Rent increases likely if agenda continues

Rent increases likely if Government’s confusing property management agenda continues

By Robin Congdon

The lack of a clear Government plan to regulate property management is creating confusion in the industry, with professional managers being forced to decipher what each new piece of legislation means.

If it continues, it is likely to result in an increase in rents and a decrease in rental stock.

There has been much talk about people being forced to rent because of sky-rocketing house prices and the housing shortage. Now the coalition government has targeted the property management industry in a bid to give tenants better homes, more rights and protection. This is not necessarily a bad thing and we agree with many of the changes.

However, both landlords and tenants need to know where they stand. A set of clear rules will give clarity so that landlords know what their obligations to their tenants are, while tenants can be clear what their rights are.

This is where the current slew of changes to legislation is making things tricky, especially for professional property managers hired to look after rentals for investors.

The problem is not so much the changes, but the way they have come out. The drawn-out process has left the industry uncertain as to how things are going to end up.

The government has a Bill proposing a ban on letting fees called the Residential Tenancies (Prohibiting Letting Fees) Amendment Bill. There is also a long-awaited Bill, the Residential Tenancies Amendment Bill (No. 2) to review who is responsible for damage to rental property. This Bill is currently before Parliament.

In addition to this, the government has just announced a review of the Residential Tenancies Act. On the face of it, the reforms do not look too onerous. They are focused on pets, notice periods, rent increases and enforcement.

Changes and the review of the current tax allowances such as the ring fencing of losses, the Brightline test and capital gains in the future are influencing investment decisions and changing the viability of some investments.

If that wasn’t enough, the Ministry of Housing and Urban Development is currently calling for submissions reviewing the Healthy Homes Guarantee Act 2017 Regulations - Healthy Homes Standards:

The consultation is based on these standards for rental homes:

1.Heating - minimum indoor temperature. Heater size, type, location and should they be provided.

2.Insulation - levels and how should the condition of insulation be assessed. (Many rentals are yet to meet the levels set in 2016).

3.Ventilation - appropriate level of airflow especially in areas of high moisture.

4.Moisture ingress and drainage – assess if regulations will better protect against moisture entering the home.

5.Draught stopping – assess if landlords should take measures to stop draughts in rental homes.

Certainly, Property Brokers would have liked the process to have been more structured. At present it seems to be one change after another and this is concerning to us as a business. It is not a climate that is encouraging investment in the rental sector and is likely to reduce rental stock and see rents increase.

None of the changes come out as a clear action plan, but rather as amendments to the Act or a Bill that needs to be translated and tested (often at Tribunal). That takes time.

There was a lot of confusion in April around Asbestos when the two-year window for implementation of changes created by Worksafe’s Health and Safety (Asbestos) Regulations 2016 expired.

The big question was what action residential property management companies needed to take to comply with the regulations. The reason was that a key tenant of the regulations stated that a place of work needed a special Asbestos Management Plan.

For our staff, the properties we inspect and manage become our place of work. Our legal advice was that every property we manage (built before 2000) needed an asbestos management plan. At $500 plus each, that adds up after a while.

This is just one example of how legislative changes have not been clearly clarified, leaving it up to the industry to confirm, decipher and seek clarity. Unfortunately, that clarification can only come after the deadline for any changes to be ratified. In this case many landlords had already put asbestos management plans into place, unnecessarily.

As property managers we are happy to provide better homes to our tenants. It makes our jobs easier. We support that – why wouldn’t we? Having professional property managers is the best outcome and having often ill-informed part-time investors managing the properties is always going to lead to problems.

There are some rogues in the industry and Property Brokers is calling for regulation to get rid of them.

However, there is a concern that the government is ignoring the difference between properties managed by professional companies and those by private landlords. The government seems to see property management companies as a convenient scapegoat and are actively warning that they will come after us to enforce their legislative programme. Investors are our clients, but there is only a certain amount of influence we have over them.

Surely, it would be more effective for the government to work with us to drive improvements.

• Robin Congdon is Property Brokers’ Divisional Manager for Property Management.

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