We need to rethink renting
Housing, housing, housing! But there is still too little discussion on renting and how to make renting a viable option. The past week has been dominated by the proposed Auckland Unitary Plan, which is audacious in actually planning for the likely growth of the city. But new supply will take time to come through.
In the meantime, just over half of adults in Auckland are renting. The ratio is less extreme in the provinces, but has generally grown since the early 1990s.
We rent like every one is a student in a flatting situation. This is fine for students, but not for others who want a home with some security of how long they will live in a place and the quality of the house.
New Zealand’s typically short-term leases for rental properties, combined with other conditions weighted against renters, do not provide an adequate alternative to home ownership.
And changing this situation will not be easy.
People are often affected by ‘‘status quo bias’, a fancy name for inertia, which causes them to generally accept the status quo or default option, even if they do not actually have a strong preference for it.
We see this whenever we get options for car features or cellphone settings, for instance – most people will go with whatever is the standard or default option.
This implies that one of the best ways to gradually move towards more longterm leases would be to change the default option.
This technique is already used in KiwiSaver, for example, where people are automatically enrolled in a scheme and have to actively opt out if they do not want to be in one.
The technique is known in policy circles as ‘‘nudging’’, because it encourages people towards a certain option that policymakers have decided is desirable, but still allows them the freedom to choose other options if they really want to.
When it comes to tenancy laws, the Government could change its template tenancy agreement to include a standard tenancy term of three years (for example).
If a landlord or tenant wanted a different length, they would have to specifically choose to alter from the template.
If introduced in this way, longer tenancies would probably become gradually accepted, and the average length of tenancies would increase over time. But it would preserve the current flexibility and the ability for tenants and landlord to sign short-term agreements if that is what suits them.
New Zealand also needs to reconsider its laws regarding notice periods for tenants and the reasons for eviction.
The notice period of 42 days simply provides too little security for tenants who want to settle in a particular area, raise a family or make their house a proper home.
It should be made longer, on the German or Swiss model.
Similarly, the law should be changed so that the standard tenancy agreement allows tenants to make alterations such as painting walls, hanging up pictures or changing the carpet.
However, the law should also stipulate that, when leaving a property, tenants must return it to its original state unless their changes are accepted by the landlord.
In combination, these changes would give tenants much greater ‘‘ownership’’ of the property, despite not having equity in it, while preserving the landlord’s ultimate control of the asset.