Letting fees ban takes effect
Gsusan.edmunds@stuff.co.nz
overnment claims that a letting fee ban will not lead to higher rents are short-sighted, one economist says.
As of Wednesday, property managers can no longer charge tenants a letting fee – which has usually been equal to a week’s rent, plus GST, when they sign up for a new property.
Instead, some are now charging a ‘‘new tenancy fee’’ to landlords when a property is rented. Quinovic charges $550 plus GST.
Others have increased the weekly commission they charge.
As part of a regulatory impact statement on the law change, officials told the government that if the landlords were to try to recoup the new fee from tenants, it would mean about $10 extra a week in rent.
But Housing and Urban Development Minister Phil Twyford has said the move will not lead to higher rents but would instead save tenants $47 million a year in fees.
Economist Brad Olsen has argued that it is appropriate that landlords bear the cost, because it is a service provided to them.
But he said it was likely that rents would rise.
‘‘Landlords will of course look to raise their prices to account for the increased cost – just as they do for any other cost, including insurance, maintenance, and rates.
‘‘What I could see happening – and would in fact be encouraged if this did occur – is to see landlords look a bit closer at what services and benefits they get from paying for a property manager. It might actually be more worthwhile for smaller landlords, with only one or two rentals, to look after the entire tenancy themselves instead of paying fees to a property management company.
‘‘Any claims by the government that the removal of letting fees won’t or shouldn’t increase rents is short-sighted.’’
Kevin Edmunds, of property management firm Quinovic in Thorndon, Wellington, said it was a factor for owners setting rents.
‘‘It has come up with many as we look to advertise for new tenants for them. The bigger cost they have been mentioning though is increasing insurance.
‘‘I think by and large they have accepted that the cost of finding replacement tenants lies with the owner but they want to recoup this and other costs wherever possible and have mostly been ensuring that rents are optimal for the time of year and the market in general.’’
Matthew Gilligan, of property accountancy firm Gilligan Rowe and Associates, said landlords were limited in the amount they could charge by what the market would pay.