Seeking rental sweet spot

‘‘The Government believes it can create a balance that favours security for tenants while respecting the rights of landlords.’’

Agood balance. It’s what a certain wellknown tenant had in mind when she strayed into an unknown house looking for a comfortable, warm, dry place to rest her head.

Admittedly Goldilocks was more of a squatter than a tenant, but the important point about her story was that before she was evicted by three large, hairy landlords, she had found a bed that was not too firm and not too soft. It was just right.

The country’s rental market is in need of that sweet spot as well.

As more and more Kiwis are shaken out of the dream of home ownership and into the rental market – 35 per cent of New Zealanders now rent, up from 23 per cent 27 years ago – they too are looking for a warm, dry, secure place to stop, and a bed that is not too firm and not too soft.

The Government believes it has the measures to reflect that greater shift into rentals and create a balance that favours security for tenants while respecting the rights of landlords.

It’s crucial that it succeeds.

Because if the proposed measures are too soft on tenants then this may create too restrictive a market, which could drive landlords out of the rental scene and deter others from entering. And if they are too hard, then they risk letting landlords off the hook for some appalling housing stock and exploitative practices.

Framing such legislation will require a deft hand that avoids distorting the country’s real estate, both owned and rented.

For example, the Government’s proposal to extend the notice period for termination from 42 days to 90 gives tenants more certainty but may place a burden on property owners, many of them mum and dad investors, wishing to sell their property and include reasonable settlement dates in contracts. That could affect values.

Similarly, it may make sense to possibly restrict when and by how much landlords can raise rents, but that also restricts the ability of a landlord to pass on real cost rises in such things as insurance, rates, building materials and even body corp fees.

These and other measures risk achieving the opposite of what the Government is aiming for: a secure, settled rental market with plenty of options for tenants, and all at a reasonable rate.

There is plenty of that overseas. Housing Minister Phil Twyford points to it as a way to justify both the proposed changes and the belief they will work. Ironically, many of the European countries with the lowest rates of home ownership rank among the highest for liveability and happiness.

In Switzerland it’s under 40 per cent, while in Denmark only 51 per cent of people own their house and in Germany it is just 43 per cent.

One thing that stands out is the maturity of these rental markets. Both tenant and landlord are in it for the long haul; these are not properties to be flicked for capital gains.

Another key ingredient is that these countries have found a balance, between landlord and tenant but also government involvement and private investment.

Not too firm and not too soft. For Goldilocks and the Government.