Rental housing

In 2001 there were approximately 360,000 rental properties in New Zealand. Approximately 80 percent of tenants in New Zealand rent their home from a private landlord or trust and approximately 20 percent rent from a public landlord such as Housing New Zealand Corporation or a local council.¹¹ Many landlords entering the market do so primarily because they see residential rental property as a good investment with an opportunity for capital gain, rather than seeing themselves in the business of providing people with homes. As a result there is often a mismatch between the needs of the landlord as investor and those of tenants who want a stable home.

Rents are continuing to rise but at a pace of around 3 to 4 percent per annum. The cost of owning and maintaining a house has risen more quickly than rents. This is driven by many factors including rising mortgage rates and the cost of building maintenance. As a result, the yield on rental properties has been falling. In 2005 we expect that both rents and the number of rental properties will continue to rise as demographic and other trends continue to increase the proportion of the population renting.

Each year between 42,000 and 47,000 rent-paying households have tenancy disputes that need help with resolution. The single largest cause of dispute is the non-payment of rent.

Tenancy Tribunal Applications Received, March 2005 YTD
Reason for the application	Number	Percent
Current tenancy (excluding rent)	2,7221	8%
Current rent arrears	1,447	4%
Vacated tenancy	3,608	11%
Vacated arrears	4,261	13%
Termination - arrears	13,320	39%
Termination - breach arrears	6,373	19%
Termination - other	659	2%
Tribunal urgent	1,466	4%
Total	33,855

The Department considers the potential mismatch of landlord, investor and tenant needs and seeks to better align the interests of landlords and tenants when developing policy service delivery initiatives.

Some landlords are very experienced and employ good property management and business practices, others are new to the business and are inexperienced. The Department's communication strategies will ensure that we reach this large and varied audience with messages that are targeted to its needs and which improve the professionalism of landlords.

Tenants

The individual and family circumstances of those renting are diverse and have also been changing. The main trends in the characteristics of people renting between 1986 and 2001 have been changes in the age, household structure and ethnicity of renters.

Home Ownership vs Rental Markets
	Owner occupied		Not owned by the usual resident
	Percent	Number	Percent	Number
Census 1991	74%	848,916	26%	301,167
Census 2001	68%	868,656	32%	412,197
Rate of Growth		2%		37%

People renting in 2001:

• were more likely to be:
  • older than those in 1986, with a sharp increase in the proportion aged over 29 and especially in those aged over 40
  • sole parent families and couples with children than those in 1986
• were from a wider range of ethnic and cultural backgrounds than those in 1986
• were less likely to be just flatting together.¹²

In the 2001 Census, over 60 percent of households with people of Pacific ethnicity did not own their own homes, and 43 percent of households that identified as Māori were paying rent for their housing compared with 23 percent of European households. Māori and Pacific households are also more likely to rent from Housing New Zealand Corporation.

Tenancies have a high turnover, with the average duration of all tenancies that ended in the year ending 31 December 2002 being less than 15 months. More than half of all tenancies in that year ended within 10 months, 33 percent within 6 months and 13 percent within 3 months. Māori households tend to be over-represented in areas with a higher proportion of short-term tenancies.

The rental market exists, in part, to offer flexibility in housing. However, some tenancies fail, making it difficult for households to maintain schooling, contact with health professionals and social links and networks, and to participate in their communities. This can have negative effects on health, education and other social outcomes. There are also financial costs associated with landlords finding new tenants, tenants moving and setting up a new home, and the potentially negative effects of sharing accommodation with others where this results in overcrowding.

Increased rental housing demand continues to lead to increased demand for our services, particularly in the Auckland region. There continue to be new tenants and landlords entering the market who are not aware of their rights and obligations, or of high-quality property management practices.

The increasing diversity, particularly ethnic diversity, of the rental market provides challenges for us as an organisation. We will ensure, through recruitment and training, that our staff have the ability to provide services to people from a wide range of backgrounds and ensure the effectiveness of our information and education in meeting the needs of diverse customer groups.

The two key priorities for rental market legislation are the Residential Tenancies Amendment Bill 2001 and the review of the Residential Tenancies Act 1986.

The Residential Tenancies Amendment Bill is currently before Parliament. It broadens the scope of the Residential Tenancies Act to include long-term tenancies in forms of accommodation not previously covered, including boarding houses and some hostels. This will present challenges, as many boarding house residents are among the most vulnerable and transient in our society.

The government's aim for the review of the Residential Tenancies Act is to ensure the Act strikes the right balance between the tenants' need for affordable and stable rental housing, and the commercial needs of landlords to manage their properties efficiently.

 ¹¹ Department of Building and Housing (2004). Getting the Balance Right – Te mahi kai Tika ai te Wharite. Department of Building and Housing: Wellington.
 ¹² Department of Building and Housing (2004). Getting the Balance Right – Te mahi kai Tika ai te Wharite. Department of Building and Housing: Wellington.