Housing Minister Chris Bishop (right) with Prime Minister Christopher Luxon. Photo / Mark Mitchell
Landlords will shortly regain the ability to easily end a tenancy without citing a specific reason, as the Government moves to fulfil a pledge to reinstate “no-cause” evictions.
Cabinet has made policy decisions on its promised tenancy reforms. Legislation is being drafted for introduction next month and is set to be passed by the end of the year. The changes will roll back many of the changes brought in during the first term of the former Labour-led Government.
In the case of reinstating no-cause evictions, it will mean NZ First voting to repeal legislation it helped pass just four years ago, although at the time it noted its disquiet at banning no-cause evictions.
Housing Minister Chris Bishop said the changes were “pro-tenant”, arguing that making it more attractive to be a landlord would drive investment into the sector, boosting supply and generating competition for tenants that would keep a lid on rapidly rising rents.
“The previous Government waged a war on landlords. Many landlords told us this caused them to exit the rental market altogether,” Bishop said.
“It caused worse outcomes for tenants: rents up by $170 per week since 2017, the social housing waitlist increasing by about 20,000 families and thousands of families living in emergency housing motels.
“We’ve heard from many landlords that, without the backstop of 90-day ‘no-cause’ terminations, they were unwilling to take a chance on a tenant who may, for example, not have perfect references or a steady 9-5 job.”
Act backed the changes, with leader David Seymour saying “when one Kiwi offers another Kiwi a place to live, both are better off”.
“Landlords want to make a fair return on helping another person with a place to live and tenants want a choice of affordable places to live. But when we skew the delicate balance of rights and obligations between landlord and tenant, both sides suffer,” Seymour said.
Labour’s housing spokesman Kieran McAnulty said the changes were “same old, same old from National”.
“These changes alongside bringing back interest deductability will make it harder for renters and first home buyers. Nothing tangible that will see more houses built, just increasing the competition on existing housing stock instead of building more homes,” McAnulty said.
The Green Party’s Housing spokeswoman Tamatha Paul said the changes would mean “a lot of people will be getting kicked out of their homes for unfair reasons”.
“It reinforces to renters that the homes that they’re living in are not theirs, that it’s not their home and it reminds them that they’re living in somebody else’s house all the time,” Paul said.
Currently, a landlord can only end a periodic tenancy if they have a specific termination ground like demolishing the property or doing extensive renovation. Returning to no-cause terminations will mean landlords can end periodic tenancies without giving any grounds if they give the tenant 90 days’ notice.
The Government is making other changes too. Currently, landlords have to give 63 days’ notice to end a periodic tenancy when the owner or their family wants to return to live in the home or if the property is needed for an employee. Landlords have to give 90 days’ notice to end the tenancy if the property has been sold with a requirement to vacate the house.
Both of those notice periods will be shortened to 42 days.
Landlords will also have the ability to end fixed-term tenancies without giving specific grounds. Currently, a fixed-term tenancy automatically converts to a periodic tenancy unless the landlord gives notice using one of the specific termination grounds for periodic tenancies, or the tenant gives 28 days’ notice they do not wish to renew it.
Under the new rules, the landlord or tenant can give notice to end the fixed-term tenancy between 90 and 21 days before the fixed term ends and not have to cite any reason.
There is something in the bill for tenants too. Tenants currently must give 28 days’ notice to end a periodic tenancy. That returns to 21 days, allowing tenants to end tenancies more quickly.
A Regulatory Impact Statement accompanying the changes was less certain than Bishop that liberalising the rental market would deliver benefits to tenants.
Officials wrote in the statement that reinstating 90-day no-cause evictions “delivers clear benefits to landlords. Tenants will bear costs with potential benefit, which may be unevenly distributed between markets. However, tenant benefits are unlikely to exceed costs”.
Officials said landlords had told them Labour’s changes “contributed to supply and demand imbalance and subsequent rental inflation issues seen in the private rental market”.
However officials said it was “unclear” whether Labour’s law changes were to blame for higher rents.
“A wide range of complex factors influence rental supply and rent prices and assessing the impact of individual factors is challenging. It is therefore unclear to what extent the 2020 RTA [Residential Tenancies Act] changes may have contributed to these issues,” officials said.
“Considering the lack of evidence and complexity of factors influencing the policy problem, it is very difficult to say with any certainty to what extent the 2020 RTA changes have contributed to it [high rent inflation]. By extension, it is therefore unclear to what extent reversing them will address it.”
The officials said the changes may have played “some role” but reckoned that “other factors - eg high rates of international migration - are likely to have had a more significant impact”.
They warned that even with these changes, high house prices preventing people from buying and high construction costs restricting supply will continue to mean rents remain high in the short to medium term.
Ministry of Housing and Urban Development officials could not reach a conclusion on what policy options they would prefer, citing a “lack of evidence regarding whether the options will be effective in increasing rental supply and taking pressure off further rental inflation”.
They said if the proposals achieved increased supply, the benefits “could more effectively” balance the cost to tenants in terms of less secure tenancies.
To assess the impacts of Labour’s changes, officials wound the clock back to 2020, noting that evidence from 2018 suggested a “significant proportion of tenancies in New Zealand were being terminated involuntarily”.
“The 2018 GSS [General Social Survey] showed that renters had substantially higher residential mobility and that the most common reason for moving was because the tenancy was ended by the landlord,” the officials said.
They warned this insecurity spilled over into other areas of society, hurting people’s wellbeing and education. The assessment warned these costs could land on the Government’s balance sheet, making it more likely someone would need health or publicly-funded accommodation support, although in this case the status quo is already quite bad, with accommodation support paid by the Government at an elevated level.
The officials partly backed Bishop’s assessment that landlords were being more picky about taking a risk on tenants, saying that increased demand for emergency housing could be evidence of “more stringent vetting” from private landlords, however they said there was a “range” of other factors driving the surge in emergency housing.
Officials noted the problem was a big one. There is an issue both with security of tenure and cost, but also supply.
About one in three households rent. They tend to have less security of abode. The average length of tenure is under two years, while the average for owner-occupiers is almost nine years. In 2022, around 45 per cent of renting households experienced housing stress or unaffordability (30 per cent or more of net income spent on housing costs), compared to 25 per cent of homeowners.
Rental supply has failed to keep up with demand.
“The population was growing at a faster rate than dwellings during 2015-2020 and despite curtailed population growth over the following two years as a result of the Covid-19 pandemic, the population/dwelling mismatch remained,” officials said.
Thomas Coughlan is Deputy Political Editor and covers politics from Parliament. He has worked for the Herald since 2021 and has worked in the press gallery since 2018.
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