Finding the balance

We hope not to become a nation of renters, but our latest census data confirms we need to pull the blinds up and face facts. Although home ownership increased by 5% in the past decade, the number of rented houses was up by 25%. That’s 625,900 households that, depending on circumstances, may feel vulnerable about the roof over their heads. The Government’s new plans to improve security for tenants are overdue, given the increasing shortage and expense of rentals. This can take a terrible social toll, especially on children forced to change schools as families repeatedly move.

Construction cannot keep up with demand, and some landlords are able to charge seemingly at will. Landlords will in future be able to raise rents only once a year rather than twice, and the obnoxious practice of making prospective tenants bid against one another will be made illegal and subject to stiff penalties. These measures alone should make rentals more affordable.

It’s in the proposed new rules for evictions that the newly sought balance between landlords and tenants is likely to be more problematic. The Government wants to remove the right of landlords to give tenants three months’ notice of eviction without providing a reason. Only if the owner wishes to sell or occupy the property themselves will automatic right of eviction be possible. Evictions for things such as antisocial behaviour, property damage or non-payment of rent will require permission of the Tenancy Tribunal, and, then, only after three separate complaints. Even with three complaints, the tribunal’s permission would not be granted automatically.

This could be a step too far. As the Property Investors’ Federation says, no landlord wants to evict a good tenant. It’s only the troublesome ones that property owners seek to be rid of, and the new rules may make this difficult, and perhaps impossible in some cases.

Where a tenant is being intimidating, loud or engaging in criminality, neighbours and property owners can be reluctant to make a formal complaint for fear of reprisals against themselves or their property. A standard three-month, no-cause eviction notice is often the only solution that doesn’t escalate aggravating behaviour.

Dealing with these sorts of antisocial behaviours – the industry estimates there are 7000 chronically difficult tenants in the system – will likely be more protracted, too. The waiting time for a Tenancy Tribunal hearing is about six weeks. If the tribunal is given the extra responsibilities and discretions proposed, delays could lengthen.

The federation says its recent survey found 50,000 landlords would consider selling up because of the difficulties anticipated in the event of a tightened eviction law. That could mean as many as 100,000 of the country’s 546,000 private rentals being taken out of the rental market. As the occupancy rate of rentals tends to be higher than that of owner-occupied homes, this would only exacerbate the housing shortage.

New Zealand might do better to study European tenancy laws, which typically restrict rent increases more tightly than is proposed here, make it harder for property owners to terminate a lease for compliant tenants, and make eviction notice periods lengthier for longsitting tenants. European tenants also typically have the right to own pets, redecorate and make minor improvements, but can be evicted if they damage the property or fail to pay the rent. These are countries with a long-established rental culture. In Germany, for instance, where more than half of households rent, the rental market is dominated by stable, large-scale corporate property owners rather than our more typical “mum and dad” landlords, and this makes long-term tenancies more easily achievable.

Unless and until our rental market becomes more professionalised, it’s going to be hard to strike a balance that allows renters more security of tenure here, without hog-tying small-scale landlords to assets that risk becoming low-yield.

For their part, antisocial tenants must recognise that unless they play by society’s perfectly reasonable rules, it’ll be hard to find accommodation. Our state house waiting list has more than doubled in two years, from about 5800 to 14,000, and more people are living in cars and emergency housing.

Now is not the time to take measures that could cause the supply of private rentals to become even tighter for the vast majority of good tenants.

We might do better to study tenancy laws in Europe, where tenants can have pets but face eviction if they damage property.