New Zealand Property Investors Federation (NZPIF) vice-president Peter Lewis says it’s a good idea because it makes a bond more accessible to more people.
“If you have a tenancy at, say, $500 a week, that's $2,000 for someone to come up with, and that can be a hurdle for students. Not many of them have $2,000 in their back pocket.”
Under National’s plans, students will be able to transfer money from their KiwiSaver to Tenancy Services and return it to their savings when the tenancy ends. They will also be able to transfer the bond to a new tenancy. There is a five year cap.
Lewis says anything that helps them overcome that bond hurdle is a good idea, providing there are sufficient safeguards to make sure the bond has been lodged before the tenancy commences.
He says the main concern for landlords will be the bond refund. “The bond can be legally used to pay for a unpaid rent, unpaid services like water, or damage to the property. So in some cases there will be a big hole in the bond being returned if any of those legal deductions are made.”
National’s housing spokesman Chris Bishop says the party’s concern over people withdrawing money for a bond and not returning it to KiwiSaver will be overcome by taking that discretion out of the hands of the individual.
“The money will go straight to the Tenancy Tribunal and gets paid straight back into the KiwiSaver. No doubt it will have some administration costs for KiwiSaver providers, but they're used to withdrawing money out of KiwiSaver. It's not something that they’re not used to doing.”
Lewis says landlords, on balance, will be pleased if a system can be worked out to do that. Basically, it's individual renters money in KiwiSaver.
Winz has been able to help some people, not necessarily students, requiring a bond. “I've certainly had tenants who have gone to Winz and I've received a bond payment from Winz. They pay it to me and then I pay it to the bond office. So it's actually going from the government back to the government in a circular way. That works quite well and if there's some other way of delivery in my view, that's great.”
As far as paying it back, Lewis says students in five years will have either completed their studies or will have accumulated money from part-time or holiday jobs.
“There should be some process in the package for students to be able pay the bond back at $100 a month or some other amount. That will make sense if they can do that rather than trying and come up with the capital fund at the end of five years, especially if there have been legal deductions from the bond.”
Five years, says Lewis, is a reasonable timeframe for the Kiwisaver bond system to work. “The average young person goes to university, gets into a flat, finishes their course, and then moves off to a job or drops out and moves away or does something, so I think five years is a fairly reasonable compromise.”
Pets in rentals
Lewis says he has had recent discussions with Bishop on ways to incorporate a pet bond into rentals.
Under the existing rules, the tenancy tribunal has ruled that if a landlord knowingly allows pets in a rental, they must expect more damage than if they don't allow them, and therefore the landlord is responsible for that damage.
This leaves landlords with no avenue for recovering repair costs.
“Which of course, means that most landlords then turn around to tenants and say, well, it's increasing my risk, I'm legally prevented from increasing the security I can ask to compensate for that risk. therefore, the answer is no to pets,” Lewis says.
He says what Bishop has talked about is a separate pet bond. “Landlords cannot legally take more than four weeks bond and there is no such thing as a separate pet bond.”
Lewis says another option canvassed is to have a system where tenants could insure against the cost of damage that a pet can do to a rental.
“He was sort of kicking that ball around, so he may come up with something along those lines as well.”
“It is not a case of saying landlords must accept pets full stop because many properties are not suitable for pets,” Lewis says.
“Obviously you can't make a blanket rule, but we can find some way to increase the willingness of landlords to permit pets in properties that are suitable. If landlords can find a way that the tenants assume liability for any damage by pets and pay for repairs, it will assist them in allowing pets.” That could be a good thing, he says.