Rental property rule changes could mean landlords end up offering tenants better quality homes than they live in themselves, a group representing investors says.
Stop the War on Tenancies has been founded to tackle the Government’s plans to overhaul the rental property sector.
Standards are being worked on that will set out the rental property insulation and heating requirements of the Health Homes Guarantee Act. The Government is also working through a proposed revamp of the Residential Tenancies Act, to give tenants more rights.
Stop the War on Tenancies spokesman Mike Butler said it was likely rental properties could end up a higher standard than some of the homes of those who owned.
Investor Lily Leung agreed some tenants would be living in “far better” conditions than their landlord’s own home.
“But that’s not the concern. The concern is that owners are being forced to waste money on things that are not even necessary in most cases… fixed heaters tenants won’t even use, certain standards of insulation that will make no difference.
“Homes are often not damp, it’s the way the tenants live that’s the issue.”
Andrew King, executive officer of the New Zealand Property Investors Federation said his organization’s biggest worry about the Healthy Homes changes was the suggestion that heat pumps could be mandatory.
He said they were expensive to install and maintain and such a rule would lead to rent rises. “[The Government] wants them because they are more efficient to run but by the time the rent goes up to cover the cost, it kind of negates that argument.”
Investor Nick Gentle said there would be unintended consequences.
“What I don’t understand is why it isn’t being extended to all housing,” he said.
“Property owners facing an upgrade now have two choices, spend the thousands required to meet the new standards or sell. If they sell, a homeowner can buy without being concerned about standards because they don’t apply.
“So this creates two markets and one buyer has an extra large cost to consider that the other does not and has to factor that into their price. All things being equal the property will stay out of the rental pool until someone who owns it makes the upgrades or an investor is able to purchase it at a price where they can spend the extra money and still cover their costs.”
He said, for people in bigger cities, the cost of upgrading a house would be a small percentage of its value. But elsewhere, the cost could be 5 per cent of the price of the house and would take years to recover.
He said he expected to see the end of the “cheap rental”. “A colleague saw the coming changes, decided stuff it and has completely upgraded all of his properties. Insulation, new carpet, paint, kitchens, heating etc. None of his previous tenants can afford to live there now and have moved elsewhere.”
Butler pointed to proposals that the Healthy Homes standards require landlords to provide heaters able to maintain a temperature of either 18C or 20C.
“There’s an assumption that if you’re in a property that is not of that temperature you’re in an unhealthy environment. But most people don’t have a set temperature unless they set a heat pump. Most people have lived in a wide range of temperatures and have done so for years and have lived healthy lives,” he said.
Claire Leadbetter, policy manager for tenancy and rental housing quality at the Ministry of Housing and Urban Development said it was not possible to predict the exact market impact from the Healthy Homes standards and other reforms.
“Many factors will influence whether a landlord chooses to increase the rent of their rental property. It is possible that some landlords could increase the rent they charge a tenant to offset the costs incurred from upgrading their properties.
“If rent is increased to a level that substantially exceeds market rates, a tenant may apply to the Tenancy Tribunal for a reduction. The RTA reform looks at options to improve this process.”
She said the Warm Up New Zealand (WUNZ) evaluation found the installation of new insulation reduced hospitalizations for occupants, but the incremental gain from heating appliances was small after accounting for the gain provided by insulation.
She said a cost-benefit analysis had been conducted to inform the development of the discussion document on the Healthy Homes Standards, which included the temperature suggestions.
“Heating devices would need to be capable of achieving a minimum indoor temperature in rooms covered by the heating standard. This would not be a requirement to heat to those temperatures.”
A survey in 2015 found that 22 percent of rental properties had no fixed heating compared to 7 percent of owner-occupied.