Themes and Issues
People with different individual and family circumstances have different needs for stable housing
By this we mean that, while some people are happy to move home a lot, others rely on being able to stay in the same home for a long time because this meets their work and family needs. An increasing proportion of older people and families with children now rely on rental accommodation. Being able to stay in the same home is likely to be important to these people.
A stable home environment allows for the development of community links and networks, stable schooling and connection with local health professionals. This can result in improved educational and health outcomes for children. By contrast, students, job seekers and people renting until they save for a house to purchase may place more value on the ease of terminating a tenancy agreement.
The RTA provides for periodic and fixed-term tenancy agreements, but not long leasehold agreements. The Act’s specific provisions are as follows:
- Periodic tenancy agreements are the ‘standard’ or ‘default’ type of agreement. They run for indefinite periods of time until either the landlord or tenant terminates them. Tenants must give 21 days’ notice. Landlords must give 90 days’ notice or if they are re-occupying or the property is sold 42 days’ notice.
- Fixed-term agreements differ from periodic agreements in that they cannot be broken by either the landlord or the tenant, unless they both agree to break the agreement. If either the landlord or the tenant in a fixed-term tenancy agreement would suffer severe hardship if required to complete the fixed term, they can apply to the Tenancy Tribunal for a reduction in the term.
- The RTA provides that fixed-term agreements of five or more years can be written to exclude reference to the RTA, meaning that none of the Act’s provisions or protections then apply to either the landlord or the tenant. Contract law applies instead.
- The RTA allows a landlord to ask a tenant for up to two rents’ rent in advance, and a bond of up to four weeks’ rent money. The bond money is held by Tenancy Services and the landlord may claim some or all of this money if the tenant causes damage to the property, or owes rent to the landlord when they move out.
The 2003 National Survey of Landlords found that most properties (around 77%) are let on the basis of periodic tenancy agreements. Because such agreements provide for rental properties to be reoccupied at short notice they do not meet the needs of all tenants. Some tenants are unwilling or unable to shift at short notice.
Landlords benefit from stable tenancies and will generally seek to retain tenants who pay their rent on time and meet their tenancy obligations. Most landlords do, however, prefer the flexibility of periodic tenancies because of:
- the difficulty in identifying ‘bad’ tenants prior to entering into tenancy agreements;
- the ability to increase rents through turnover of tenants;
- the ability to sell rental properties for capital gain in response to appropriate market conditions;
- concern that having a sitting tenant may reduce the opportunity to market a property and realise the value of their asset quickly.
While home ownership offers greater housing stability, we know that more people, including an increasing proportion of families with children and older people, now rely on rental accommodation. Through anecdote we also know that some people who might prefer to rent, for lifestyle or financial reasons, become home owners because they cannot obtain adequate stability from the rental market. While the social sector (such as state housing) can provide better stability, many of those needing such security will not meet the sector’s income eligibility requirements. Paradoxically, once in the social sector some tenants will seek to remain despite their improving income status because of the value they place on the stable home provided by the sector.
More use of fixed-term and longer tenancies could be encouraged through either legislative or non-legislative means or a combination of both. For instance, the equivalent to the RTA in the United Kingdom provides for long leaseholds, assured tenancies (similar to periodic tenancies) and short tenancies (less than six months for landlords who want to sell or repossess a rental property). Each tenancy agreement has different conditions associated with it:
- Short agreements provide for the landlord to regain possession of the property six months after the beginning of the tenancy by giving two months’ notice.
- Assured tenancies give a tenant the right to remain in a property unless the landlord can prove to the Court that he or she has grounds for possession.
- Long leasehold agreements give the tenant the right to live in the property for a fixed number of years.
The RTA could be amended to accommodate and promote a greater menu of tenancy agreements. This could be achieved by removing the exemption for tenancies longer than five years and adding provisions to accommodate a range of different agreements including long agreements. Doing so would require consideration of:
- Improved access to information, for both landlords and tenants, on prospective landlords and tenants prior to entering into a long or fixed term agreement.
- Roles and responsibilities of tenants and landlords in respect of maintenance. Many landlords currently undertake significant maintenance and upgrades between tenants. If tenancies were longer, alternatives would need to be provided for. For instance, the Act could be amended to provide for long-term tenants to meet the costs of some maintenance requirements directly or for landlords to undertake maintenance and upgrade work during a tenancy.
- Bond requirements. With longer tenancies, there might be a need for different bond arrangements.
- Rent control requirements. Any constraints on the ability to adjust rents during a tenancy would be a disincentive for landlords to enter into longer fixed-term tenancies.
- Notice requirements. The RTA would need to state under what, if any, circumstances it might be appropriate to break a long or fixed-term tenancy agreement, and what, if any, notice would be required. It could also provide for a right of renewal if certain circumstances were met.
Alternatively, standard or model long-term agreements could be developed without legislation. Simply providing for longer-term agreements will not, however, achieve greater security for tenants who require it unless landlords are willing to enter into such agreements. Promotion of more stable tenancies, therefore, must also identify and address any issues that result in landlords preferring more flexible agreements.
Questions
- How important is stable housing to people in different family and individual circumstances?
- How well does the private rental market respond to different needs for stable housing?
- What stops landlords offering longer-term tenancy agreements?
- What can be done to encourage landlords to enter into longer tenancy or leasehold agreements for those who want them?
- Could the RTA be amended to provide improved choices for people wanting stable housing? If so, how?