Wellington Property Investors' Association

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wellington@nzpif.org.nz

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03-12-2018

An update on two critically important reviews of the rental industry

Two critically important reviews on the rental industry are underway simultaneously at present. The RTA Review and the review of standards for the Healthy Homes Guarantee Bill.

The RTA Review covers many issues, however the main matters are:

  • security of tenure for tenants
  • removing 90 day no cause notice
  • how a landlord can sell their rental property
  • allowing tenants to modify their rental
  • potentially making it compulsory to allow pets

The first three matters are interrelated, all aimed at shifting control of the rental property away from the owner and towards the tenant. If done well it shouldn’t be a problem to improve security of tenure for those tenants that want it, as a greater number of landlords probably want long term tenancies more than tenants do.

The problem is that tenant groups want long term security as well as the flexibility to exit the property quickly if they want to. This isn’t balanced and one sided policies never work. Unfortunately one of the suggestions under consideration by the Government is to remove fixed term tenancies and convert periodic tenancies to open-ended tenancies.

An open-ended tenancy would mean a landlord can only end it if they require the property for another purpose or if the tenant isn’t meeting their obligations. Tenants could still give three weeks’ notice. While exactly what the conditions for being able to end a tenancy haven't been established, tenants groups believe that selling a property is not a sufficient reason. This would mean that an owner would be restricted to selling a rental property to another investor who was also willing to take on the existing tenants.

Combined with this are proposals increasing the notice period once a property is sold from 42 days to three months. Many home buyers would not want to wait three months to move into their new home and would be put off buying a rental. Potentially this could mean that you can only sell a rental when a tenant decides to leave or to another investor. This would severely reduce the number of potential buyers, thereby reducing the property’s value.

The NZPIF believes that removing the 90 day notice with no reason is a poorly thought out policy. A membership survey two years ago showed that this tool was not used frequently. However when you need to end a tenancy but cannot get the documented evidence required for the Tenancy Tribunal, this is an essential tool.

Likewise there needs to be robust thought into allowing pets in rental properties. While the NZPIF encourages members to allow pets, allowing tenants to have them of right will make property management very difficult. Neighbours of tenants with pets causing problems will not thank the Government if this aspect of the standard goes forward.

The NZ Property Investors Federation attended workshops around the country to discuss these and other issues. The NZPIF has also put forward a detailed submission on these and other points raised through the review. You can view this here.

On top of this review there are standards in the Healthy Homes Guarantee Bill that concern the NZPIF. While we are generally supportive of standards, they need to be done in a cost-effective manner as tenants ultimately pay the price for them.

The current Minimum Standards for insulation, fully investigated just two years ago, are a good practical mix of providing insulation benefits in a cost effective way. It is a fact that there are diminishing returns with applying extra levels of insulation and that there is less than a 10% increase in efficacy between 1978 insulation standards and current standards. With this information, it was decided that rental properties without insulation should be required to install new insulation to current standards, but already insulated rentals without a significant degree of degradation would not. We supported this as it was beneficial and cost effective for tenants.

 

We are concerned now that Government has sought out information to discredit the current situation and allow the Healthy Homes Standards to require top-up insulation to current standards.

Government have used an Otago Medical School study, which claimed health benefits from top-ups to insulation, to justify insulation top-ups in rentals. However there are some serious faults with the study that make their conclusions incorrect. Firstly they used calculations that are not considered standard practice that over estimated the benefits of top-up insulation by 300%. Secondly they didn't find any benefits in reduced hospitalisations or reduced use of medication. The only benefit was in the mortality rate of people over 65 years who had previously been in hospital for circulatory conditions. They then extrapolated this out to all tenants which is clearly wrong.

We are also concerned that many rentals will be forced to install heat pumps when tenants do not want them. An NZPIF study shows that around 18% of rentals in Auckland already have heat pumps and 60% in Invercargill. This tends to show that landlords are willing to supply heat pumps when the local climate shows a need and there is tenant demand.

Officials have said that only energy efficient heating should be acceptable in the majority of rental properties, because this will save tenants money. However the lower running cost of these expensive heaters will be offset by higher rental prices.

The NZPIF has made a detailed submission on the Healthy Homes Standards that you can view here.

Policy Analysts will be advising Government on public feedback to the reviews within the next few weeks. Government are likely to give an indication of what changes they are likely to make around April next year, with law changes coming into effect early in 2020.

Lastly I would like to thank all members of their local Property Investors' Association and associate members of the NZPIF. These members financially support us to advocate for all rental property owners. If you are not a member, please consider joining your local Association or at least become an NZPIF Associate Member for just $25 a year. You can join here.

 

Tags: rta - healthy homes guarantee bill

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