One implication of Auckland’s long-term housing shortage and resulting housing affordability crisis is that nearly half of all Aucklanders now live in rental accommodation. Among some ethnic groups, especially Maori and Pacific Islanders, most people live in rented accommodation.
There are also clear geographic trends, with much of South Auckland having especially low home ownership rates:
While several initiatives, like KiwiBuild, are aimed at boosting housing supply and thereby improving housing affordability, this will take a long time to filter through. Furthermore, even the “relatively affordable” house prices of KiwiBuild homes are likely to be way out of the price ranges of many people who currently rent. So it’s important to keep looking at what can be done to ensure renters have a decent quality of life.
One of the major issues with renting is how insecure it is. This plays out in the data where renters move much more frequently, including those with school-aged children (who presumably have quite an incentive to stay in the same place):
One likely reason for this frequent moving is that New Zealand’s rental laws currently provide a very low level of tenure security. Essentially, without reason tenants can be turfed out of their homes with (in some cases) little more than six weeks’ notice.
Fortunately the Government is looking to do something about this, today announcing a discussion document that looks to overhaul the worst parts of New Zealand’s rental laws:
The public is being asked for feedback on new Government proposals aimed at making life better for renters, Housing and Urban Development Minister Phil Twyford has announced.
“Our tenancy laws are antiquated and don’t reflect the fact that renting is now a long-term reality for many of our families. A third of all New Zealanders now rent,” Phil Twyford said.
“Insecure tenure can forcer families to continually move house. This is particularly tough on children whose education suffers when they have to keep changing schools.”
Phil Twyford urges landlords, tenants and other interested people to have their say on the proposals covered in a discussion document on reforming the Residential Tenancies Act released today.
“We want to strike a balance between providing tenants with security of tenure and allowing them to make their house a home, while protecting the rights and interests of landlords.”
The discussion document covers proposals on:
- ending no cause tenancy terminations while ensuring landlords can still get rid of rogue tenants
- increasing the amount of notice a landlord must generally give tenants to terminate a tenancy from 42 days to 90 days
- whether changes to fixed-term agreements are justified to improve security of tenure
- limiting rent increases to once a year
- whether there should be limitations on the practice of ‘rent bidding’
- whether the general obligations that tenants and landlords have remain fit for purpose
- better equipping tenants and landlords to reach agreement about pets and minor alternations to the home
- whether further controls for boarding houses are needed to provide adequate protection for boarding house tenants
- introducing new tools and processes into the compliance and enforcement system.
“As people rent for longer, they want to be secure in their homes and put down roots in their community. That’s why making life better for renters is an important aspect of the Government’s housing plan,” Phil Twyford said.
The discussion document and a link to an online submission survey are available at: www.mbie.govt.nz/rta-reform.
Consultation runs for eight weeks and closes at 5pm, on Sunday 21 October 2018.
These are important changes, but it’s also important to get them right. So head to the MBIE website and have your say.
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I never cease to be amazed that the main focus on housing affordability is on owner-occupier housing when roughly 50% of us live in rental accommodation. The best thing the government could do is to ramp up the supply of rentals – whether state or privately owned – rather than tying itself in knots trying to boost the supply of new homes for purchase at “affordable” prices. But quite apart from the dwellings themselves, issues such as security of tenure and a fair relationship between disposable income and the cost of renting need to be dealt with, so it is encouraging to see the discussion document exploring these and related issues.
Agree, Graeme, and I note that in plenty of parts of the world, providing large numbers of rental housing is considered ‘core’ Council business. Councils can and should be part of this, but whether it’s Government or Council, providing sufficient low rental accommodation works to keep rental rates down, making rental investment less attractive, and keeping a cap on property prices.
A house is a house, doesn’t really matter if it is rented or owner-occupied, the two markets are very much intertwined. Someone who moves into a new Kiwibuild will likely vacate a rental property.
Getting more houses on the market gives people more options, allowing them to be more picky. This alone will have a significant impact on the rental market, as landlords will have to fight for tenants by offering agreements more in favour of the tenant, and through improvements such as insulation and heating.
Selling off the HNZ houses in Pt Chev by National didn’t change the number of houses… a house is a house. Except that it did, in a sense. HNZ is now intensifying those that are left, or at least the most likely candidates. The private sector isn’t doing the same, they are MacMansioning them. Had HNZ retained those rentals, the government could be providing many more homes here. As an example of the intensification possible, 3 homes are becoming 31 in one location, ten (I think) are becoming 62.
One of the design parameters for these apartments is that they are independent in all the ways required to ensure they can be sold easily as individual units. Sad. Particularly when some of those ‘shared facilities’ are exactly what helps in socially binding a mini community.
That’s disappointing. We really shouldn’t be selling off government or council owned land without a master plan, this is one of the best opportunities we get to have well planned residential areas. I was over at the new Tamaki redevelopment recently visiting friends and was impressed. They own their house but it was built by the developers within a master plan and is a nice street facing terraced house.
Just submitted on this, took a while. Focus was on pet ownership, specifically as we are currently looking to move but there is absolutely 0 options available for us and our current house is cold, damp and mouldy….at least we have our cat, right? haha
Its about time these antiquated rental laws were overhauled. Not many other businesses operate with such carte blanche in which landlords operate. Renting a home is the easiest ‘business’ to operate in the land!
Pets are a lifestyle choice, not a necessity. I dont agree with the aspect of the changes. Its hard to have sympathy for people that complain about having no money then spend money on pets/tobacco/alcohol.
Define lifestyle choice? I guess all we need is a roof over our heads right, probably don’t even need that? Just food, water and oxygen aye, rest is pretty much up to the renter!
Maybe I’m wrong but you are probably the same sort of person that believes we should provide 1.6 million parking spaces in Takapuna, one for every man woman and child so be their god given right…owning a car is NOT a lifestyle choice.
I have plenty of money by the way, earn WAY above the national average, but I still can’t buy a house…strange that? I pay way above what someone should for rent and wouldn’t mind some value on that expenditure. Maybe I should just work harder aye and stop buying Avocados!
Don’t bother replying, I’ve read your boring arguments a million times over and the record is well and truly broken.
Well actually, I havent owned a car for years. As necessary as a pet.
Looks like you don’t own any apostrophes either!
So lonely people living on their own wanting pets – that’s a lifestyle choice? Technically correct, and such a very sad stance on life.
…also it would be great if it WAS a lifestyle choice. The point is that for many Kiwis owning pets currently is NOT a choice (but finding a place with car parks is easy). That’s one of the things that should change.
Do you seriously think that all people who rent have no money!? There are many people like myself who are on a good income that rent because we think the current housing market is a ponzi scheme and offers really poor value for money.
I don’t like pets myself and have children, but I find it baffling that landlords run a mile from well trained pets, a yet will trip over themselves to get a young family with kids that will likely draw on the walls and throw food on the carpet at some point.
My cat is addicted to avocado lattes, I fear she will never be able to rent or own her own home.
Do you make her pay for them? What is her income from: selling native skinks and birds to taxidermists, or socks back to their original owners?
I don’t ask how she makes her money, but she goes out late and comes back will well patted fur.
You seem to have zero empathy and max judgeyness – so how long have you been a landlord?
The current rental law does not provide long term rental security for both tenant and landlord. Both party can terminate any contract even the ‘fixed term’ with just a few weeks of notice.
The implication is disincentive for the tenant to look after the property, invest in furniture and upgrades. Due to the fact the tenant are not certain they can live in the property for long term and a poor sense of ‘ownership’.
Also there is a problem with responsibility: Tenant has no sense of ‘ownership’ so they tend worn out the property quickly but the landlord has to fix them. Eventually the landlord will be disincentive to invest in nice expensive fittings that are found in owner occupied properties. This will cause a negative vicious cycle.
In contrast to commercial lease, there is much more certainty and flexibility. Commercial tenant can sign a long term lease, with rights of renewal. Any transfer of ownership would not terminate the lease and cause no effect to the tenants. The contract are generally flexible enough to add clause such as demolition/redevelopment and termination.
Also a good part of commercial lease is the tenant has full control over the renovation and maintenance of the premises because they know they won’t be evicted anytime and ‘own’ the premises for a long time.
This give a sense of ‘ownership’ to the tenant and give them good incentive to look after and maintain the property. It is a win win for both tenants and landlords.
Nail on the head 🙂
The only way to bring rents and prices down is additional supply.
All of these law changes will have a cost, either directly or through the increase in risk, and when there is a shortage of supply, it will result in rents going up.
Fully agree that increasing supply is the biggest thing that can be done.
However, I don’t agree that these law changes will have a cost on tenants if supply is increased. It is more likely that the risk would be borne through landlords not being willing to pay as much to buy a rental. Those that would loose would be speculative investors and that doesn’t really bother me.
The rental investment market should really be a relatively safe place for someone to put their money, with little hope of big capital gains, not the current speculative market that it is.
Totally support better tenancy security. What we have is abysmal. But it is only a symptom of a greater problem.
The construction industry is so bad, there will always be a demand driving up the prices for houses. Government trying to use a broken system to build more housing is totally futile.
If they make it hard to kick out a tenant, then I’ll just have no tenants and leave the house sitting there appreciating value because we aren’t building new houses. I can do this and still make money, because the whole tax system is broken.
As long as there is a giant loophole to avoid paying tax on capital gain, I will keep buying additional houses using the banks’ money and my tenants rent. My house “earned” more money than I did last year from capital gain and I don’t pay any tax on that gain. I then use that gain to borrow more money to buy more houses. And when the global economy tanks again I’ll sell a property to tide things over. Also, I have a benefit of not paying rent out of my after-tax income. This is an actual financial benefit that I can use to repay the bank instead of treading water paying rent and getting no where.
It is no wonder we have such an enormous chunk of our wealth stupidly tied up in relatively unproductive investments. The system practically begs us to do it.
Investing in housing doesn’t create new jobs, well-paying jobs, or make the country richer. Instead we get poorer every year as we borrow more money to maintain our standard of living.
Instead of investing into R&D and great ideas and business, we tie our capital up into the wonderful ponzi scheme we have. I’m part of it because the last several years have seen insane returns. The rental part is a side show in some regards.
Making it harder to kick out tenants may not actually work out to the benefit of the tenants. It will result in more scrutiny into the private lives of renters. More systems to track bad tenants and good tenants that landlords will pay through the nose for. To the extent that large chunks of renters may never be allowed into another home because they pissed off some landlord who gave them a bad reference. Landlords will be so risk averse they won’t even look at some people.
But politicians don’t think that far ahead. So we will just get more rules that make it worse for tenants.
Tax all capital on an annual basis to move our wealth out of housing and into more productive investments like businesses. Housing prices will stabilise and maybe drop and scare off lots of the crappy landlords. It will drive demand for more tax efficient (smaller) housing and drive demand for councils to allow innovation on those areas.
There is no silver bullet, but best to start with the elephant in the room.
Yes.
I think it is appropriate to tackle both the elephant AND the tiger in the room. Otherwise it will never get done. And the system is broken and badly on so many fronts I disagree this can be left alone for yet another couple election terms.
I also disagree with some of the impacts you predict but that’s fine I’m expecting that there’s going to be that kind of rdsistsnce. I have been a landlord both in Germany and here and simply disagree. We are soooo far from rental security like in France (where the pendulum has gone too far) that any changes here will still be pretty timid anyway.
When are we going to have a government that has the courage to stop housing being used to as an income to fund peoples lifestyles? When???
Renters rights improvements are great but when the system is so tilted toward having to rent rather than buying your own what could be the best medicine to counter that? Liberating investor housing back to real home buyers, those who want to live in what they buy!
Housing is verging on a basic right, like air, water and food. But in NZ like many other western countries housing is a way to enrich oneself, ones greedy self, whilst at the same time creating havoc for those who missed out because of their age or income.
Example – https://www.news-mail.com.au/news/kiwi-furious-after-aussies-trash-his-airbnb-home-o/3504339/
My heart is all broke up for poor Ravi Punjwani whose house/Airbnb was trashed by Aussie tourists over the weekend. “It was frustrating”, he explained, for the young family who immigrated to New Zealand two years ago. “This is our dream project. We want to add more houses (to the business),” he said.
“A lot of time it felt like a mistake to be involved in managing rental properties but maybe “some day we will find a way to resolve all these issues”
People like Ravi come to NZ, buy up houses and deny locals houses to buy and live in. Why, because he makes a living from buying houses and renting them out very short term and one assumes, flicking them off for a nice little profit. Ravi and his investor clones collect more and more houses denying that stock to real home buyers who in turn are shut out of the market. And so the government has to pass more legislation to protect these rent slaves from exploitation.
Am I glad that the Ravi’s of this world chose to come to NZ? No. Nor am I equally enamored by all the local investors who do likewise.
You can add all the supply you like but whilst we have this warped investor culture, the problem is not going to go away!
Disagree. Adding to supply with be a significant disincentive to investors hunting for capital gains, if house prices are flat or falling there is little reason to be making speculative purchases.
You need both, otherwise you are just hoping that additional supply will level out and then drop prices, otherwise all you are doing is giving more houses for people already with houses to buy..
Yes, I agree.
I fully agree that we should be tilting the balance towards renters rather than landlords. Personally I think landlords should have to give five years notice if they want a tenant to move out, reduced to one year if they pay the tenant say six months rent.
This would still allow landlords who plan to live in the house when they downsize or retire that opportunity if they plan in advance, but it would make it clear, you are investing in housing provision not land.
My point previously is that I think people are underrating the impact under supply has had on the market becoming a speculators paradise. Most investment decisions have been made on anticipated capital gains, if these capital gains dry up people will quickly loose interest, it happened with the share market in 1987-88.
Agree entirely Waspman. I find the weirdest part is that skyrocketing land prices are rarely even mentioned in housing crisis discussions, despite it being the single greatest impediment to buying a home. I own a rental property, because of the ludicrous capital gains I make on the land, while doing sod all to earn it. Meanwhile, productive work and successful ventures are taxed to the hilt, and therefore effectively punished.
As long as those with an excess of land have no incentive to sell it, they (and I’m including me here) won’t sell it because that would deny the greater ransom that can be gained from a later sale from a finite, essential natural resource.
I love the idea of a decent land tax (among other resource taxes) in lieu of income and company taxes. It would be so easy to administer, it would encourage investment in productive and useful activities, and would free up land for those who need it. Auckland is quite low density by international standards, there is plenty of space for infill housing if we can eliminate the profiteering culture we have now.
But that is the stumbling block… changing a culture, where land is seen as “owned”, and not simply a natural resource that is “used” like air or water. Adding a few housing projects here and there won’t be enough to change it, if they are sitting on gilded dirt released for a ransom. However, a land tax would start a fundamental shift in behaviour.
Yes. Should be easy since we don’t own the land, only the title…
Haha, sure:)
If the title gives exclusive, unrestricted rights of access to the titleholder that’s then inherited by their descendants, then it’s ownership in anyone’s mind. No difference.
And the title makes it easy to attribute tax to individuals. So why ain’t we doing it? It would make a huge impact, and I’ve never come across a good reason why not. Weird.
Has Generation Zero taken the issue up? They’d be a good group to attempt to change perceptions.
Am I right in thinking proposing capital gains tax was when Labour were voted out of office last time? Oh that they had managed then.
+1 Waspman. The combination of offshore investors and mass immigration over the past decade or so have created the situation where housing in Auckland has gone from being plentiful and owned 90%+ by Kiwis to the current situation of people living in cars, paying unaffordable rents or mortgages and with likely around half of the housing stock owned by either foreign investors or recent arrivals to the detriment of locals who can’t afford a house anymore (both by the vastly increased costs and by the depressed wages as a consequence of the above mass immigration).
It looks like the current rental and landlord situation is such a badly performing market (overpriced, low quality, unsafe, unhealthy) that the government needs to intervene. To me the best way to do that is to compete – like kiwibank does in the banking sector. If the government offers enough low priced high quality rentals, surely other landlords will have to start matching it. I reckon ditch kiwibuild, start kiwirent, and hopefully when some landlords pull out of the investment market those houses can go to first home buyers.
How about doing what is standard elsewhere and regulate the market as we do in many other areas such as medicines. Require that the product does what it says on the box, stays warm isn’t mouldy, won’t be double in price shortly after moving in. The market is such that without minimum standards and laws there will always be people with limited choices who have to pay to Iive in substandard housing. Landlords see it as a business, not a social good.
Good thing TOP plans to contest the next election. The solutions were presented at the last election. Unfortunately, nz media focused on ‘sound bites’ of Twitter conversations rather than show how TOP’s tax policy could cool the property market, reward working to make a living by reducing income tax, and make renting a more secure proposition suitable for raising a family.
Unfortunatel Morgan was too busy insulting all and sundry to explain his policies.
With Geoff Simmons becoming the new leader, maybe NZ will find a more palatable presentation.
I think their vote will fall without a high profile leader. Morgan was mad but just as Colin Craig did he drew attention to his party, look where the Conservative party are now.
TOP’s policy was insanity. Good luck convincing home owners they should be taxed for not paying rent.
I am a homeowner and would happily switch to TOP’s tax policy. If your *equity* in property is less than about 7-8 times your income, you are better off under TOPs tax policy because of the 30% decrease in income tax (this BTW, reflects the position of about 80% of NZrs). I also take the longer term view and would like my children to be able to buy their own homes one day – doing nothing isn’t going to solve the issue.
TOP’s other related policy was tenancy reform to provide security for families renting – what is being discussed in the thread. In today’s speculators’ paradise, you can ship tenants in and out to take advantage of the best time to buy and sell. This is in part what drives the property market; tenants are desperate to find stability, and the only way to do this is to buy.
You can achieve without a hideously complex tax regime that locks in the idea of housing as something that should always generate a return on investment.
For the benefit of others reading, TOPs tax policy is actually not that ‘hideously complex’ for the honest home owner with a mortgage through a NZ bank on the property they live in paying PAYE on their earnings. Local bodies already collect rates based on property valuations and NZ’s cadastral information is pretty good so most of the system is already in place.
Perhaps Buttwizard69420 would share his/her much simpler alternative.
Yeah, the tax regime would be pretty simple for most people because it would be just like council rates and most people would be better off except the asset-rich, cash-poor crowd.
And as a follow up comment. If TOP’S tax proposal was adopted, many of the 33,000 ‘ghost houses’ may well come back onto the market and the 50% of renters would get a 10% pay increase by way of income tax reduction. This would be far more effective than any Kiwi Build scheme and achievable within a year or two. NZ is not short of houses – we have just have a broken tax system.
My house was one of the 33,000 as I was on annual leave that night, but it won’t be coming onto the market just as a result of tax changes. I wouldn’t take that 33,000 figure particularly seriously.
I wonder if electricity records might help establish occupancy. It would be interesting to know.
It would certainly be possible, would give a much better idea of short term and long term empty houses.
This article sums it up, buying newly built houses at discounted rates to rent out
https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12111450
I love their thinking. There is a shortage of houses to rent, so let’s make it less attractive to rent a house out. Excellent thinking. It is also expensive to rent a house so why don’t we pass some rent control rules, that worked out so well in New York! Truth is many landlords only have a tenant so they can claim the capital gain was fortuitous and so tax free. If they got rid of their tenant it is harder to claim capital gain wasn’t their intention. Maybe more will use airbnb as a cover instead
Do you see a difference between these proposed changes and the general requirement for improving the houses, such as with insulation? Do you think there should be law against or tax of houses sitting empty?
How do you make it illegal to have a house empty?
Legalize squatting
My point is most people make a hell of a lot more money from the capital gain than the ever get from a tenant. Rent is just some cashflow. Landlords will react to the changes and not in a way that will be good for tenants. Most will avoid open rental agreements if they can’t get rid of someone. If there is still an option of fixed term then they will all go for the 1 year fixed term, non-renewal option. If rent is going up quickly they might go for a six month short term lease so they get to do two increases a year. If none of those appeal they might leasehold the property and sell the lease to someone and collect ground rent instead. I mean why would a landlord give someone and open right to reside there? If you want long tenure you have to pay for that. That is what leasehold properties are for. Landlords are not a charity.
Having been a small-time/spare-time landlord (not the greedy sort) for nearly 30 years, I would never go for the short-term, non-renewal tenancy option. My aim has always been to get and keep satisfied tenants in there, paying the rent and in no hurry to move, i.e. win-win for everyone. Changing tenants is a pain in the butt and a cost.
Having said that, trying to maintain a quality rental can be very difficult with tenants who have varying standards or who for whatever reason fail to look after the place. So as a landlord you either have to be extremely picky as to who you allow in (and even then can get it wrong), or you accept that a goodly proportion of tenants will not respect a quality place and therefore cease trying to maintain it as such. E.g. new carpets soiled and spoiled after only 12 months can be quite dispiriting, so the inclination to leave the tatty old ones in place is there.
And the inclination to quit landlording altogether is also strong with the raft of requirements being piled on (e.g. I MUST carry out 6-monthly formal inspections and document everything with photographs or I will no longer be insured, whether in my judgement this is necessary or not). Get a property manager in? Yes, this is an option but it adds a middle-man which someone has to fund and long-term outcomes can be very mixed.
At the moment the place has lain empty for a lengthy period for renewal of flooring which was rotted out by previous tenants failing to advise that the washing machine was leaking (which of course was never evident during inspections!).
In my view landlording is becoming less-easy to do as a small-time occupation. I suspect more and more small-timers will pull out and their properties will either be snapped up by the (greedy) big guys or else be lost from the rental market. Is this a good thing or not? – that is the question.