Estate agent: Scrapping letting fees will increase Hawke's Bay rents

Rental properties and letting fees in the spotlight. Photo / file.

Proposals to scrap letting fees for rental houses could see property management companies here lose $4 million a year - and some will not be able to take such a "hit".

Housing Minister Phil Twyford yesterday introduced a new bill to Parliament that would ban property agents from charging a letting fee - which in Hawke's Bay would work out at $365 on average.

"When moving into a new rental property, tenants can face up to four weeks' bond, two weeks' rent in advance – and one weeks' rent as a letting fee – in addition to moving costs," Mr Twyford said.

"With homeownership rates at a 60 year low, this bill recognises that we need to take action now to make rent more affordable so people can save to buy their own home.

"Banning the charging of letting fees to tenants is a good first step in improving the life of renters, while we continue our broader review of the Residential Tenancies Act."

Government data shows there are usually about 10,700 active rental bonds at any one time, and with the region's average rent now at $365 a week, if the bill became law about $4m could be returned to renters.

However, Tremains Rentals general manager Ruth Shannon said rent would probably have to go up to compensate.

"Rents may likely rise as the costs for the letting fee cannot be solely absorbed by companies. We are talking between 10 and 20 per cent of income being wiped off property management companies. No business can take a hit as such as this.

"Subsequently we will be reviewing how we will tackle this though some of this cost will likely be placed on to the owner. They will want to recover this extra cost and will likely lead to rent increases.

"The letting fee is a legitimate business expense. It is for the cost of doing viewings, going through applications, preparing tenancy agreements, inducting the tenant and carrying out the signup process. This takes time and is a significant cost to any property management business

"The one benefit of this bill is that landlords will want to secure longer tenancies. We may see more of a focus on ensuring that properties are better maintained to secure longer-term tenancies. We certainly want to see warm, dry houses for tenants and this benefits everyone.

"This is just the start of many changes we anticipate around renting in New Zealand. The Government's agenda is to improve the conditions for renters, though there maybe unforeseen circumstances such as landlords trying to recover extra costs."

Oxygen Rentals general manager Christian Casbolt also said rents would likely have to rise if the bill became law.

"There are a host of costs associated with providing a professional letting service to the standard required by legislation and insurance obligations alike.

"Management companies have no capacity to absorb these costs and they will likely be borne by owners in the first instance who will naturally look to recover any additional costs they bear through increasing rents."