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Home / Business

Call for more tenant rights

Diana Clement
By Diana Clement
Your Money and careers writer for the NZ Herald·NZ Herald·
5 Jun, 2017 01:21 AM6 mins to read

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Tenants say rental legislation makes it too easy for landlords to kick them out. Photo / 123RF

Tenants say rental legislation makes it too easy for landlords to kick them out. Photo / 123RF

Housing is a basic human need. But tenants in New Zealand say it's hard to feel secure when renting, as it is too easy for landlords to give them notice to move out.

Now some industry experts are suggesting this country's rental landscape is ripe for rent controls and long-term leases giving tenants the ability to rent a home long term.

Currently, the 30-year-old Residential Tenancies Act (1986) allows landlords to give tenants 90 days' notice to move with no reason given.

They need only give 42 days' notice if they plan to move into the property themselves and can increase rents every 180 days.

This lack of tenure and insecurity over rent rises means that tenants can't set down roots. Those with children often have to change schools, buy new school uniforms and may be forced to rent at a much higher price than they can afford.

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In their book Generation Rent: Rethinking New Zealand's Priorities, Shamubeel and Selena Eaqub argue that it's becoming increasingly difficult for ordinary people to buy their own homes and that living in private rental homes should no longer be a second-rate option.

The whole basis of power in the relationship between landlord and tenants is biased in favour of landlords, says Alan Johnson, senior policy analyst with the Salvation Army Social Policy and Parliamentary Unit.

Tenants fear standing up to their landlords when there are issues with the property because they live under the threat of eviction, regardless of what happens in the Tenancy Tribunal.

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Rent controls
The answer, say some, is rent controls. These are common in parts of the United States and European countries such as Switzerland and Germany.

Such controls even out the bargaining power between landlords and tenants.

In some cases those controls involve rent caps. In others, there are limits to how much rent can be raised over time.

Angela Maynard, manager of the Tenants' Protection Association (Auckland), is in no doubt that Auckland needs rent controls.

"Here rents can go up every six months. It has got to the stage where people can't afford to rent a house.

"Where can they go? This Government is not into subsidising unless you are on the street, or almost on the street, or in a motel."

Median rents paid for a three-bedroom property in Auckland range from $500 in Otahuhu to $1000 in Herne Bay/St Marys Bay according to the Ministry of Business, Innovation & Employment's Tenancy Services data. Even at $500 that's 38 hours' work at the post-tax minimum wage.

Much as it would like to see rent controls, the Salvation Army doesn't believe they work.
"Markets find ways around controls," Johnson says.

None-the-less the Salvation Army believes market rent is not a fair measure to increase rent on. It would rather see landlords' ability to increase rents based on increases to the Consumer Price Index or wage increases, not "market rents".

The problem with basing rent increases on "market rent", adds Maynard is that mechanism can ratchet rent up unnaturally.

For example, more landlords are renting by the room to students and others, which brings in a higher rent for the property than letting it as one tenancy.

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Or, says Maynard, owners of sought-after properties use rent auctions where desperate potential tenants bid against each other to win the property, which increases the rent.

Both measures push up the median which landlords base their rent increase on.

Food isn't subsidised
There are always two or more sides to an argument. When it comes to rent controls, Andrew King, president of the New Zealand Property Investors Federation, points out that Kiwis need to eat, yet there are no price controls on food.

"Providing a home for people is really expensive. (Rent) is the cost of providing a service," says King.

"Currently it's over $100 a week cheaper to rent than own the average New Zealand home. Given renting is cheaper than owning, it indicates that rents are not that expensive."

He adds that the more red tape the Government adds, the more expensive rentals become for Kiwis.

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"Politicians need to realise the harder you make it for investors to provide a service, the more expensive that service is going to be. Ultimately it is the tenants that will pay."

Security of tenure
It's not just rent controls that tenants want enacted. Maynard advocates for a package of measures including security of tenure and warrants of fitness for rental properties, which ensure that the home is healthy and safe.

Insecure tenancies can affect psychological health, community connections, schooling and household finance.

Mark Bennett, senior lecturer in the Faculty of Law at Victoria University of Wellington, cites Ireland and Scotland as examples for New Zealand to consider. Both made changes to their tenancy laws to increase the security of tenure.

In 2004, Ireland adopted a more European model, moving away from the English system of tenure security, that New Zealand follows.

"The size of the private residential sector has not shrunk, so we know it doesn't have any big impact on that. And Ireland is still increasing tenant protections for secure tenure, so we know that there is a view that the reforms don't go far enough in protecting tenants," he says.

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While some landlords argue that security of tenure curtails their right to sell properties, Johnson says secure tenancies could be sold with sitting tenants in the same way that commercial landlords do. This works overseas.

For its part, the Property Investors Federation is not against security of tenure, providing it's fair for both parties. Many landlords would like to have longer term responsible tenants, says King.

But tenants often want to have their cake and eat it, too. They demand guaranteed security of tenure, but still want to be able to give three weeks' notice to leave. There need to be concessions on both sides, says King.

The other issue, he says, for landlords is that security of tenure does cut down their options considerably if they need to sell the property.

"In Auckland, you cut out 60 per cent of potential buyers."

Maynard says: "In a civilised society that respects its citizens, you should be able to house your population. Rent controls and security of tenure, followed by good healthy safe housing, enable that."

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