Landlords: How tough do they have it, really?

Friday, 23 November 2018

A group representing landlords said this week there was a risk that tenants would end up with better quality homes than owner-occupiers, thanks to reforms proposed by the Government.

The Healthy Homes Guarantee Act has been passed, and the standards that accompany it are being developed. These include required levels of insulation, heating and ventilation.

At the same time, the Government is working on reform of the Residential Tenancies Act, which would give tenants more rights.

We talked to both sides about some of landlords' main concerns.

* Rental properties 'could end up better than landlords' homes'

* Landlords reveal why your rent is rising**

Some properties are damp because of the way tenants live in them, not the house itself.

Stop the War on Tenancies spokesman Mike Butler said there was 'rhetoric that claims New Zealand's houses are cold and damp and making people sick. But [Government] has not provided evidence that this is actually the case because little is known about the private rental property sector'.

Landlords say things like drying washing inside, showering without a window open or extractor fan on, cooking without ventilation or using unflued gas heaters create damp problems.

But Robert Whitaker, spokesman for Renters United, said New Zealand's rental housing stock was 'significantly older and more poorly maintained than owner-occupied housing'.

'This is the result of decades of poor maintenance and little to no regulation of quality. As a consequence, there is a significant minority of rental homes that have chronic air- and weather-tightness issues,' Whitaker said.

Landlords say some tenants won't use heat pumps.

'We have to find a way to address this quality deficit for the good of everyone in rental housing, not to mention our health system and the taxpayer. Like everyone else, renters want to live in healthy, safe homes and most go out of their way to do what they can to look after their homes, including ventilating them, but opening a window does nothing if the house has a chronic dampness issue due to poor design or maintenance. '

Commentator Shamubeel Eaqub said, in most parts of the world, things such as in-built ventilation systems were standard.

Heat pumps are expensive to install and maintain, and some tenants won't use them.

It has been suggested that the new rules may require heat pumps, where it's possible, because they are an economical form of heating.

Robert Whitaker, spokesman for Renters United, said New Zealand's rental housing stock was 'significantly older and more poorly maintained than owner-occupied housing'.

The NZ Property Investors Federation has questioned this, saying that landlords will recoup the cost of installing heat pumps from rent, offsetting any power bill saving the tenants might get.

'A low-cost portable 2400-watt electric heater can raise the temperature of a room to the required level as a simple test may prove. Not all tenants want or will use heat pumps. The main reason houses stay cold in winter is that people on limited incomes are scared to turn on the heater, and a big heat pump is scary to those people,' Butler said.

But Whitaker said, in almost all rental houses, fixed forms of heating were more cost-efficient than any other form. 'Whilst the affordability of any form of heating is an issue for many renters - especially those facing continued rent rises - it's pretty obvious that if they can afford to turn on a heater they'd rather turn on one that will heat the house as efficiently as possible.'

Eaqub said it was reasonable for investors to be annoyed at the imposition of extra cost.

But he said they would be better to argue for the ability to claim capital works as a tax deduction, or for the return of depreciation on rental properties. 'It's fair to say that when the government imposes new standards that have never been there before, there should be some support to meet the cost of that.'

Improving insulation can mean a lot of cost for little improvement.

Landlords argue that, once insulation is installed to a certain standard, improving it costs a lot for little gain.

Proposals have included requiring rental properties' insulation to be upgraded to the 2001 benchmark, or the 2008 standard. If the 2008 standard were used, up to 190,000 houses would need upgrading. A cost benefit analysis by NZIER for the government said that would cost $1500 per house.

Consultation has finished on the Healthy Homes proposals.

That analysis showed that requiring the 2001 standard had a slightly better return compared to cost than requiring a top-up to 2008 levels, because the cost to upgrade to the more recent level was higher and there was less of an energy saving to be gained.

Nothing is being done to tackle rental arrears.

Investors say a big issue for the sector is rental arrears. The majority of cases heard by the Tenancy Tribunal relate to unpaid rent.

Butler said once a tenant fell three weeks behind in rent, the tenancy should be cancelled without anyone having to go to the tribunal.

Whitaker said the tribunal was funded 'almost entirely' by interest earned from renters' bonds held by the government.

'Despite this, it has evolved into a landlords' court, as reflected in the statistics on rent arrears cases. Landlords have a clear and obviously economic incentive to take such cases to the tribunal and the tribunal has a streamlined process for submitting such claims and they can be ruled on in absence.

'Additionally, many landlords have insurance policies that require they take these steps so it's hardly surprising that there is a high proportion doing so. In our view this does not indicate that rent arrears are a significant issue, rather it illustrates the extent to which the enforcement of the tenancy laws are already in favour of landlords.'

Ending no-cause terminations will make it impossible to get rid of some tenants.

Landlords say they need the ability to resort to a no-cause termination from time to time. If there is a block of flats where one person is being antisocial, telling them that their neighbours have complained could make their notice period unpleasant for the others, for example.

But Eaqub said just because investors didn't want to give a reason, it didn't meant they shouldn't have to. 'The tenants deserve to be told 'you're being disruptive, sort it out or you're out'.'

Reports are coming in from around the country of landlords selling up their properties ahead of tougher tenancy regulations. The government is considering changes to the Residential Tenancies Act - including limiting rent rises to once a year and s

Landlords have also said extending the notice period required from someone selling a property from 42 days to 90 will make it harder to find a buyer.

But Eaqub said that would just become a consideration to be navigated as part of the process of running a property investment business.

If it gets too hard and expensive, landlords will just get out.

Economist Cameron Bagrie agreed some investors would 'hit the eject button'.

'It's getting harder and property investing is going to be more about yield and cashflow and less about capital gain going forward. More long-term investors are going to be enticed into the market which is a good thing. The only issue is that at what price do those ejecting and those entering settle on.'

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