The Ministry of Housing and Urban Development (MHUD) has warned the Government a proposed law change aimed at better protecting renters, could end up hurting them.
This could affect their willingness to rent their properties out, leading to more stringent vetting of tenants and higher rents.
Consequently, more people at the margins could require government accommodation support.
Yet MHUD concluded: “The likelihood of rental supply contracting because of the proposed changes is considered low.
“The likelihood of the proposed changes resulting in rental increases is uncertain.
“There are a wide number of factors that affect rent, so it would be difficult to attribute any change in market rent to any once factor or elements of the tenancy reform package.
“Effects on rents may be muted by other factors that reduce costs of landlords such as, for example, lower interest rates.
“Increased housing supply because of the government’s build programme will in the medium to long term limit landlord’s ability to increase rents.”
The Bill passed its first reading in Parliament on February 20 and is now being considered by the Social Services and Community Select Committee.
What’s in the Bill
If passed in its current form, the Bill will mean:
- Landlords can only end a periodic tenancy due to a reason stipulated in the law (IE anti-social behaviour by the tenant, an intention to sell the house or do major renovations). If the owner or their family intends to live in the house, they will have to do so for at least three months (currently the law doesn’t stipulate a timeframe around this).
- Fixed-term tenancy agreements won’t end at the end of the initial term unless specified grounds for this have been met (IE the landlord needs to sell the house, or the tenant has breached their obligations). If these grounds don’t apply, fixed-term agreements must be become periodic agreements unless both the tenant and the landlord agree otherwise.
- Landlords will need to give 90 days’ notice to end periodic tenancies (as opposed to 42 days). If the house is needed for their family or employee, they can give 63 days’ notice.
- Tenants will need to give 28 days’ notice to end periodic tenancies (as opposed to 21 days).
- Tenants will be able to add minor fittings to their premises where the installation and removal of the fittings are low risk. For example, they can install shelving, curtains, child-proofing fittings, internal locks and accessibility fittings for people with disabilities.
- The minimum period between rent increases will be raised from six months to 12 months.
- Soliciting rental bids by advertising a property without a rental price for example, will be banned.
- The Ministry of Business, Innovation and Employment will have new compliance tools to take direct action against parties who are not meeting their obligations.
- The existing civil and criminal penalties in the law will increase by between 50% and 80%.
- The jurisdiction of the Tenancy Tribunal will be increased from $50,000 to $100,000 so the Tribunal doesn’t have to transfer as many cases to the District Court.
- A party who is successful in the Tenancy Tribunal can have their identifying details removed from the Tribunal’s decision.
Getting the right balance
MHUD said the risk landlords could lose income was partly offset by other parts of the Bill. For example, the requirement for tenants to give an extra week’s notice before ending a periodic tenancy, as well as new systems for dealing with anti-social tenants and tenants who don’t pay rent on time.
“However, we recognise that a consequence of limiting landlord’s ability to end periodic tenancies unilaterally and for any reason, will be that - in some instances - tenants remain in a property for longer than is desired by the landlord,” MHUD said.
Associate Housing Minister Kris Faafoi said: “We have been mindful of the need to modernise the law and correct problems in a way which is proportionate and places reasonable requirements on landlords and tenants which can provide both parties with certainty. These changes get that balance right…
“New Zealanders have already seen the removal of letting fees, and the introduction of Healthy Homes Standards to provide adequate insulation, heating and ventilation, which will require compliance from 1 July 2021.”
National and ACT opposed
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.
“ACT says we need to change the law to free up land to bring its cost down, and make it easier to build houses. Only then will the next generation of New Zealanders be able to afford a stake in the future.”