Rental market reform pose challenges for tenants

Tenants could suffer under Labour’s proposals to reform the rental market, rental property owners and managers say.

Labour is promising that if it were to form the next government, it would strengthen the rights of renters by limiting rent rises to once a year and increasing landlords’ notice periods to 90 days.

It is also planning to abolish ‘‘no-cause’’ tenancy terminations and require a formula for increases to be set in tenancy agreements so that tenants know what to expect. Letting fees would be banned. Labour leader Jacinda Ardern - who announced the plan at a private home in Henderson, Auckland, said the moves would make renting a more stable and healthy experience for families.

But Andrew King, executive officer of the New Zealand Property Investors’ Federation, said the plan could backfire.

He said in a situation where tenants lived as neighbours, good tenants were often loath to complain about poor behaviour from their neighbours for fear of repercussions.

If landlords were not able to give eviction notices without cause, and instead had to say it was because the tenants were intimidating their neighbours or exhibiting other antisocial behaviour, it would put the good tenants in danger, King said.

‘‘You can imagine the good tenants will say, ‘don’t give them notice, we’ll leave’, so you lose the good tenants, that puts them under pressure with all the expenses of moving and you end up with the poorly performing tenants you can’t get rid of.’’

David Faulkner, director and consultant at property management consultancy Real-iQ, said the removal of letting fees could also have unintended consequences.

Some bigger property manage- ment firms might be able to absorb the cost, he said, but others would have to pass it on to landlords if they wanted to stay in business, which could lead to rent rises.

‘‘It’s a well-meaning policy but when an MP says [the letting fee] is being charged ‘because they can’, they’ve either not done their research or they are grandstanding.

‘‘If they haven’t done their research, that’s concerning,’’ Faulkner said.