On the brink of a crisis

Tuesday 3 March 2020

Proposed tenancy law changes, which come in an environment of rental shortage, are on the brink of creating a low socioeconomic rental crisis.

By Miriam Bell

That’s one of the major themes to come out of independent economist Tony Alexander latest quarterly survey of people’s views on their respective business sectors.

Alexander says landlords’ survey responses show they have deep concerns about the proposals to end no-cause terminations and roll over fixed tenancies to periodic tenancies.

“Owners are not just saying they will raise rents to reflect various cost rises, but will actively weed out any existing bad quality tenants they might currently have before the legislation becomes effective and it becomes near impossible to remove them.”

If the proposed reforms are put in place, many owners plan to only select proven good tenants, Alexanders says.

“Tenants not in work, tenants with bad credit histories, tenants with young children and, solo mothers, amongst others, will now not be considered.

“The changes could deliver some rental pricing power to the ‘good’ people, but in an environment of worsening rental property availability this will throw even more people at the mercy of state housing services – if they can get them.”

By lifting the average quality of New Zealand rental stock, government policy will price it out of reach of many is a key underlying theme to emerge from the survey, Alexander adds.

Respondents’ comments reflect this, with many emphasising that they feel landlords and their rights over the properties they own are under attack.

“The ugly is the government is putting on anti-landlord regulations. Landlords will increase rents to recoup the costs, will not select ‘trouble tenants’ and sell if the ‘90 days termination’ is removed,” says one respondent.

Many also say they are looking at selling off their lower end rental properties and will focus on the higher end rental market.

“The loss of the 90-day no-fault notice (with associated loss of fixed term tenancies), is a huge no-no,” says another respondent. “It means I am shifting from providing tidy, average rental properties at median rents to top-grade rentals at upper-quartile rents.

“This means I am minimising the risk of anti-social tenants that I can't get rid of, and only taking top tenants with great references and no credit problems. To do this I have sold two properties as too difficult to upgrade for my desired market, upgraded two properties, and am demolishing one property and rebuilding new.

“The advantage to tenants is that they will be getting lovely as-new properties. The disadvantage to tenants is that they will face a much higher bar to get in and be facing higher rents.”

Another respondent, who is a long-term landlord, says they are really concerned about the proposal to stop being able to end a tenancy without giving a reason.

“If you give a reason then presumably you have to provide evidence, which could be very difficult to get legally. I have never needed to do this up till now, and hope I don't in the future, but it gives me some reassurance to know I can if I need to.

“This is unlikely to cause me to quit property. However, it makes me think about ending my current tenancies, renovating my places to a high standard, and being very fussy about who I let them out to.”

Alexander’s survey follows hot on the heels of a REINZ survey which found that a total of 82.1% of respondents disagreed or strongly disagreed with getting rid of the 90-day notice. Further, 45.4% of tenant respondents were against the change, as compared to 40.9% who supported it.

Read more:

Removal of no-cause notice opposed by 45% of tenants 

RTA reforms pile pressure on landlords 

Comments from our readers

On 3 March 2020 at 11:43 am WellyLL said:
Strategy is going to impact on future supply across the lower end of the market. As an investor I'll be less likely to want to buy additional stock for the lower end of the market (unless it is to students). I've got the cash to buy two atm, and are holding off waiting to see.
On 3 March 2020 at 12:21 pm cafeg said:
We should be able to choose who lives in our Rental Properties. This new law stopping the 90 days no clause away stops that and will make it really hard to get rid of problem tenants - Not that I have had to do that yet. What this government is forgetting that we own the property not the tenant, They are renting off us and should have to follow what the owner wants. In future I will only seek long term tenants - one year or more, great references and credit history and will not rent to anyone at risk. Like I said above we own the property and it is our choice who rents it !!
On 4 March 2020 at 11:23 am beardo88 said:
We have rentals in lower socio economic areas and have a number of beneficiaries as tenants, it is already hard as if they fall behind in rent it is nearly impossible to get WINZ to repay us and them charge the tenant over time. I end up by subsidising WINZ by taking arrears payments. While I feel for the position anumber of my tenants are oin there is no thanks from WINZ or help when things go wrong. I had to threraten to evict a tenant before WINZ made up the arrears. My stance will be to sellt he rentals in these areas, and buy in better areas and look only for blue chip tenants. As the adage goes 'better an empty house than a poor tenant'. This government is doing beneficiaries no favours by this latest poorly thought out policy, bye bye beneficiary tenants/ hello higher rents....
On 5 March 2020 at 12:14 am Peter L said:
Dont forget that the proposals also effectively create lifetime tenancies. At the end of any fixed term tenancy the tenant and only the tenant can decide whether they go or if they stay in what automatically rolls over into a periodic tenancy. The landlord will have no say in that decision.
On 5 March 2020 at 11:28 am hohoho said:
Current government not listening to both tenants and landlords & owners, and will find out at election time, the backlash. By not increasing supply of low rental social housing FAST enough to cater for an increasing queue of HNZ waiting list for urgent housing, and attacking existing providers, it will both raise rents as well as reduce stocks. The private sector will not come into the social housing market unless they are subsidised or profitable- so why make it more difficult for both tenants & landlords/owners by imposing cuts to 90 day no-notice rule, that was sparingly used to get rid of tenants from hell- who were causing neighbours not to have peace and quiet enjoyment of their living arrangements and tying up precious reources of police/council when noise & domestic violence are constant for some. These trouble makers will be made homeless eventually and the government would rather place them in 1-2k overcrowded motel rooms.

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