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Is The Government Coming Down Unnecessarily On Landlords? Will This Ultimately Benefit Or Hinder Tenants?

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On Sunday November 17, the Associate Minister of Housing Kris Faafoi announced even more proposed changes to the Residential Tenancies Act, impacting again on both tenants and landlords.

The key changes proposed:

  • One rent increase allowed every 12 months 
  • Rental bids by landlords banned
  • A landlord’s right to use no cause terminations to end a periodic tenancy are being taken away.
  • Tenants would now be allowed to add minor fittings such as brackets to secure furniture against earthquake risk. They would also be allowed to babyproof the property and install visual fire alarms, doorbells, and hang pictures on the walls.
  • Financial penalties to take direct action against parties who are not meeting their obligations are being made more severe.

Mr Faafoi framed the proposed changes by saying, because around one third of New Zealanders rent, “Our changes are balanced, providing certainty to both parties about their respective roles and responsibilities.”

“We understand that landlords require clear guidelines, which help them protect their investment and assist them in their dealings with difficult tenants and the law ensures this. If a tenant acts irresponsibly there can be repercussions.”

The next step is for changes to be drafted in a Bill to amend the Residential Tenancies Act 1986, to be introduced to Parliament in the first quarter of 2020.

What will the implications be?

Rentals.Co are as always looking closely as any proposed legislation coming out of government to ensure their landlords receive the best guidance and support, after a year of tremendous change within the landlord sector.

Bronwyn Inglis shared these views:

Whilst these are merely proposals at this stage and at their earliest wouldn't be introduced till 2020, the governments indications are worrying and clearly show a lack of foresight with the proposed changes likely to negatively impact tenants and landlords.

We have already seen landlords exit the rental market following the need for higher levels of insulation required to meet minimum housing requirements. Further changes are likely to see a further exodus of mom and pop investors choosing to invest elsewhere, driving supply lower, demand higher and rental increases will spike sharply. Particularly given the proposed single rent increase annually.

However, is all lost and should landlords exit the rental market?

Bronwyn goes on to share her knowledge and expertise, and the clear statement is, a good letting agency is key and a calm level head is required:

We have seen many announcements and proposals, and its worth noting that these are exactly that - a proposal. A lot will likely change over the coming months as feedback is sought and the dust settles.

The importance will ever more lie on having a good letting agency involved from the outset, particularly with the need for good tenants if the right to use no cause terminations to end a periodic tenancy are taken away.

We at Rentals.co have never supported the use of rental bids, due to having seen the first hand impact this has on short term tenancies, overstretching of tenants and later failures by tenants to meet their financial obligations.

This approach often overlooks long term tenants who may only be willing or able to pay less, but easily countered by rental voids and chasing non payment. The purpose of a good rental agency is to secure the best tenants to fit the needs of the landlord. Being Northland’s largest rental agency, we have a track record of achieving this.

Mr Faafoi the Associate Minister for housing in his proposal said “Greater security of tenancy and less regular rent increases, coupled with the ability to make minor improvements, mean renters will be better placed to make their house a home.” 

Rentals.co agrees with this: long-term tenants who treat their property well can be beneficial for the owner, and as such minor fittings would be a fair and reasonable request.

The view however held by Rentals.co with regards curbing rent increases to an annual approach is one of surprise that it is being proposed. The impact will be more sizeable and significant rental increases taking place as opposed to these being staggered throughout the year. Tenants will feel the brunt of these increases and it will make rents ever harder to plan as opposed to the governments hope of making it easier. Rentals.co does not see this negatively impacting on landlords, and with over 500 properties managed, their knowledge of the market across Whangarei and Northland is invaluable in setting the correct rent for the year ahead.

Bronwyn further shared :

Rentals.co is all about keeping standards high for everybody and is proud to be working with David Faulkner (RealIQ) to ensure the needs of tenants and landlords is heard from those who best know the industry. We [Rentals.co] are well placed to understand the market forces and as property management being our sole business, we know landlords with us will be insulated from any negative impacts this legislation may bring

Rentals.co encourages all landlords to complete the survey RealIQ is undertaking available here and Landlords and Tenants alike can ensure that Rentals.co will continue to focus on long term value for both parties through effective property matching, working with both parties to continue to drive up rental quality, as well as ensuring compliance of landlords is always achieved.

If you, or someone you know are looking for a fresh approach from your rental Agency, ensure you give the team at Rentals.co a call.