Fees ban ‘could raise rents’

A ban on letting fees will stop ‘‘an inherently unfair’’ charge being levied on tenants at a time when they can least afford it, say renters’ representatives.

The bill banning letting fees on rental properties has passed its third reading and will become law.

Housing and Urban Development Minister Phil Twyford estimated the change could prevent the handover of up to $47 million in payments which were ‘‘unfair’’ and had ‘‘no economic rationale’’.

It is common for tenants to be charged a week’s rent plus GST as a letting fee, plus four weeks’ rent as bond.

Only property managers or landlords’ solicitors are allowed to charge the fees at present. Property managers also charge landlords an ongoing percentage of the rent collected.

Victoria University of Wellington Students’ Association president Marlon Drake, who submitted in favour of the ban, said it was great to see positive action coming out of students’ ‘‘grassroots campaigning’’.

‘‘This will be a welcome reprieve for students looking to rent in the capital over the summer and into 2019.

‘‘But we will be continuing to push for better processes to make sure student renters have access to affordable and quality housing into the future.’’

Tenancy rights advocate Robert Whitaker, of Renters United, was also pleased.

‘‘Letting fees were inherently unfair, charging renters for a service rendered to landlords,’’ he said. ‘‘They represented an additional cost at a time when renters could least afford it ... they were almost always charged at the maximum allowable amount.’’

But property managers said tenants would be in for a rent increase.

‘‘We have already instituted rental reviews and it is highly

likely they will be in excess of what the letting fee annualised would have been,’’ Kevin Edmunds, of Quinovic, in Thorndon, Wellington, said.

‘‘Twyford is adamant that it won’t lead to rent increases. Well he is just plain wrong.

‘‘I am really not sure what planet he lives on.’’

Bindi Norwell, chief executive of the Real Estate Institute (REINZ), agreed.

‘‘In the long run it’s likely that these costs may be passed on to tenants via an increase in weekly rent. REINZ, alongside other similar industry bodies, outlined this point in our submission to the select committee.’’

It might also mean that students or seasonal workers who needed shorter tenancies would be less attractive to landlords, Norwell said.

With the raft of legislation being directed at landlords, more might decide to exit the rental market reducing the available pool of rental properties and driving up prices.

It would be better to regulate the property management industry rather than focus on individual issues such as letting fees, she said.

Statistics New Zealand Dwelling and Household figures from 2017 showed 33 per cent of Kiwis lived in rentals.

Earlier this year, Wellington rents caught up with Auckland, the median price reaching $550 a week in both cities in January.

Whitaker did not accept that rents would rise.

Rents were determined by what people were willing or able to pay, however much hardship that placed them in.

‘‘Where there is a supply problem like in Wellington we expect to see increases again next summer, but it’s unlikely those increases will be any greater due to the law change.’’