Gareth Morgan vies to protect renters with longer leases, eviction restrictions, improved insulation funded by ETS proceeds and more social housing

Gareth Morgan's The Opportunities Party has released a policy explaining how it would like to reform the Tenancy Act to better protect renters. 

Below is a copy of the media release. You can see a full copy of the policy here. 

The Opportunities Party has a bold new plan to address the major problems confronting New Zealand, housing affordability.

While TOP’s ground-breaking Fair Tax System will stop residential properties being misused as tax free investment vehicles for the wealthy and suppress rampant house price inflation, TOP believes structural reform of the rental and social housing markets is also needed to solve the country’s most pressing social issue.

TOP will adopt a German type model to vastly improve the rights of private market tenants while demanding minimum standards for all homes and gifting current state housing stocks to non-profit social housing organisations.

The Opportunities Party intends to develop a deep market for long term rental accommodation so that families can be secure knowing that investing in home ownership is not the only way that security is achievable.

Party Founder and Leader Dr Gareth Morgan says, “Homes not Houses will alter the profile of New Zealand home ownership so the modest and low incomed no longer need to climb the mountain of home ownership in order to create a stable long-term home for themselves and their families.”

The ability to evict tenants will be greatly reduced and rental properties will need to be sold with existing tenants in residence. While market rents will still apply there will be regulations to prevent existing tenants being priced out of their homes.

The benefits of this policy package do not accrue to tenants alone. Reducing the social disruption of constantly moving home will result in less stress on families, higher educational achievement and reduced spending on social services to address the problems caused by that disruption.

“Solving the housing crisis isn’t just about increased building or decreased prices” says Dr Morgan, “It’s about the way a civilised society should regard residential property as a social asset for an entire nation rather than a financial asset for a select few”.

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47 Comments

The risk here is that owners might choose to leave their house untenanted. Other countries have an 'empty home' tax but hopefully the TOP taxation on net wealth will discourage this behaviour. Discouraging speculation will decrease urban land prices. This is good for the economy but the big losers will be recent home buyers. One small consolation is that those with negative equity won't pay tax under the TOP scheme.

They could leave the house un-tenanted, however surely that would clearly point to the investor speculating on capital gains only? and be liable for a huge tax bill. Also while I am sure a few people could do this in the high end properties I'd suggest most mom n pop housing "investors" would bleed $s too badly to consider it viable.

I think this is a good move. For a long time renting was seeing as something temporary but more and more people are staying long-term if not permanent.

Developers may get stuck with tenants they cannot get rid of e.g. developer wants to buy 1/4 acre hoping to develop 4 townhouses to sell. Tenant of current house refuses to leave and effectively denies a further 3 residences to the market. Will the Vendor have to offer the current tenant money to buy them out or risk the sale?

Living in North Shore there does not seem to be much need for tenancy protection - cheaper rents probably but the current system works for what are generally middle class housing. The problem is at the lower end of the market where these changes may help. But they do have to be implemented carefully.
Living and renting in London in the 1970's when they had very strong tenants rights - it led to more empty properties than anywhere in Europe, it led to a preference for foreign students over local families because the former would move on and it led to 'Rachmanism' - where landlords threatened tenants in order to evict them.

When you buy or rent a home in Germany, you should have no expectation that a kitchen is included. There is a room that you could use as a kitchen. That room may ... be a completely empty room with electrical outlets and plumbing hook-ups (at least you know where the sink is supposed to go I guess.) Yes, your “kitchen” will most likely have nothing at all in it. Oftentimes, the last owners have not only taken all the appliances, but also the counter tops, light fixtures and literally every single thing in the room.

But you know what, there is nothing saying that if we used Germany as a model we would be forced to mirror their laws exactly, why, who knows, we might even be able to make them to suit our society. Who'da thunk it?

One time the dishwasher door handle broke. It took 3 weeks for the landlord to fix it. I much prefer having control over my own stuff. Another landlord of mine replaced a relatively quiet LG dishwasher with an extremely noisy model. No pets. No hooks on the walls etc.

It's not as if the landlords are saints.

Many landlords want tenants for the Long term.

Indeed, who wants to kick out a good tenant ?? most of the residential rentals are actually investment properties and it is in the Landlord interest to keep it occupied 52 weeks in a year ....
TOP is a very funny party with leader and cheerleaders going funny too ... they are seeking German renting laws without all the other German aspects and way of life, discipline, social responsibilities and other punitive laws in place ! ... Selective and weird lot really !!

I think the key point here is, any sale of the house would be subject to the tenancy, save I suspect for any mortgagee sale. Regardless of how good the tenant is, they are only useful so long as you want a tenant. A longer term lease would therefore mean you could not give vacant possession on settlement or indeed until the expiry of the lease, but on the other hand the purchaser would get a house with an income stream. I don't have a problem with any of this.

I think legit landlords will like this. It's the specuvestors (those reliant on future capital gains to make any money) who will not. Bring it on!

If renting long-term is going to become an expectation of young Kiwis (e.g. as Key suggested) then it's certainly fair to give long-term renters more security of lifestyle. The current situation is a bit untenable.

In Germany you pay the rates, insurance and maintenance. They also have fixed term contracts like we do here. You also need to either paint the house when you move in or paint it on the way out. Any scratches or damage caused by wear and tear you are liable for. I know as had to paint my last two German rentals one that I got kicked out of as the landlord wanted to move back in. Go figure that the landlord could actually have access to the their own property.

The rates, insurance, water, maintenence, etc are all bundled into Nebencosten - aren't they?
At least that was always my understanding when I lived there.
I don't see how a renter in NZ doesn't pay those charges - it's just that it is bundled into the rent.

The painting thing only works in apartments - it's the same in a few countries.
I don't think it is a bad thing, but impractical when renting a whole house.

I never had to repaint any of my German apartments. I always found the Landlords to be very reasonable, actually. Much more so than in New Zealand.
A friend of mine in Hamburg always told me, at the first sign of trouble just mention one word to install the fear of god into any German Landlord - "Rechtsanwalt".
I doubt the that would trouble the thoughts of any NZ Landlord.

Not true as lived in a house and had to paint it and I don't wish for the rose tinted glasses to be worn by all when talking German rentals. Let's not forget they also take 50 cents in the dollar from your income although speeding fines are cheap.

Sorry, I phrased that wrong - I meant to say, it isn't practical in New Zealand due to our housing stock.
Not that it wasn't the case in Germany.

However we reset our laws, we do not have to copy Germany's word for word

the other thing in Germany is if you cross a landlord than instead of getting paid $12 a week payments like I do for unpaid rent by WINZ, they will land you in a nice German court and you either pay your arrears or go to jail.

I love the German system now!

Same.

If we are to give up on owning our own houses and take up the option of long term rentals, then does the suggested policy need to also include the German superannuation system as well. 19.6% tax contribution (50/50 split of contributions) - https://en.wikipedia.org/wiki/Pensions_in_Germany. Food for thought

You also need to pay 10 weeks bond in Germany

10 weeks bond when you are paying 500 Euro a month for a 2 bedroom apartment?
What's that, like 1200 Euro?
4 Weeks bond in New Zealand for something similar - size, type, location wise - I would bet you would be paying more.

You would definitely be paying more here. But then everything costs more to cover.

We have a whole cost issue that is not present elsewhere. Try replacing an oven, wall, window, carpet in NZ for what they pay overseas.

Even when I was a tenant (never been a landlord) I could see the bond wouldn't cover anything if we were that way inclined.

The security aspect needs to be balanced.

Back the truck up Gareth. I want to yell out to you a phase about Lies, damn lies and statistics! Have a look on your page 2 of your policy as mentioned above ( http://www.interest.co.nz/sites/default/files/embedded_images/01256%20TO... ).

The main reason for our house prices differing from Germany is that our population has grown by 1.2% year on year since 2000 while Germany's growth is 0% over that time (google popn changes for Germany and do it again for NZ) Plus our interest rates are lower than 15 years ago.

Just watch out for the Double edged sword I encountered in Ireland.

Stay 6 months, and a minimum tenancy of 12 months can be declared.
Stay 12 months, then it becomes 2 years.
Stay 2 years and it becomes 5.
Stay 5, it becomes 10, etc....

What is good for the Tenant is also good for the Landlord though. If the Tenant wants to move out after 3 years,they may be liable for an additional 2 years of rent.

Tenants want security especially long term if starting a family is in mind. Also having had 2 friends recently treated very badly and been forced to leave I think having long term tenure is a good thing.

I agree, but security comes at a price...

- Lose your job and want to move, well you still owe the landlord for the rest of the term.
- See your dream house and want to become a homeowner, well on top of that mortgage, you now need to pay the extra 3 years of rent.
- Job takes you out of town, tough keep on paying for your old rental.
- Little bundle of joy comes along...

My point is, that for the law to be fair, it must work both ways. If a tenant gets security, then so does the landlord.

There may be a break cost payable, but that's certainly not going to be the rent for the balance of the term.

So you are after unbalanced security - security for tenants only, not for landlords.

No, that how any break in a contract works. If the tenants breaks a shortfall payment may be required, but it is never the full balance of rent, as the landlord can and must relet.

Sublease or transferable lease

It's an option, but why should the tenant have both security and freedom, with the landlord being bound to rent the house in perpetuity to any leasee / subleasee?

Alternatively would the person subleasing takes inherits certain risks from the landlord, and if so - will that be popular in NZ?

Commercial buildings get their leases onsold, landlords of them don't all antsy about that, so I fail to see why something similar cannot work for residential, or are people buying houses as investment with too much emotion attached, or are they just control freaks who get their jollies by telling others how to live their lives.

As they say about the German market, it certainly encourages a higher level of professionalism among landlords (including many more running residential properties as a commercial business). Probably reduces the pretend-y arrangement where houses can be sometimes a business and sometimes not (for tax purposes) here.

Amen to that.

Landlording in NZ could certainly use some professionalism. Is there any other industry so completely full of clueless grasping numpties who dick their customers around with impunity, have no interest in fulfilling their responsibilities or maintaining even minimal standards in the product they're selling?

Well, maybe my internet provider is that useless. But I doubt that any other industry could get away with it.

It happens here already, I've seen several times a tenant leave before the end of their contract, if they find someone else to run out the term there's no issue.

The whole idea of the change is to swing the balance in favour of the tenant, giving them the security to live in the same place long term and raise a family. Unfortunately, the landlord gets slightly less control over his investment, but hey, that's life. People will go into it with their eyes open.

This is wrong.
The 'minimum tenancy' is the tenant's secure tenancy. They can choose to leave by giving less notice.

See http://www.citizensinformation.ie/en/housing/renting_a_home/types_of_ten... and search "required notice periods"

I have set out the legal situation in Ireland and Scotland here:

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2914694

The whole German system is based on the fact that around 75% of all accommodation was destroyed during WW11 and the properties inherited from the Communist DDR were worse than rubbish. Hence the need for long term stable tenancies became a long term necessity.

And long term tenancies are needed here due to the war on Average Joe to the point where it is now extremely difficult to buy a house that no-one can tip you out of easily.

So you're saying their government took meaningful action when faced with a shortage of housing? What a novel idea!

So the same as nz commercial, people would be more fuzzy, good

While the longer-term suggestions would probably be good, it's how to get there from here that would cause the most fun:

  • Existing tenants have turned the walls into Gruyere and run the standard-issue canine pack outside
  • House is Partay Central
  • House is tinny/P-lab/unlicensed brothel
  • House manages to pack in a family per room but has one loo and an outside laundry

To be sure, to be sure, these are caricatures and extremes. But the central question is straightforward: there has to be some sort of Jubilee for both tenants and landlords/ladies, so that the Brave New World starts out with acceptable accommodation, acceptable tenants, and plain-language legal frameworks. Many Solomons required to sort wheat from chaff - that transition period could run a decade or more, and I'm sure common taters will be able to pose some Interesting situations from their own experience.

As with so many of GM's crusading and idealistic suggestions, the devil's in the details, and this one is no exception.

Best way to transition to this form of leasing would be purpose built new housing especially for it, it is not really suited to older, high maintenance houses on large parcels of land.

Ireland and Scotland have moved from a system similar to our to more secure tenure.

Landlords still have the ability to require tenants to leave, but good reasons must be given. In Ireland the secure terms are 4 years. We could use this model and tailor it to what we think is fair in New Zealand.

I wrote a short piece on this: https://www.newsroom.co.nz/@future-learning/2017/04/03/17767/generation-...

And a longer discussion https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2914694