This submission was made amidst growing concerns over the need for better standards and accountability within the property management sector.
Nearly one in three households rent, with half of those properties managed by a professional property manager.
REINZ chief executive Jen Baird says property managers are responsible for huge amounts of kiwi’s wealth and retirement savings, and the revenue generated from those assets, with no regulation.
“With the housing market facing unprecedented challenges and concerns about rental properties' standards and management practices, regulatory measures have become imperative.”
In its verbal submission, REINZ stressed the importance of striking a balance between regulatory oversight and operational flexibility for property managers.
Baird says the Residential Tenancies Act is complex, and there are no minimum standards for staff training, which has resulted in underinvestment in this area.
“There is a lack of formal checks on what happens to client funds, and instances of bond fraud are too common. Some residential property management businesses do not separate general business expenses from client funds, which makes it difficult to protect client funds.
“Apart from the disputes tribunal, there is no other formal avenue for landlords to raise their concerns about property managers' failures to perform with reasonable skill and care. There is also a variance in the quality of services that property managers offer, Baird says.
“Without some form of regulatory intervention, it is unlikely that many of these issues will be self-correcting.”
Detractors of the Residential Property Managers Bill say increased regulation will lead to higher fees for property management services.
REINZ says reputable property managers already have a number of the requirements (insurance and a trust account) in place so additional costs will be small. These costs are unlikely to add material costs at a per-property level and it does not expect there to be wholesale rent increases due to the regulation.
“People may choose to manage properties themselves, but it doesn’t seem a rational argument to suggest this will occur because of the added cost of this regulation,” Baird says.
“Managing a property requires an understanding of many different pieces of legislation, requires good people skills, and you need to be available to your tenant if there are issues. This is also a competitive market, and fee level is already a competitive space for residential property managers.
She says without the Bill, the property management industry will continue to manage billions in assets and rent without regulations, leading to potential harm for property owners and tenants.
This includes inadequate protection for bond and rental money, renting non-compliant spaces, increased dispute resolution costs, negative impact on tenant wellbeing, and insecure tenure affecting children's academic performance and health.
More than 1.4 million people lived in rental housing at the time of the 2018 Census. According to the census, more than 7,800 property managers worked in New Zealand in 2018. Removing commercial property managers, there are still more than 5000 residential property managers. That is a considerable number to operate with no regulation, Baird says.
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