David Hargreaves offers alternatives to what the Government is proposing with its revamp of New Zealand's tenancy rules

David Hargreaves offers alternatives to what the Government is proposing with its revamp of New Zealand's tenancy rules

Well, they've got this completely the wrong way around, I think.

With the introduction of the Residential Tenancies Amendment Bill into Parliament, the Government is going to press on as intended with some far reaching changes to our tenancy rules for rental accommodation.

The officials have had their say on the legislation, the public now get their say (submissions close on March 25) and the bill is set to be reported back to Parliament on June 22.

I've already expressed a view on the plans, but since there's now definitive legislation to look at, I now have another go.

And as I said at the top, I think the Government's got this wrong and I hope even at this relatively advanced stage it can be convinced to change its mind. A complete reversal in thinking and direction is what's needed in my view.

My focus here will be on the part of the legislation with the biggest ramifications - that's the proposed abolition of 'no cause' ending of periodic tenancies. 

As I said in my earlier opine on this subject it seems clear to me the Government originally  had philosophical hankerings to completely remove fixed term tenancies in favour of all open-ended (periodic) tenancies. 

It met big pushback from the public on that one (ending fixed term tenancies, that is) so didn't persist.

Pushing the landlords into open-ended tenancies

What we've got now is a proposal, as per the legislation, that fixed term tenancies will continue.

But of course now once a fixed term tenancy ends it will automatically revert and become 'periodic', or more to the point, open-ended unless the landlord can give specific reasons for the tenancy to end. And ditto to that once the 'periodic' term begins. A landlord can now only end a tenancy for 'good reasons'. And such reasons of course include if the tenant repeatedly fails to pay the rent on time or repeatedly engages in antisocial behaviour.

Clearly the Government wants as many people as possible to be on open-ended tenancies whereby they decide if and when they will move out. And that's without those tenants giving any commitment at all to staying in the property for any period of time. Which is just unfair, I think.

Essentially as planned what will happen is now that a tenant will go into rented accommodation and simply be able to stay there for as long as they want,  pretty much until the landlord decides they want to sell the place, or genuinely need to refurbish it, or genuinely want to move in themselves. And there's even a nasty little clause in the legislation that makes it an offence for a landlord to try to terminate a tenancy (either by giving a notice to the tenant or by applying to the Tenancy Tribunal for an order) "knowing that they are not entitled to do so". I think that clause is just plain offensive.

You won't be able to get rid of them

As this legislation stands I reckon it's going to be virtually impossible for landlords to remove unruly tenants once a 'periodic' tenancy has commenced. And remember, the clear intention for this Government is to have as many tenancies as possible simply to either be, or become 'periodic'. 

The legislation says that most unruly tenants will now only be able to be removed on a 'three strikes and you are out' basis. So, that's three written warnings that have to be issued by the landlord within a 90 day period before the landlord can then apply to the Tenancy Tribunal to get the tenant out. Imagine the work that would be involved for a landlord in doing that. Imagine the effective cost to the landlord in terms of hours spent (and by implication money lost) in doing that.

As I said in my earlier article on these proposals, the most likely outcome here is that landlords would seek gold-plated tenants that come with excellent work references and excellent previous tenancy references. People who might be more on the 'fringes' and on whom landlords might have been prepared to take a chance earlier, will not get those chances now.

The poorer and more disadvantaged are less likely to get a break. This legislation will most undermine the people it sets out to protect, in my view.

The whole premise of the legislation is wrong.

Telling the private sector what to do

The legislation takes, in my view, an attitude that private sector landlords 'have' to provide rented accommodation. It takes an attitude that every tenant should be able to go into a property without making any specific commitment themselves, but that the landlord is effectively now committed to allowing that person to stay in the landlord's property for as long as they want.

Well, there's a problem. Nobody HAS to rent out property.

If it's too tough and too risky then landlords will likely just not bother. 

Potentially then we could simply see rental properties taken off the market. Maybe they would be sold. As I said in my earlier article that MIGHT be good for first home buyers, for example, because it would put more properties on the market.

But it might also drive up rentals for the properties that are still up for rent, if the (more limited) supply of such rentals becomes more squeezed.

And it means that those who would most struggle to get into a rental property now probably won't be able to and will be left looking for state housing as their solution. This would definitely further marginalise more people and simply produce more people dependent on the state, I think.

My answer

So, what would I do?

I would actually turn this on its head.

Get rid of 'periodic' rentals instead. 

Make rentals for a fixed term. 

Ah, you immediately say, not everybody could or would want to sign up for say a year  -  and landlords might not want to risk signing up people for that long.

Well, okay. A month could be a fixed term. 

As I might have mentioned previously somewhere, many years ago I rented a rundown bedsit in a rundown part of South London from a landlord who only rented to people from New Zealand, who fashioned his flats as 'holiday rentals' and who would bring a fresh one-month tenancy agreement round for you to sign every month!

Now you might think that sounds silly. But, if a landlord was not sure about a tenant then they could sign them up for a month or two as a kind of trial and then if all appeared to be going well then sign them up for a longer term. Why not? Both parties would at least know where they stand.

And equally, if both parties were in agreement and happy, what about the possibility of people signing up for say a three-year tenancy or even longer? 

Surely if we want to see more maturity come into the New Zealand rental market then having tenants signed up for proper agreed terms of tenancy is the way to go. 

Turn this on its head

I have rented a lot. It's not a nice feeling that the landlord could, at a whim, decide they want to end your tenancy. 

But equally, the person who owns the property is entitled to do what they want with that property. Telling that person they have to 'put up and shut up' with a tenant for an open-ended term, when the tenant themselves makes no such commitment in return, is plainly unfair.

The way to give tenants security of tenure is by defining a specific period of time for the tenancy and to have that renegotiable at the end of the term.

This legislation as it stands is an attempt to railroad landlords into taking on tenants who may or may not prove to be the tenants from hell on an open-ended basis. 

It is the state trying to tell the private sector what it should be doing. 

Well good luck. It will have the opposite effect to what is intended.

As I said at the top, the Government have got this completely the wrong way around. Make fixed-term rentals the way to go. Do away with open-ended 'periodic' tenancies.

My hope actually is that with this being an election year this legislation might get lost in the rush and not make it through Parliament. I really do hope so, because I reckon for sure that if it does go through as currently intended it will prove unworkable and it will have to be changed.

What do you think?

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Thanks David - you've hit the nail on the head here.

It will be virtually impossible for landlords to remove unruly tenants once a 'periodic' tenancy has commenced. Only a negligent or poorly informed landlord would rent to a tenant that is even slightly risky.

One small but significant change to the Bill would make it much more reasonable - remove the provisions that force fixed term agreements revert to periodic when they end. The result will be that almost all agreements are on a fixed term basis as no landlord in their right mind would agree to periodic. Fixed term provides certainty for both parties, whether it be for one month or five years. There is a huge incentive for landlords to try sign good tenants up for longer terms. And of course, if the tenant or landlord wants to end it early they can do so if they have the agreement of the other party.

The Bill is going to the Social Services and Community Select Committee. Looking at those on the committee, I wouldn't actually be surprised if five of the nine members are receptive to this idea. Probably a waste of time but I might write to them individually.

https://www.parliament.nz/en/pb/sc/scl/social-services-and-community/tab/mp

There will be a fixed proportion of renters who act in a way which is either antisocial to the neighbours, who do not treat the property with care or who do not pay the rent on time. We are led to believe that everyone has the right to be able to live in a house. So, given that there will be a whole population of people like this, whatever the govt does with the rules, they will still need to be housed somewhere. At present a proportion of these people will be shuttling from private rental to private rental causing carnage in their wake.
The introduction of rules will make it harder to move people on will result in much more rigorous due diligence being undertaken. Therefore, there will be more rental downtime particularly in the cheaper rental areas and there will be more people struggling to find a house to live in. More and more of these people will presumably end up on the govts books. Thereby ending up being housed in motels or the recipients of new housing NZ developments. Which will concentrate them. But they will always exist. In most cases their behaviour will have taken generations to bed in. And it is now fixed in place. They will consider themselves to be victims. There is no way forward for those with attitudes like this.
Times are good at the moment. Employment easy to find if you have the right attitude, you actually look or are willing to move.
When the next recession take place, look out. Its going to be very unpleasant in some neighbourhoods.
Sorry if this sounds a bit gloomy, but I firmly believe that this is reality of the situation.

"More and more of these people will presumably end up on the govts books. Thereby ending up being housed in motels or the recipients of new housing NZ developments."

That is the current CoL's goal. Make it harder for these people to climb out of poverty and be self-sustaining. Once they get a taste of free sh*t from the government, like how the benefit increases are now going to be based on wage growth rather than CPI (basically giving away NZ's productivity increases to non-productive baby factories) they will vote Labour for life. Pretty much a prelude to eventually f*cking up a country I'm afraid :)

An EXCELLENT and thorough piece David thank you. I haven't until now ever made a select committee submission on any proposed legislation. But this legislation is too important to ignore. I am not alone, there are many interest.co commenters on both sides of the divide who are anti unaffordable rents. I wouldn't want to be an Auckland renter the way its going.

What are the odds that the standard form rental agreements start coming with: “The tenant and landlord both agree that this tenancy shall not become a periodic tenancy upon conclusion of the fixed term agreed” in bold red font with a space for both parties to initial next to it?
Perhaps rental agreements will as standard come with a formula for annual rental increases that has horrendous rates built in to encourage tenants to move on every year?

My guess is such as clause wouldn't be legally binding.

Doesn’t the legislation say that tenancies become periodic unless both parties agree otherwise? If it does then such a clause would simply fulfil that agreement criteria.

I see what you mean, but still suspect it won't fly. Would be happy to be proven wrong!

Too risky as may be seen as contracting out of the legislation. I think a clause with subsequent fixed terms of say 3 months rolling over as each fixed term ends would be more likely to be upheld if challenged.

Not sure there is any incentive for a landlord to include such a clause though. Would this not mean that they are unable to evict an unruly tenant at the end of one of 3 month terms?

Sorry, should have clarified rollover would apply unless either party gave notice that there would be no rollover (say within 1 month of auto rollover).

Oh, I see.

1. You can't contravene the tenancy act. If challenged in tenancy tribunal they will strike out anything that contravenes the act.
2. Any formula that specified a rate that were to be above market rate (like increasing rent to $5,000 per week on week 53 of a 52 week fixed term) would be contravening the act and would be struck out by the tenancy tribunal if challenged. And this particular attempt might also result in a fine for flagrant abuse of the act.

The formula could index to 1.1x upper quartile rent for the area. Excessive rent rises must be shown to result in rents that would be well above market for them to be struck out as far as I am aware.

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Disclaimer: I have never been a landlord, but I have rented in various places around the world, and am currently a homeowner.

As a homeowner I believe that ultimately the property is the owners (i.e. Landlords). They therefore have a valid right to determine who they want living in their house.

As a previous renter, I also very much understand the tenants side. They should have some level of security and stability.

My preference would be for a rolling fixed term, similar to what I experienced in Ireland.

Minimum lease of 3 months.
If not terminated by either party, this was automatically extended by 3 months. Then,
If not terminated by either party, this was automatically extended by 6 months. Then,
If not terminated by either party, this was automatically extended by 1 year. Then,
If not terminated by either party, this was automatically extended by 2 years. etc...

The idea being that the longer you stayed, the longer you had the right to continue staying.

The benefit was that if both parties were happy, they had some sense of stability. While if one/both parties were unhappy, then it could still be ended relatively easily at the next date with no reason required.

The main negative, was that if the date rolled over and your situation changed soon after, you were stuck for potentially quite a long time.

Administratively, it meant that you had to be on top of the rollover dates. To end the tenancy, notice had to be given at least 1 month before the next rollover date. This clause was the same for both landlord and tenant.

I believe this notice period is perfectly fair. After all, it is how our fixed term employment agreements operate.

Ultimately I believe the best result for both parties is to have a good working relationship. This tends to be more prevalent when dealing directly - i.e. avoid property managers like the plague (or Wuflu if you prefer a more modern take on the old saying).

Ireland has really come into its own in recent years. It seems to have thrown off the shackles of the erstwhile controlling Catholic church and even allowed some fairly liberal abortion rights. Its tenancy regulations smack of common sense; such a sensible system would be impossible to achieve in NZ......most tenants would never understand it.

What an offensive generalisation of renters. Proud of yourself for implication only idiots are renters. Troll much?

How dare you imply that tenants in this country are stupid. Seriously. How stupid do you have to be not to realize that large numbers of people are having to rent and rent for much longer because house prices are way out of whack compared to wages. People like you are exactly why people despise landlords and smug homeowners who don't have the humility to at least recognize that a large part of the reason they are landlords and homeowners is due to luck and timing.

I entered the workforce in 2008 at age 18, earning $21,300 per year. I have saved 20% of every single pay since my very first payslip via savings/Kiwisaver and bought my first home in 2017. I bought my second this year. I worked long and hard for 9 years to get in the market and I did it by saving. No Home Start Grant, no bank of mum and dad. No luck involved, and no great timing.

The best time to buy a house is now. Prices aren't going to crash until another 50,000 homes magically appear. Stop complaining and work for your freedom.

Well done.

Unclear how that makes all other renters idiots though.

Am I right presuming you're not in Auckland? One would need to be on a much larger income to expect to save a deposit, even over 9 years. Especially if paying rent (or perhaps you were at home?). DC and int.co have done some good work on FHB affordability that indicates the number of years couples on median income need to save for adequate depo in lower quartile house.

Presumably there were some big changes to your income, as even with 10% annual raises, you'd only be circa $46k by 2017, which would struggle to service even a lower quartile loan (it's not just about the depo, it's the servicing - realistically one should not borrow more than 4-5x income)

If it ain't broke don't fix it.
I am unsure as to why the government wants to go down this track.
Landlords are not in the least bit keen to find new tenants without good reason. I have never heard of a landlord not having to tidy a place up - both inside and outside - to the standard it was let in which is both time consuming and/or involves expenses; there is down time and loss of rental income between tenants; it is time consuming interviewing potential tenants or, under recent legislative changes, expensive if one uses an agent; and then there are all the risks associated with taking on a new tenant.
I am an ex-landlord. In a duplex I had one tenant for over 12 years and another for 9 of the 12 years that I owned the property. Talk to an accountant and they will suggest that a landlord budget for 48 weeks occupancy a year; keeping tenants for the full year was another 4 weeks a year rent above budget. I was smug.
There is no need for this legislation as in the case that I cite. Yes, a tenant may occasionally have an issue with a week's rent especially around Christmas, but as the landlord I was more than happy to work around this for that extra four weeks over-budget rental income annually.
Who are the Government trying to protect - poor tenants???
As I have previously posted - this Government seem to have a "naive renters mentality".

hey P8, "you ask I am unsure as to why the government wants to go down this track."
Isn/t it obvious? why did they promise 100,000 new homes before they got in.
The proposal will wreck the rental housing industry. Sure you will get some landlords out of the market but it will end up putting more tenants on the road, opposite to the idealised effect.

There should not be any such thing as a "rental housing industry", that is the exact bloody problem, that there is one.

What is broke is the cost of renting. Friend of mine in a low income rental took the rental on 2 years ago at $400/week for a 3-bed place. First annual rent increase, it went to $440/week; just received the second annual increase to $500/week. She can't afford that and has downsized to a basement apartment with one bedroom. She is a working Mum with three kids - receives the max accommodation supplement. She has had to move out of the area where the kids go to primary school and where she works. She will now commute 14kms each way every day.

Yep and rents will go up more with this latest round of meddling. Tell her to think about whether this government has helped or hindered her.

14kms? Must not be Auckland, that's a short commute in Auckland.

Have you seen the public housing waiting list? This Govt thinks if it can force private landlords to keep their crappy tenants in place, they won't end up on the public housing waitlist and make the Labour Govt look worse. Of course, this legislation will have the exact opposite effect by denying these people a rental property in the first place. But you can't tell this lot anything.

This is why I will retain an empty house ( home unit actually). The risks of damage and excessive wear and tear are too great to take the risk. Once bitten twice shy. The maintenance (hiring tradesmen) is too expensive these days and even wear and tear repairs like re-plastering and repainting, or plumbers' visits, can wipe out a full years rent or more. For once, let's be realistic: most tenants generally have no idea what it costs to 'run' a rented property.
I may consider renting to a professional lady but I understand it is now against the law for landlords to pick and choose tenants. I would even then want the government to guarantee to cover every cent of damage or excessive wear and tear; this is not covered in a workable way by insurance.

It may be against the law to specify the gender, ethnicity, age of tenants but set the rent low enough and you get a wide range of applicants and then you choose. Maybe you will choose a 'professional lady' but having met a diverse range of applicants you may suddenly prefer the elderly man or the single Mum with kid, etc. In other words it is a law that does little harm and cannot be enforced in practise.

Sounds like a robust business plan. BHSL should try this.

Evidently that scoundrel really got under your skin.

Then sell the @#$&ing thing so it can again be what it is intended for, someone's home. This is madness, that it is worthwhile to own a house and just sit on and make money. Should be taxed right out of that imho

"But equally, the person who owns the property is entitled to do what they want with that property."
This just isn't true, and not just in the context of renting. An owner occupier can't knock down their suburban house and build a mini factory. There are numerous council rules about what kinds of structures are permissible, and what kind of extensions are permissible. If you rent out your house, you are essentially going into business. Every other business must comply with regulations, why not landlords?

"Telling that person they have to 'put up and shut up' with a tenant for an open-ended term, when the tenant themselves makes no such commitment in return, is plainly unfair."
Why is it unfair? It's a difference in obligations, yes - but the landlord and tenant are in very different positions. Similarly, an employee can quit any time they like, but employers can't just fire someone for no reason. Why? Because their situations are different.

Disagree with your second paragraph.

Employers, can and do get rid of employees very easily. This most common method is via "restructure", but tinkering with job descriptions then "performance management" also work. Increase workload, without increase in pay is also common. A few even suck up the litigation, and do just "fire" them.

Unfortunately for the employee the end result is the same.

Rereading your first paragraph, in particular "Every other business must comply with regulations, why not landlords?" is something I think should be looked at further. Renting is indeed a business. There is a financial transaction for the provision of a service. GST should really be payable, and certain consumer protection and H&S rules should come into play, most of which would probably benefit the tenant.

The laws of economics and market place suggest a fixed term tenancy will be cheaper for the tenancy, as this provides security of income for the landlord.

Personally, I let out the homes I own for an initial fixed term of one year, with 3 weeks notice in favour of the tenant thereafter. If the tenant is not treating the situation as they should, I roll over the one year period and increase the rental.

Every landlords situation is different, however if I have good tenants I general charge them below market rent to encourage them to stay. Bad tenants can cause you all sorts of headaches and costs, and more often than not it takes a long time to get blood out of a stone.

David it's interesting that you mention London and the UK as an example. Having been a Landlord in the UK, it still remains quite difficult to end a "Short Hold Tenancy" and it is weighted a bit more towards the Tenant. Even with Tenants who fall behind paying the rent, Landlords generally can't force them out. I found that most cases, Landlords had to wait for the year contract to be completed.
You can add things such as "break clause" but even then it's difficult to uphold them.
Here's a link to the UK's current Tenancy agreements: https://www.gov.uk/tenancy-agreements-a-guide-for-landlords/ending-a-ten...

I would go one step further and suggest we look at the German model , where tenants can , if they wish , stay in their rented home for their entire life .

So in Germany , you have companies listed on the German stock exchange that own apartment buildings , and these are leased to individuals , often for anything from 5 or 10 up to 40 years.

And the system works

And the tenants can paint walls and make certain other modifications, while accepting that they may incur costs to restore the apartment back to the original specs when they leave.

There is definitely merit in this model which is more akin to commercial real estate or infrastructure (it really only works for apartments). Professional investors can buy and sell apartments with tenants in place. The returns are similar to an inflation linked bond with both coupon and final sale price generally correlated to inflation over the long-term.

This is something the Super Fund should be looking at rather than getting hosed on Portugese bank insolvency restructuring.

Totally agree, this needs to be a thing here, does not need to wipe out short term rentals for those who need them, but there are too many people now who may never own, they still need somewhere to call HOME and having leaseholds similar to commercial ones could go some way to bedding that in.

Indeed. However in some cases those tenants pay for all fit out - kitchen, bathrooms etc etc.

There are plenty of places where corporations run residential property businesses. HOWEVER, a corporate has shareholders who require a return on investment. So residential rental yields would need to be in the vicinity of 5-6% net (thats after all costs of maintaining and managing the rental are paid). Otherwise why would shareholders provide funds to residential property corporations, rather than commercial property operators? Now go work out how much rents in NZ would have to rise by in order to provide a 5% cash dividend to the owner each year. I'd say most would have to at least double, if not more.

@KW you are correct , but only up to a point .

A listed residential company or trust could fund developments at a 3% cost of capital , and pay shareholders 0.5% dividend , which means that on a highly geared property there will be enough for shareholders to get a yield .

In any event , the market would need to see real downward adjustment in rents , and in a fully supplied market , this would occur .

Right now rents are being driven by demand from migrants , and whoever else you may wish to blame , if there was a decent supply , the prices ( (rents) would stabilize

Theres not enough scale in NZ for that model, even the mammoth building chains and supply chains that support the build to rent sector in developed countries have no presence here due to that fact. Its why we have this tinpot problem ridden rental industry in NZ...all done on the cheap.

Can see this would be fine with a good tenant/landlord. That's the crux and would be pretty hard work with a bad tenant. Perhaps a public register for tenancy performance could be made available like a credit rating to highlight and weed out the worst?

Already is such a register.

Ok. Who holds that and how do you access it?

"Telling the private sector what to do
The legislation takes, in my view, an attitude that private sector landlords 'have' to provide rented accommodation. It takes an attitude that every tenant should be able to go into a property without making any specific commitment themselves, but that the landlord is effectively now committed to allowing that person to stay in the landlord's property for as long as they want."

Sounds like being an employer & employing people in this country.... I might move to Russia, less restrictive

Russia might not subsidise you with an Accommodation Supplement benefit though. Russia also looks to have capital gains tax, that horrid "war on landlords" folk like to shriek about on here.

Does anyone know National's stance on the proposed changes?

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They're consulting with Xi and will be back to us soon.

From Jenée Tibshraeny’s piece the other day:

Neither National nor ACT supported the Bill at its first reading.

National MP Dan Bidois coined the Bill “radical” and “unnecessary”, saying it would only pile on costs for landlords and renters.

Meanwhile ACT leader, David Seymour, said: “It’s beggars’ belief that, at a time when Kiwis are paying record rents, Labour is passing a law that will increase them even further.

He shouldn’t really be surprised.

Along with David's comments, and the very valid commentary above, this "Well, there's a problem. Nobody HAS to rent out property." is where a problem exists.

Landlords could toss their toys and just let a property sit vacant. Auckland is already identified as having almost 40,000 properties sitting empty. what if that number swelled to twice that? what would the Government do then?

I'm hoping it does have the effect of a large wave of ex-rental properties coming on the open market. And in doing so, of course I'm hoping market prices come down.

Our number 1 problem in NZ is housing costs. The rate of inflation in that regard (both for purchase and rental) is way outstripping the rate of rises in income. Anything that puts a brake on the attraction of housing as a business enterprise should be welcomed. I recall the same argument about landlords selling up when the Healthy Homes legislation came in, but I haven't seen any stats saying that saw a big influx of ex-rentals coming on the market.

What I suspect (hope!) the government will do as well is get a shared-equity scheme up and running - giving more low/middle income families the opportunity to purchase. That is the advice coming in from the housing advocacy sector. In many cases (because of high rents compared to income) the barrier to entry of families stuck in the rental market, is the deposit needed to purchase, not the repayments on the loan.

The more policy introduced to reduce house and land prices, the better.

If one can improve tenure of tenancy and at the same time reduce house prices, all the better.

In my experience, problem tenants are a minority anyway, and the majority of that minority are government tenants.

My biggest hope is that this legislation passes as is and that all the moaning landlords sell up.

I'm hoping the antisocial louts will be finally gone from my street next month, that roar up the street at all hours with their fifty mates in tow. I'm hoping their landlord has learnt his lesson in giving these young citizens a crack at the rental market. I'm hoping his insurance covers the damage. I'm hoping they find greener pastures somewhere else. I'm hoping they don't move in next door to you Kate, as their neighbours were so worried, scared and just plain exhausted. I hope they don't move in next to my mum or anyone's mum for that fact - it would probably finish her off. I hope the government don't remove the ability to move on problem tenants without the threat of having the landlords house burn down. I hope I'm not put in this situation again...

How much better would your life be if the house in question was occupied by its owner?

No different. I'd never equate ownership of a house with acceptable social conduct.

You are a damned sight more likely to have acceptable behaviour from the occupants of a property they own. The whole denial of people from proper homes has contributed in no small way to the breakdown of society, in my opinion

Yes, I assume you'd be happier with an owner-occupier. That's my point. Fewer rentals more owner-occupiers; cheaper housing across the board!

The part of your comment where you put forward a logical argument supporting this very “interesting” theory is notable in its absence.

Kate, regarding your healthy homes comments, you’ve neglected to consider two things:

1. The full effects of this change have not come to fruition as compliance is only required by 1 July 2021 for most landlords and by 1 July 2024 for all landlords. And it will take time for market equilibrium to be reached some time after that still. I think you’re confused as the 2016 insulation rules required compliance by 1 July 2019.

2. You have no way of knowing how many landlords have sold up, will sell up, or have been able to increase rents as a result of these changes.

1. Yes, and insulation on its own was moaned about.
2. We do know that owner-occupier numbers have decreased over a number of decades, and we do know that rent rises have outstripped wage rises in the shorter term (i.e., more recently). StatsNZ reports on these trends.

It would kill the construction industry as the cost to build would be more than what the property would sell for.

It might pay to consider the laws of unintended consequences. First off, if landlords sell their cheaper, lower quality homes (you know, the ones in the crap areas that attract crap tenants) they will rotate the money into buying a more expensive home, in a better area, in order to attract a better tenant. Therefore those landlords will now be competing with you dear Kate, when you go to try an upgrade your current home. Result - prices go up in those areas/price brackets. The cheap, low quality homes will be purchased by first home owners, many of which are currently living with their parents/flatmates or have recently arrived in the country, and so will not free up another rental property. Result - prices wont drop for low quality houses, but rents will rise. Lastly (and this is my approach) in order to get ahead of the capital gains tax that is likely coming, landlords will sell up their low quality houses and put the cash into a bigger and better family home for themselves. Buy as big a house, and in the best location as you can afford, and sit back and wait for the tax free capital gains. All without the stress of dealing with tenants. Again, with money no object for owner occupied homes, prices will go up.

Not one of those potential consequences is a bad thing as long as the bottom end of the RE market becomes affordable.

What if the lower end of the market goes from being bought by investors to being bought by developers who then redevelop them into more premium products (to get better bang for their buck) ? How about owners simply keeping the properties vacant as a store of wealth / inflation hedge ( every minimum wage /dole rise simply redefines the share of productivity that needs to be allocated to each person with the net effect of inflating the dollar cost of tangible assets ) so as long as we have a min wage and or dole property seems to be a safe-ish bet. To many people confuse nominal dollars with the productivity it represents, the market will usually adjust itself when a disconnect appears when the value of a productivity unit is made to artificially differ from the dollar(s) that represent it.

If sufficient pent up demand for property exists, it is entirely possible that property prices will not drop due to investors selling up, but rents will rise due to reduced supply (and those rising rents then underpin an increase in property prices at the lower end due to yield)

If you are going to buy houses to keep vacant to store wealth, then you are not a very nice person, putting it mildly.

I think this is a terribly uninformed comment.

I am a landlord. I was silly enough to build 3 apartments in disused office space some years ago. So I created 3 affordable houses. How many have you built Kate? Zero? I thought so.

And now you want to tell me I should sell up, because you know, I'm taking properties away from first home buyers or something.

I can tell you what I am doing: Talking to my property manager, who of course, is looking at this legislation and discussing it with all his landlords. The general opinion is a along these lines: 1) This is going to cost us a lot more, so put rents up and 2) It might be worth selling up.

Neither of these options (even no. 2 which you desire) are going to help the renting situation.

If you're looking for reasons house prices went up a lot after 2008, this is my take: 1) A flood of overseas money being printed and going around the world looking for a home, 2) Banks and governments inflating their way out of the GFC.

I disagree completely. Landlords already deliberately time the market to end their fixed term tenancies with the annual influx of students to capitalise on the inflated demand. This gives existing tenants two options: Give in to the demands of the landlord and pay whatever rent they raise it to to resign for a year, or leave and fight it out against all the others in the same boat.

So you want landlords to charge below market rates?

Interesting. Some would call this a form of price exploitation by targeting windows of peak demand.

Except it's not peak demand. It's sustained demand that is adjusted periodically. The market has maximum liquidity at that time, so it make sense for periodic tenancies to start/end there.

I thought Faafoi was about the only one in the COL that had any semblance of business acumen!
However, I was totally wrong!
This government of nillers should keep out of meddling in business owners business, and concentrate on how to run the country successfully.
However that is far too much to ask and anyone that thinks that they are doing a good job are seriously misled!
What have they done successfully that has made anyone’s life any better over the past 2 years?.

For a start they got rid of the National government who would not admit there was a housing crisis in New Zealand when anyone with half a brain could see there was one.

Personally don’t see any housing crisis in Christchurch.
Houses being bought and sold and tenants coming and going.
There may be a shortage of houses that are affordable for people in some areas but they would be no different in all countries in the world.
Ms. Ardern stated that they would build all these affordable houses! Failed
She said she would sort out child poverty! Failed
Reduce immigration significantly! Failed
Pike River! Failed
Over 2 years in power and success rate of success with her promises is a big fat ZERO!!

Unlike the majority of the North Island and parts of the South Island there is no housing crisis in Christchurch as many of its inhabitants left after the big quakes. Of those who are left many would love to leave but are hamstrung by the fact that even if they sell up they could not afford to shift to their city of choice as housing is more expensive there. It certainly is sad to see how a once nice town has been reduced to such a sad state of affairs.

Or they will do things like make sure the term covers the quiet times of the year.

I like the idea of fixed term tendencies. Win win. I’ve signed a couple of 2 year ones. Internet companies need fixed term contracts, why not landlords? Only caveat is90 days before fixed term ends, needs to be clear what’s happening at rollover. Min should be 12 months though.

The US has leases, and works pretty well in terms of tenant and landlord security.

Internet companies aren’t the model I’d be going with. They also have the fixed terms to claw back all the free stuff they give you to sign up. 2 year fixed term first month rent fee isn’t going to happen anytime soon for my property

If landlords ever gave me free stuff, I would have given it back i left early.

Coming off a stable 5 year tenancy, moved cities and bought this time.

This legislation is going to force me to leave a property empty. I was planning on renting out a holiday home for 3-10 months to people who need temporary accommodation while building, doing seasonal work, or looking for a place to buy. Because fixed term tenancies now become unlimited tenancies, I cant run the risk of renting the place and not getting it back, so empty it will stay until I decide to sell it. This is in an area where there is a desperate shortage of rental properties. My only other alternative is AirBnB, although this probably means it wont be rented over the tourist off season.

You can provide that, it's called transitional housing;

https://www.workandincome.govt.nz/providers/housing-providers/emergency-...

Who in their right mind would rent to Housing NZ clients? I'd be renting to professional working people, not those looking for emergency housing. And if you notice, even the HNZ tenancy is limited to being under 3 months, which is the limit for short term tenancies. Anything over 3 months will now be a perpetual lease.

You are just so naive Kate. That is a recipe for having a house trashed. For a few months rent. Crazy.

Unfortunately you are likely one of many.

As a former tenant and current landlord I never liked fixed term agreements as moving out at the end is a problem. Finding somewhere else to rent when you have a fixed date is a bit of a hassle and you end up with either nowhere to live or it paying for both places. I know of several people that have had a change in circumstances and have been left paying for a rental they don’t live in. The landlord was in no hurry to find replacements. My current tentants asked for a minimum time period as they wanted some security they wouldn’t be out on the street in a month. We did 6 months fixed and 3 years on they are still there. The more rules that apply, the harder it is to get a mutually beneficial arrangement set up.

We rent to housing NZ tenants. The rent is guaranteed on a long lease. The house has, however been mistreated since having a total refurb. Therefore we expect to have to gut it completely one day and start again. However the occupants with their large tribe of children and kids mates don't seem too worried living in a house in which they destroyed the brand new flooring, chopped down established trees and graffitied on the exterior walls. I personally can't understand it but I guess they are happy to have a subsidized, dry, warm roof over their head. Renting property is definitely not for the faint hearted and anyone who asks me about doing it I simply advise, don't. There's a huge element of luck in renting property, plus it helps to be handy and save money on tradesman costs which are ongoing.

People looking for investment now I'd advise just enjoy life, keep it simple, do Kiwisaver or commercial property if you can but avoid residential rentals now.

Cannot wait for the day to sell up.

Ridiculous situation with privatised housing, it is affecting the ability to retain skilled staff when tenancies end every 12 months. Long term renters need fit for purpose tenancy laws, if you don't agree then sell up and get lost.

What David suggests will happen totally resonates with me. All new tenancies will become rolling fixed terms with the landlord only renewing for a new fixed term if they are happy with the tenant, when this legislation comes into place.

I have a fixed term tenancy coming up for renewal in May. The tenant is great and I am happy to renew but I won't let it go onto periodic. In fact I will reduce the term to six months. I have experience where tenancies can go bad over time. A previous tenant in another property I own was fine for a year or so except for the odd missed rent payments. After about 2.5 years her boyfriend moved in (without my consent). She didn't fess up for over six months he was living there and he was only there once when I did inspections. From that point on though I had repeated issues (increased frequency of missed rent payments, neighbour complaints, damage to property). I think in total I went to the tenancy tribunal 5-6 times with only minor improvement. When I finally gave her 90 days notice to vacate after about 5 years living there, she immediately stopped paying the rent. I finally had to evict her. End result over $20k worth of repair work, $3.5k rent owing. The tenant played the system to the letter of the law and knew exactly what she could get away with.

Under the new legislation, this scenario will play out more often unless landlords protect themselves with fixed term tenancies. Incidentally, I still own that property but run it full time as an AirBnB. After doing an expensive renovation of the property I wasn't going to risk renting it out to tenants again to have it ruined. I suspect more landlords will also consider this as an option meaning a further reduction in supply of rental properties for long term tenants.

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