Property Management

Call for rent caps after freeze ends

Rents are set to go up for many as the Covid-19 prompted freeze on rent increases comes to an end later this week, but tenant advocates are now calling for rents to be capped.

Monday, September 21st 2020

NZPIF executive officer Sharon Cullwick

When New Zealand went alert level four lockdown back in March, the Government introduced a temporary freeze on rent increases in a bid to support people through the uncertainty.

This meant that landlords could not increase the rent on sitting tenants – although the rent freeze did not apply to new tenancies.

Six months on, the rent increase freeze is due to end (on September 26) and that’s likely to see rent rises for many tenants.

NZ Property Investors Federation executive officer Sharon Cullwick says it’s effectively been eight months since landlords have been able to activate rent increases and some catch-up was inevitable.

“When the Government instituted the rent increase freeze, it wasn’t just the subsequent six months that it applied to.

“Any rent rise given by a landlord in the 42 days before the freeze also couldn’t be put into place.

“In total, that’s quite a long time to go without any increase in rent. So it won’t be surprising to see may landlords activating rent rises after the 26th.”

It’s worth noting that the Government’s recent changes to tenancy law mean that a 12-monthly limit on rent increases is now in place.

So should a landlord increase the rent on their rental property immediately following the expiry of the freeze on rent rises, they will not then be able to increase it again for a year.

This part of the tenancy law reforms came into effect earlier than the other reforms in a bid to help tenants who are struggling financially as a result of Covid-19.

However, tenant advocates are not happy about the state of affairs when it comes to rents with Renters United now calling for rent caps to be introduced.

As one of the demands in their newly launched Fair Rent Now! campaign, Renters United want current and future MPs to commit to limiting rent increases to no more than inflation.

The only exception to this would be where significant improvements have been made to the quality or facilities of the home – beyond ordinary maintenance or changes required to meet minimum standards.

Renters United spokesperson Anna Mooney says this is the only way to stop rents from becoming more unaffordable.

At a recent election forum in Wellington, Green Party candidate Ricardo Menendez March and The Opportunities Party (TOP) leader Geoff Simmons committed to introducing such rent caps.

Labour’s Andrew Little, National’s Nicola Willis and NZ First’s Taylor Arneil did not, instead pointing to increasing supply as the answer to housing issues.

Cullwick thinks the introduction of rent caps is unlikely – especially because when they have been attempted in the past they haven’t worked.

“Essentially, rents ended up going up just as much as they would have because as soon as the caps were eased landlords increased them to the point they would have been at anyway.”

However, she does sound a note of caution to landlords considering huge rent increases.

“Remember, as a landlord, you do want to keep good tenants. They are your customers after all so you don’t want to lose them, or bankrupt them. It’s worth thinking about that going forward.”

The latest Trade Me Property rental price data shows the national median rent was unchanged year-on-year in July. It is currently at $500 per week.

Auckland and Wellington are the regions with the highest rents. In Auckland, the median weekly rent also remained flat, at $560, in July. But in Wellington the median weekly rent was up by 4% year-on-year to $550 in July.

Meanwhile, Stats NZ’s rental price index stock measure (which captures rental price changes across the board, including existing tenancies) shows that August’s rents were up by 0.2% on July and by 3.2% year-on-year.

Read more:

Freeze on rent rises introduced – temporarily 

Radical tenancy reforms now law 

No rent growth for the first time in three years 

Comments

On Monday, September 21st 2020 3:19 pm WellyLL said:

Ah yes, the "Plan to Fix Renting" that is a plan to turn your investment into tenant's forever homes with their costs pegged to inflation and landlords costs left to the market... and with tenants in the box-seat at the end when it comes time to sell. You see, the plan says you can never get rid of sitting tenants, and the same old rent will apply to a new buyer (more or less). Who, you may ask, would buy property with a sitting tenant with an increasingly poor yield? - You'd have to drop the price right? Ah, that's where the tenant coms in. they'll be very interested in helping (They could buy.. at a discounted price of course! or agree to exit in exchange for cash...let's call it...relocation donation! Either way money in the bank for them and they could then use the profit for a house deposit! It's a nightmare of a policy - and intended to be so in order to get a few items across the line maybe? but looks like no party is going to touch it - because there is no strong public or political interest in nationalising the private property of mums and dads... Some highlight of this investment nightmare includes: - LL's cannot demand vacant possession on sale or move in unless tenant agrees - LL's must undergo a WOF -and met an even higher standard now including health and safety checks - LL's peg rent to CPI as in article but also must set reasonable market rent based on the exiting tenant and show incoming tenant what last tenant paid. - New legislation for what minimum kitchen and laundry facilities must be provided (does that mean a fridge, dryer and washing machine?) - Institute a regular review process so more stuff can be added as they think about it (solar panels, double glazing?). _ Paid advocates for Renters - Tenancy Tribunal to take an investigatory approach - i.e. LL hunting. - New "real" penalties for LL's including being disqualified from managing your own property. - Allow the tenants to change the terms of the agreement (i.e. increase occupants due to family/tenant life circumstances - Pets allowed (again! (Does someone on the committee want a puppy?) - Changes to property allowed, including painting, building ramps etc Really if anything here gets even a midge of traction, I think it is time we have a better counter movement.

On Monday, September 21st 2020 3:56 pm WellyLL said:

Ah yes, the "Plan to Fix Renting" that is a plan to turn your investment into tenants' forever homes with their costs pegged to inflation and landlords costs left to the market... and with tenants in the box-seat at the end when it comes time to sell. You see, the plan says CPI and so over time your yield will erode, and may even become impossible to met costs eventually and you'll sell, but you can never get rid of sitting tenants, and the same old rent will apply to a new buyer (more or less) cause everything is pegged to market rates - which just so happens is driven 100% by CPI and nothing else). As time erodes rent, LL costs increase as do prices of new builds and untenanted property at a faster rate than CPI (as they clearly do and have done for decades) Who, you may ask, would buy property your rental with a sitting tenant with an increasingly poor yield? - You'd have to drop your asking price significantly right? Ah, and that's where the tenant coms in. They'll be very interested in helping (They could buy.. at a discounted price of course! or agree to exit in exchange for cash...let's call it...relocation donation. Either way money in the bank for them and they could then use the profit for a house deposit!

On Monday, September 21st 2020 6:05 pm Peter L said:

Accompanied. of course, by similar caps on Council rates, insurance premiums, plumbers and electricians charge-out rates and - yes - MP's pay.

On Monday, September 21st 2020 10:14 pm Mikep said:

Twenty years ago I purchased a property for $105K and rented it for $230pw. Today I have purchased a $415K property and it is rented for $450pw. The problem is NOT landlords charging too much for rent. It is the supply and demand for housing and the low income economy that we live in. During the rent freeze, I received a 6% increase in rates and almost 10% increase in insurance costs. I would be more that happy for the government to legislate that local government can not increase rates anymore than the CPI.... as if that will ever happen.

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