I presume this Member’s bill failed. I also presume this is something like what Twyford was referring to.

 

Turei on landlord v. tenant rights

In Parliament today Green co-leader Metiria Turei asked a contentious question about landlord family’s rights versus tenant family’s rights.

Metiria Turei: Is the Minister arguing that a landlord’s family has more rights to that home than the tenant’s family, who may well have been living in that home for many years, built their lives around the schools and working community there—that those tenants have fewer rights than those other families?

Hon PAULA BENNETT: Well, we believe in property rights. The landlord owns the property, and if they wish it for themselves or their family then they have to give only 42 days’ notice, so yes.

Either the landlord or the tenant giving notice to vacate a rented property has been fairly common through my lifetime.

I don’t know if it is happening elsewhere but in Dunedin 12 month tenancy agreements have become common, tying them in with annual turnover of student accommodation.

I believe the Greens are pushing for virtually lifetime guarantees for tenants.

Full transcript:


Residential Tenancies (Safe and Secure Rentals) Amendment Bill—Support

5. METIRIA TUREI (Co-Leader—Green) to the Minister for Building and Housing: Ka tautoko ia ia taku Pire e hoatu nōhanga wā roa ana, ngita ana, tū roa ana i runga i tana tohutohu ki te hunga hoko whare tuatahi, ko nāianei, “probably not a good time for a young family to buy”; i tētahi whare i Akarana?

[Will he support my bill to provide more secure and stable long-term tenancies, given his recent advice to first-home buyers that now is “probably not a good time for a young family to buy” a house in Auckland?]

Hon PAULA BENNETT (Minister for Social Housing) on behalf of the Minister for Building and Housing: Although we certainly respect what the member is trying to do as far as tenants’ rights are concerned, we will not be supporting the bill, with the reason being that we are genuinely concerned that it might drive up compliance costs and actually end up harming tenants more than it ends up actually helping. The Government, however, is open to reforms that would encourage longer-term tenancies, and work is under way on setting up a stakeholder group on these very issues.

Metiria Turei: If the Minister is telling first-home buyers now not to buy a house, because homes are too expensive, will he at least support better tenancy rules that will create transparency around rent rises, given that rents are increasing at twice the rate of wages and families cannot afford that level of increase?

Hon PAULA BENNETT: The first part of the member’s statement, I believe, is taken a bit out of context, and we are certainly not telling first-home buyers not to buy. In fact, we are seeing the opposite happen, and even in my own electorate of Hobsonville Point you can see many new homeowners buying there. However, in relation to the transparency and to some of the clauses in the bill, as I say, I think they need careful consideration. We have concerns on this side of the House about unintended consequences and those not being positive for the tenant.

Metiria Turei: If the Minister is encouraging people to stay renting because housing is so expensive to buy, will he give renters more security in their homes by removing the 42-day eviction notice, which is leading to increased levels of homelessness?

Hon PAULA BENNETT: I do not support the first statement by the member, but in relation to the second statement, 90 days is actually the norm and there are exceptions that can be the 42 days. The exceptions to the 90 days are where the landlord’s family or themselves want to move in, or an employee, and then in the cases of where they might have sold. Where it is sold, it is when there is an unconditional agreement actually signed and the new owner wants a vacant property. It is 42 days from then, not from when it goes on the market or anything else, so, actually, 90 days is the norm.

Metiria Turei: Is the Minister arguing that a landlord’s family has more rights to that home than the tenant’s family, who may well have been living in that home for many years, built their lives around the schools and working community there—that those tenants have fewer rights than those other families?

Hon PAULA BENNETT: Well, we believe in property rights. The landlord owns the property, and if they wish it for themselves or their family then they have to give only 42 days’ notice, so yes.

Metiria Turei: Has the Minister talked to the Minister of Education about the effect on children from having to move schools every year because their parents cannot afford stable long-term tenancies in homes because of rent increases and 42-day notices?

Hon PAULA BENNETT: Yes, I have, and actually we agree with, and share, her concerns around those who are moving a lot and not actually getting settled in their communities. That is why we have a number of things that are in place that are leading towards that—whether it is around social housing, whether it is around the work that is going on via schools and social workers in schools and other sorts of programmes. What we are concerned about is that some of the policies that the member is trying to put through, in her bill, potentially could have landlords withdrawing houses for tenants and, as a consequence of that, we think that that of course will mean fewer homes and actually lead to more disadvantage for those very people whom she is trying to help.

Metiria Turei: Does the Minister not understand how irrational it is for the Minister of housing to be telling families not to buy a house because housing is too expensive and yet to stay in rental accommodation when renting is, as she has said, insecure, unstable, and expensive?

Hon PAULA BENNETT: I know it is hard for the member to appreciate, but actually I think that there is probably agreement across the House on what we want to see as the outcomes for these people. What we disagree on is actually the venue and the vehicle for doing that, and the member’s bill, at the very worst, is actually careless and could lead to more actual vulnerability for those very families whom she is trying to help. We have said that we are looking at setting up a stakeholders’ advisory group where it can be carefully considered and we can make sure that we have got the interests of the tenants foremost in those views. We already made changes to the Residential Tenancies Act earlier this year, which I think go some way towards protecting some of the tenants’ rights—

Metiria Turei: No, it doesn’t.

Hon PAULA BENNETT: —well, they do, actually—and that is what we will continue to do, but it will be in a careful and thoughtful manner that actually leads to better outcomes.