The Labour government in New Zealand has had a bit of bee in its bonnet for a while now over the regulation (or lack thereof, to a degree) of the private rental market in New Zealand.  This sector provides around a third of all occupied properties in the country, or roughly, 600,000 households.

It is a vitally important cog in the housing machine and Labour’s latest proposed amendments to the 1986 Residential Tenancies Act (RTA) have caused some concern, primarily it must be said, to landlords and owners of rental properties.

The amendments stem from a perceived imbalance of power between the landlord and the tenant and the admittedly errant behaviour of a small minority, who in any class, become the yardstick that all are measured by.

As can be imagined, in a country where there is generally a housing shortage, vulnerable and even desperate tenants, will be exploited. Landlords ‘auction’ rent, evict tenants simply in order to re-let at higher rents, fail to maintain properties, sometimes to the extent that they are not fit for human habitation, ignore antisocial behaviour are in simply ignorant of any the social and humanitarian obligations that are concomitant with being a landlord.

Now, having said all of that, whilst that behaviour exists, it exists, as economists like to say, at the margins and whilst where it is extant, it is horrendous, it is far from the norm and there is currently a tenancy tribunal that can and does provide regulation, if one can withstand the natural confrontation that goes hand in hand with prosecuting this type of claim. Frequently that is not the case and a lot of tenants are simply scared that such action will result in their tenancy being terminated, or, to state the bold reality, be made homeless!

Trying to regulate that is a laudable course of action but as ever, particularly with the current government, the legislation drafted, clearly has not had the benefit of input from anyone who knows anything about the rental market here.

In order to redress the balance, the law, when passed, sometime in this first quarter, will do the following;

Remove the ability of landlords to end a periodic tenancy agreement with no cause; the Act will provide specified reasons why the tenancy can be ended and they include the following key ones, inter alia;

To sell the property or to undertake extensive renovation/repairs.

These are reasonable grounds but the landlord can’t just state them, they have to go to the tribunal and ‘prove’ them.

The other  issue is that whilst it is clear the fixed term can’t be usurped, (nothing wrong with that) once that has expired and the tenancy becomes periodic (rolling monthly), the security of tenure for the tenant, doesn’t really change; he/she can now stay as long as they like, whilst the landlord sits and wonders if there’ll be rental income the following month.

This is a very real concern; most landlords have only one or two properties, a lot hold them for retirement income purposes and that uncertainty equates to sleepless nights and stress.

It gets worse; should the tenant exude antisocial behaviour (not defined) then provided there have been three notices issued to them, within 90 days, termination of the tenancy can be sought. Sought not granted. That, would still be up for discussion.

Antisocial behaviour is a blight on the people living next to the perpetrators, not the perpetrators themselves, and the landlord will get the blame yet is unable, unless this criteria is met, to do anything about it.

Three instances! This is the government sanctioning a modicum of undefined antisocial behaviour as being an acceptable norm!

Rent arrears; if the tenant is at least 5 (working days, so weekends don’t count!) late with the rent on at least 3 occasions within any 90 day period, then the landlord may seek termination of the tenancy. See above!

If my company files a GST return late, chances are I’ll be fined 10% of the GST due, if a rates payment is a day late on a rental property, a similar fine, yet they are quite happy to impose what is effectively a ‘get out of jail free’ card on renters who are late paying.

Interestingly, the RTA, doesn’t provide for interest payments on rent remitted late, even if it is validated at the tribunal.

The other major issue that is not addressed by the reforms, is damage to the premises; there is no provision for termination on the grounds that the premises are not reasonably well-cared for or that damage, accidental or malicious, is occurring. That is ludicrous. The tenant can apparently knock holes in the wall and doors, flood the bathroom, leave window open to the elements, all with impunity!

So, what are the consequences of this?

Well, several, and all of them to the detriment of the tenants.

Inverse ghettos; if the tenant can’t be evicted without going through the significant process stipulated in the act, then the selection process will naturally be strict and only those will stellar incomes/references/standing, will be considered. Anyone who even looks like they might be a problem will be rejected.

Higher rents; if the rent can only be increased to reflect market demand, improvements etc. annually, then the initial rent will be set higher than it would otherwise be; this goes to affordability and forces those less well-off into lesser (and cheaper) accommodation.

The higher rents are also likely to be set to mitigate against mis-use of or damage to the premises.

Landlords resiling from the market; less rental properties = increased demand = higher prices and lower choice.

All unfavourable and unintended consequences of a policy that was drafted by people with little or no knowledge of the subject matter.

Landlords and tenants have a symbiotic relationship; terminations and evictions rarely occur for spurious reasons; the vast majority of cases referred to the tribunal are for non-payment of rent or antisocial behaviour or damage or misuse of the premises; no landlord wants to evict a tenant who pays the rent on time, keeps the home reasonably clean and damage free and enjoys his or her right to quiet enjoyment of the premises and allows their neighbours, the same.

Seeking to legislate for the extremes of human behaviour is folly and this policy if enacted as it is currently drafted, it will be to the general detriment of tenants everywhere, particularly the lower income occupiers, will inflate the already high cost of renting a home, and lower the overall quality of the stock.

Nice one Labour, in the few months you have left, have a look and see what other industries you can bugger!