Executive Summary - Key Issues
New Zealand's housing environment today is quite different from what it was when the RTA came into effect in 1986. Because the way we live has changed so much, the Government has decided to review the Act.
The Review is taking place within the context of the Government’s wider NZ Housing Strategy. Government's interest in reviewing the RTA is not to remove the protections provided by it, but to ensure that it continues to meet the needs of landlords and tenants in today's housing environment.
Getting the Balance Right has identified the following key themes and issues for the Review and provides some discussion on each. It also poses questions about the implications of these themes and issues for you to consider. Your answers to these questions will help the Government decide what changes may be required to the RTA.
More people rent and it's important to get the balance between landlords and tenants right.
New Zealand has changed since 1986, and now more New Zealanders rent and proportionately fewer live in houses they own. Because more people are renting, more people are affected by the RTA. This means that the social and economic costs of getting regulation of the rental market wrong and the benefits of getting it right are bigger.
Within the rental market, more individuals and families depend on housing provided by private landlords (rather than state or council landlords). This means that private rental housing is having a bigger impact on New Zealand's housing, social and economic outcomes than it did in 1986.
The circumstances of people renting are more diverse.
The family and individual circumstances of people renting are more diverse than they were in 1986.
Proportionately fewer young people are flatting away from home and more older people and more families with children are renting. Many of these people will need or choose to rent for longer periods than they have in the past.
Tenants and landlords are more culturally diverse and more have English as a second language. Some tenants have special needs – for instance – they might need a very large house to accommodate extended family members, or they might need a particular form of accommodation because they are disabled.
People with different individual and family circumstances have different needs for stable housing.
A level of certainty about being able to live in the same home over time is very important for families, especially those with school-aged children, and for older people. Single people and couples might also value being able to stay in the same home over time, depending on their circumstances. This is what we mean when we use the words ‘stable housing’ in this document.
Many households in New Zealand achieve stable housing through owning their own home, but for an increasing proportion this is not possible, while others prefer to rent for lifestyle and other reasons.
Most people who rent in the private sector have a periodic tenancy that can be ended by either party at short notice. Fewer people have a long-term fixed tenancy.
While social housing (such as state housing) can provide stability, the capacity of that sector is limited.
Housing is becoming less affordable.
It seems that both buying and renting a home is becoming less affordable, especially for low-income earners and for people living in growth areas like Auckland or in rural areas where quality housing is in short supply.
Being a landlord involves both risk and costs. These costs may deter some people from becoming landlords and providing affordable housing for low-income earners. Changes have been made to help landlords trace ex-tenants who owe them money but there are still concerns about how payment orders from the Tenancy Tribunal can be enforced against tenants. Many landlord/tenant disputes and evictions occur over unpaid rent .
It may be that some tenants would benefit from additional support to budget better and to manage on limited finances. There may also be ways to decrease some of the costs faced by landlords and to encourage landlords to provide affordable rental housing.
Is there a problem with the quality of rental housing?
The RTA does not require rental houses to meet particular quality standards.
While some rental properties are new and purpose built, many are older homes that have cycled onto the rental market. The quality of these properties is variable and sometimes poor. Rental houses, like some owner-occupied houses, are not always well maintained.
The RTA requires landlords to keep the premises in a ‘reasonable’ state of repair’ but different interpretations of what ‘reasonable’ means are a common cause of tenancy disputes.
Standards of property management are variable.
Small and part-time landlords dominate the private rental sector. Many manage their properties well. Some do not. Some are ‘accidental’ landlords and some are only landlords until they can sell and realise a capital gain on their investment property or find a more desirable investment.
The incidence of large-scale landlords and the use of professional property managers are low. Further, standards of practice between property managers are also variable.
Do prospective landlords get the right advice?
There are few entry barriers to investing in residential property. Concerns have been raised about the adequacy of financial and other advice provided to potential property investors and landlords. Often the advice that is provided includes no reference to the obligations and duties of becoming a landlord, managing relationships with tenants or the practicalities of entering into a service business. Instead, residential property investment is frequently ‘promoted’ as if it were a passive investment.
Not all rental accommodation is covered by the RTA.
The rental housing market includes specialist accommodation that sometimes has a high service component, such as serviced apartments and student accommodation. The RTA excludes these and some other forms of accommodation with a high service component. While the RTA is currently being amended to cover boarding houses, other forms of specialist accommodation with a service component are either regulated separately or not at all. People who own or live in these types of accommodation cannot automatically use the mediation services provided by Tenancy Services or the Tenancy Tribunal.
It is not always clear who is responsible for paying some household costs.
The cost of providing utilities (such as water) and services (such as removal of wastewater or rubbish collection) to rental homes is becoming a frequent cause of dispute between landlords and tenants.
This is because of a trend to charge both the fixed and variable costs of these services direct to occupiers (who may be tenants) rather than property owners, in ways not envisaged by the RTA.
For instance, some gas companies are now charging separately for the costs of maintaining meters and lines to houses (even when no gas is used).
In other cases, there may only be one gas, water or power meter to a rental property that has been divided into a number of rental units and no way of knowing the actual share of the power or water used by different tenants.
There is a need to establish clear principles to guide the way that household costs are divided.
Tenancy support services for landlords and tenants are important.
The RTA provides for tenancy support services for both landlords and tenants, including education and information, advice, mediation and adjudication.
Most of these services are provided by the Tenancy Services part of the Department of Building and Housing (formerly Ministry of Housing).
A recent review of Tenancy Services indicated that the approach being taken by Tenancy Services is right – with a focus on trying to deal with disputes between landlords and tenants as early as possible. Landlords and tenants thought that the services provided were useful, but also noted that there was room for improvement in some areas.
Would some tenants benefit from advocacy services?
Some tenants may need additional help to understand and act on their rights and responsibilities under the RTA.
For instance, people with a mental or other disability may have difficulty accessing their rights and dealing with their responsibilities as tenants; people who have language difficulties or a different cultural background may be uncomfortable with the tenancy mediation and adjudication process.
The RTA could provide for an advocacy service for such tenants.
We invite your responses to each of the issues and questions raised in Getting the Balance Right. If you consider that there are other issues or questions that have not been covered, please include them in your submission.