Tenants will no longer have to pay hefty letting fees when renting a new home under a bill introduced to Parliament today.

The bill will make it illegal for letting agents or landlords to charge a letting fee, and allows for damages of up to $1000.

Tenants can be forced to pay - usually a week's rent - on top of upfront costs of up to four weeks' bond and two weeks' rent in advance to secure a rental property.

Housing Minister Phil Twyford said it was a "bizarre anomaly" that the current law allowed letting agents to charge tenants a fee for services provided to landlords.


"I don't know any other area of the law where two parties can contract for the provision of services then charge a third party," he said.

Twyford described letting fees as a way of gouging renters and it was time they stopped.

"Generally letting agencies only charge these fees when market conditions are such that landlords have all the power and tenants are on the back foot."

He hoped letting fees would be gone by the end of the year. He didn't believe rents would go up when the costs were put back on landlords and estimated the move could put up to $47 million into the pockets of Kiwi families each year.

"We don't think there's any reason to think rents will go up.

"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."

The review will examine a range of changes including limiting rent increases to once a year and improving security of tenure.