Stronger tenancy laws could help lower house prices

This Government has one important mission above all — to begin to restore the possibility of home-ownership for more young families than can afford present house prices. The task will require action on many fronts, a state building programme alone is unlikely to be enough. In the meantime, a large number of New Zealanders are facing the prospect of renting a home long term, possibly for life.

To follow is an excerpt from a story in the New Zealand Herald.

You can read the original article here.

This means New Zealand needs to take rental housing much more seriously. The Government is right to be proposing laws that will provide much more stability and security for tenants and their children. Rented homes can no longer be treated as simply an investment income for an owner who has bought the property primarily for a capital gain. If owners needs rental income to cover all or most of their holding costs many will have to adopt a different attitude to their role.

They need to embrace the fact they have become providers of an essential social service. Few things in life are more important to people than their home. And it must be considered "their" home when they rent it. A landlord ought to take professional pride in helping to make it their home.

The Government proposes to extend the notice period for ending a tenancy from six weeks to 90 days, nearly three months. The extended period would seem the minimum that good tenants deserve (bad tenants should be able to be evicted more quickly). Having to move house can be very disruptive to people's lives, especially for children.

Their educational progress will suffer if they have to change schools much more than once a year. Tenancies of six months of even a year should not be out of the question.

The Government's discussion paper proposes to limit rent increases to once a year, which should help provide more security so long as the limit applies to the property, not the tenancy. If it applied to the tenancy it would create a perverse incentive for landlords to give 90 days notice and re-let the house every time they wanted to raise its rent.

The discussion paper goes too far, though, when it proposes to prohibit bidding for rental homes. When a house is vacant the owner should be able to let it at the highest rent it can attract. In areas where there is a shortage of accommodation and desperate competition for it, the rent will be bid up. It is hard to imagine how the law could stop this, quite apart from whether it should.

Landlords must retain a right to select their tenants and while bids might be a factor in selections, they are unlikely to be the only one — especially if the law gives the chosen tenants more secure tenure.

The paper proposes not just longer notice requirements but more rights for tenants to make alterations and keep pets if they want. If those sort of rights become law, landlords are going to be extra careful in their selections.

The Property Investors' Association warns the extended notice requirement could lower the sale price of rented houses. That would be a bonus for all tenants hoping to afford a home they could truly call their own.