The current Government is making a raft of changes to the renting environment that’s already changing the market and making rents rise nationwide. Don’t get me wrong – I think change is good. For too long, the landlording “business” has been allowed to freelance unfettered. That good old Kiwi “she’ll be right / No.8 wire” mentality has worked for a good while, but not any more.
Labour (I’m brushing past NZ First in this blog, as they only get in the way…) have announced many changes that will directly affect an increasing number of New Zealanders. Labour are marching forward carrying the banner “Make Renting Better” and revamping the Residential Tenancies Act. The changes they’re proposing are aimed at bringing the current legislation into the modern age, and improving the situation for the growing number of renters.
People’s attitudes to renting are changing too, and for many it’s become a lifestyle choice. It’s estimated that there are roughly 600,000 rental properties in New Zealand, and that number is set to increase. On average 2.1 people live in owner-occupied properties in NZ, but an average 3.9 people live in a rental property. That means when a rental owner sells their property to a first home buyer (and lots of them are doing that right now), then 1.8 tenants are left still needing a place to rent.
With tenancy law aging badly at over 32 tears of age, it’s about time things changed. You also have to consider the proposals in the Better Homes Bill. These include moisture control, drainage, air flow and ventilation, heating, condensation, and even go so far as to legislate an interior temperature specification.
All these points will certainly improve the condition and standard of many rental properties around the country. The need to comply is going to be difficult to enforce, and is purely aimed at rental properties. Why is Labour not calling it the “Better Rental Homes Bill”? Why are they not including ALL residential properties?
Compliance and Regulation
The compliance issue is at the heart of these changes. With so many new regulations, requirements, compliance issues and set standards, a lot of rental owners are just going to find it all too hard, and sell up. This will further tighten the market and rents will go up.
I mentioned earlier the “No.8 wire” mentality and how that needs to disappear as it’s way past its sell by date. The majority of rental owners have only one investment property. The common idea that rental investors are tripping over wheelbarrows loaded with $100 bills is naive in the extreme. Most rental property owners have only one property and many of them are “baby boomers” who plan to sell anyway.
Who Are They Selling To?
Certainly these rentals are not being picked up by the next wave of investors, because they just aren’t there. Those investors that are there are not finding properties well enough priced to be a rental. So who is buying them?
Kiwisaver is now maturing for increasing numbers of rental tenants, which is a really good thing. Tenants in this position are now becoming first home buyers. Couple that with extremely low mortgage rates, and the pool of available rentals shrinks even further. Thanks to my old Economics lecturer in Scotland, I can grasp the basics of supply and demand, and the supply of rentals has fallen significantly over the past year.
Rents have responded in typical “market forces” fashion, and will continue to rise for the foreseeable future nationwide. Not exactly a vote winning strategy for Labour, to be frank, and this hurts the very people that they are trying to help.
The market has already changed shape, and will continue to change as new legislation is introduced over the coming months. These changes are also already affecting New Zealanders with extra costs and responsibilities for landlords, and rent increases and a severely restricted selection of rentals for tenants.
Tenants have the opportunity to be better informed about their rights and responsibilities, and the standard of rental properties is now forced to improve, which again is a good thing. What about the owner-occupier residential property market? Should these regulations apply?
They really should, and regulation of the landlord sector is needed sooner rather than later. Not just for property managers and their companies either. I’m looking at private landlords too. There needs to be regulation for all landlords to align with the incoming property compliance regulations. This will mean that these improvements to the general NZ housing stock will actually happen.
Once we get past the pain of change and things start to improve, I’m asking Labour and NZ First (if they’re not to busy) to move regulation of Landlords and Property Managers up to the top of their To Do list.