COMMENT: Housing supply increase is being hampered

Friday 22 May 2020

The much-needed increase in housing supply is being hindered by new legislation relating to rental properties, warns NZ Property Investors Federation executive officer Sharon Cullwick.

The NZ Property Investors Federation (NZPIF) welcomes the Budget 2020 announcement last week that the Government plans to fund 8,000 new houses with 2,000 of these being made available for emergency housing.

However, the reality is that even more houses are required.

Of the 600,000 tenancies in New Zealand, 90% are provided by the private rental sector with only a small percentage available through Housing New Zealand and other community-based organisations.

Although any house available for rental is a help, having an excess supply of these is the only way to solve the current issue.

Introducing improvements like the Healthy Homes Minimum Standards are great and needed to upgrade the older housing stock of the country, but they will also unintentionally reduce the supply of rental houses.

That’s because these older houses are being demolished and removed from the rental pool and are often replaced by owner occupier properties.

Consequently, the situation becomes worse and the current total of 15,000 people on the emergency housing waiting list increases. Little thought has gone into the timing of such legislation.

Given the right tools, private providers could step up their supply. However there are many negatives that discourage any further investment.

Take for example the new tenancy termination regulations introduced as an emergency measure in response to the Covid-19 crisis.

We have seen recently how families returning from overseas due to Covid-19 have been unable to move back into their own house. 

This is due to changes in the legislation which removes the ability of a landlord to terminate a tenancy so that he and his family can occupy the house.

We have also seen how dairy farmers are finding that their tenants, who have also been their employees until the end of their contracts, are refusing to move due to these new termination regulations.

In both these examples, the tenants involved probably would have been willing to move if they had been able to find alternative housing. The lack of supply is the issue here as well as the termination regulations.

Another related issue is that a fixed term tenancy is now no longer for a specific amount of time as it automatically rolls over to become a periodic tenancy. 

Yes, there are still ways that you can remove your tenants. But the reasons that allow a landlord to do so are very limited under the new legislation.

Further, unless the parties both agree, tenants cannot be asked to leave unless there are rent arrears of at least 60 days and/or proven "anti-social behaviour".

These are all unintended consequences of the legislation and if the proposed changes in the Residential Tenancies Amendment Bill go through, as they are presently written, they will be a major on-going issue.

They will do nothing to help solve the shortage of housing but instead will hinder any improvement in housing supply.

Comments from our readers

On 22 May 2020 at 11:23 am cafeg said:
more landlords will also be leaving after July 1st 2020. As part of the healthy homes standard we have to supply certification that we comply with the standards for every new tenancy after July 1st. which means certification by an independent inspector and more cost to landlords that cant be claimed as expenses since thy ring fenced expenses deductions.
On 26 May 2020 at 1:40 pm AH93 said:
None of these comments and complains offer any solution to the NZ Housing bubble besides making easier for property investors to increase their portfolio, which of course makes it harder for FTB to get into the market. Its a horrid feedback loop. > Take for example the new tenancy termination regulations introduced as an emergency measure in response to the Covid-19 crisis. We have seen recently how families returning from overseas due to Covid-19 have been unable to move back into their own house. This almost seems to be making the argument for having no social responsibility, and making it acceptable to kick out tenants on a whim. Surely this is not the reputation that landlords want? Granted, the covid-19 situation is extremely difficult for many. But should it really be renters who bear the brunt, in the above situation? The more landlords sell, the more property prices will come down. Sure this will negatively impact those want capital gains from their property, but NZ has to prioritize the issue of prohibitively expensive housing, and the generation of renters.

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