Government Warned of Rental Reform Risks

Why the Government Has Been Warned Rental Reforms May Lead to Rent Increases and Homelessness

The Residential Tenancies Amendment Bill passed its first reading in Parliament in late February and has many worried, particularly landlords.

The Ministry of Housing and Urban Development has told the Government that its new tenancy law will increase rents in the middle of a housing crisis.

The bill’s regulatory impact statement says the law could reduce the number of rentals available and increase rents, demand for state housing, and homelessness.

The Government has introduced the bill in the hope the reforms will alleviate these problems by banning rent bidding and removing the ability for landlords to evict tenants with 90 days' notice. The reforms aim to improve tenants’ security and stability while protecting landlords’ interests. The amendments are intended to help strike a balance between protecting a landlord’s interest in their property, and ensuring tenants receive fair rights for the rent they are paying.

However, the first reading in Parliament came with a warning that should the bill become law it would increase rents for tenants and reduce the rental stock, increasing homelessness.

While most investor organisations are in agreement with certain aspects of the bill, such as only allowing one rental increase every 12 months, landlords are concerned about the removal of the 90-day notice period and the move to tenants having the right to renew fixed-term tenancies.

Under the legislation, fixed-term tenancies will become periodic tenancies at the end of the fixed term. This applies unless the landlord and tenant agree otherwise, the tenant gives notice, or the landlord gives notice using one of the specified reasons.

As a result, landlords may increase rents to offset any additional risks and the added restraints may mean landlords are less willing to rent their properties, leading to a housing shortage.

Other lesser talked about impacts of the reforms include landlords being obligated to permit fibre connections to their properties under certain circumstances and the ability of the Tribunal to make pecuniary penalty orders for unlawful acts. The maximum amount of a pecuniary penalty would be $50,000.

The bill has been referred to the Social Services and Community Select Committee before it will go to its Second Reading. To receive regular updates on the progress of the bill and practical implications the bill may have for you, sign up to our Crockers Auckland Property Insight which showcases the latest Rental and Sales stats along will blogs and updates.

If you have specific questions relating to the changes and how they could affect you, contact Crockers to discuss your situation further on 0800 2762 5377.