New tenancy laws coming into effect Feb 11 2021

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#2632015 7-Jan-2021 20:10

Handle9:

There were already provisions for dealing with tenants who don't pay their rent, trash property etc. That's all part of the business risk of owning a rental property and can be insured. If the landlord is too cheap to take reasonable levels of insurance that's really their bad luck.

The reason why the laws are changing in favour of the tenant is NZ has really draconian laws in the favour of the landlord. It is very unusual internationally to have at will termination of a tenancy by the landlord with 90 days notice.

Let me tell you about my bad tenants.

6 holes punched in walls and 6 doors with holes punched and kicked in them.

A large Penis spay painted on the wall

Insurance assessor said each hole was a seperate claim and a separate excess, so I am already looking at $7000 in excess costs

They of course failed to pay rent too so by the time I got them to the tenancy they owed over $10,000 in arrears and damages (based solely on the excesses)

Yes the property was inspected, but the guy who did the damage had his girl friend leave him so he "got angry", all that damage done in one night.

They came back afterwards and smashed a bunch of windows.

Police had ZERO interest, it was a civil matter..."go to the tenancy tribunal".

Its up to the landlord to trace the tenants when they do a runner. Not the police. IRD, Social welfare, etc will not help, "privacy" they claim. Unless you find them you can not get any money from them.

And NOW under the new laws, they would be liable at most by the excess OR the bond , which ever is the lesser.

The laws were not draconian in favour of the landlord. Good tenants are looked after. Mine are currently paying $150-200 a week below market rates.

The ones who are always shifting are the bad tenants.

And unlike other businesses who can trespass people at will, if a tenant assaults a landlord they can only evict them if and only if the police lay charges.

Yeah landlords have so much power...not.

sir1963

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#2632018 7-Jan-2021 20:20

elpenguino:

The squatter's right is based on the fact that shelter is one of life's most basic necessities, unlike a car, and therefore assumes more importance. By owning a house which you do not use, you are denying shelter to someone.

You could decide who to rent to it to. Or if you can't be bothered being a landlord, sell it to someone who will be a landlord. Or sell it to an owner occupier.

If we were to take your position to the extreme, Bill Gates could move into town, buy up all houses that come onto the market and leave everyone else on the streets. Cos it's his right.

The idea of property rights is only an idea, as is the whole fiction of money. If I pay 'made up' money for a house and keep it empty, someone has to sleep in a very real garage.

As a society, we need to keep these ideas of property rights and a need of shelter in balance.

I know a lot of people complain about violent crime or climbing gang numbers - one of the factors that pushes people into these worlds is poverty, including the shutty houses and neighbourhoods people live in.

Sometimes 28.3 grams of prevention is worth 453 grams of cure. NZ needs to do more to improve our housing situation.

A tent is shelter.

But seeing as how you feel this way, put your money where your mouth is and sign up as a guarantor. When a tenant does $10,000 worth of damage the landlord can come to your place, take everything you fictionally own and sell them to pay the bill.

Or better yet offer up one of your kidneys to someone, you only need one. Surely health is as much of a right as shelter. Do you think you should forcibly have a kidney removed because someone else wants one ?

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#2632019 7-Jan-2021 20:21

sir1963:

Let me tell you about my bad tenants.

6 holes punched in walls and 6 doors with holes punched and kicked in them.

A large Penis spay painted on the wall

Insurance assessor said each hole was a seperate claim and a separate excess, so I am already looking at $7000 in excess costs

They of course failed to pay rent too so by the time I got them to the tenancy they owed over $10,000 in arrears and damages (based solely on the excesses)

Yes the property was inspected, but the guy who did the damage had his girl friend leave him so he "got angry", all that damage done in one night.

They came back afterwards and smashed a bunch of windows.

Police had ZERO interest, it was a civil matter..."go to the tenancy tribunal".

Its up to the landlord to trace the tenants when they do a runner. Not the police. IRD, Social welfare, etc will not help, "privacy" they claim. Unless you find them you can not get any money from them.

And NOW under the new laws, they would be liable at most by the excess OR the bond , which ever is the lesser.

The laws were not draconian in favour of the landlord. Good tenants are looked after. Mine are currently paying $150-200 a week below market rates.

The ones who are always shifting are the bad tenants.

And unlike other businesses who can trespass people at will, if a tenant assaults a landlord they can only evict them if and only if the police lay charges.

Yeah landlords have so much power...not.

Echo that. Last rental. Was fine then it wasn't. new full interior paint, new every floor lining, new shower/bathroom, three skips full of junk. That was after caving in and getting a property manager. Yes, we could grab a new build for cash, better tenants, but yield isnt worth it. But the new owner is happy, we moved on.

The best part was the eviction notice, more weeks of no rent

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#2632020 7-Jan-2021 20:21

elpenguino:

tdgeek:

There is a lot a Govt could do, but you have to ask the question, why do Govts always do nothing?

I posted what I think is the reason for Labour to appear to be doing nothing.

National always did nothing because of an ideology that the market always sorts out the problem.

And labour is following an ideology that is making things worse.

sir1963

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#2632021 7-Jan-2021 20:25

GV27:

elpenguino:

Sometimes 28.3 grams of prevention is worth 453 grams of cure. NZ needs to do more to improve our housing situation.

The 'not my problem' attitude is fine until social unrest makes it your problem. Until then, people seem to think 'fill your boots' is a zero-consequences approach when it comes to housing.

If you feel the threat of unrest is a reason, then perhaps those are precisely the people we don't need in NZ.

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#2632027 7-Jan-2021 20:36

GV27:

networkn:

It's called reality. What is your magic solution to fix this? Who do you think build the majority of houses? Property investors and developers. Take away the incentives then what? Even less houses. The problem is demand outstrips supply. Land is expensive in Auckland, less so in other places.

If the price of houses dropped significantly, there still won't be any more houses!

My solution is that we treat it as the national level disaster it is like we did in Christchurch: you insure people out based on a historic valuation for their family home so they are protected from negative equity, and then aggressively attack demand through monetary and tax policy and collapse the whole thing in on itself - and then never let this sort of idiocy happen again.

The fact that people have been able to make huge amounts of money from imported population pressure we can't support through infrastructure or policy execution does not mean that house prices should be forever inflated past the point of affordability because people think their investments should be insulated from the basic concept of risk, and certainly not to the extent that we ignore the massive social costs that come with house prices and rents being what they are.

The status quo is not sustainable. Either we manage it down to something reasonable, or an external shock will do that for us. At that point though, all bets are off.

Perhaps people will want to give up education, health, welfare, etc to pay for it.

The status quo at the moment is an anomaly bought about by the GFC and Covid resulting in historically low interest/mortgage rates, previously there was a far better long term return in the share market.

But everyone wants it "now"

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#2632029 7-Jan-2021 20:38

sir1963:

And labour is following an ideology that is making things worse.

What ideology is that? They aren't doing anything, which as with every other past Govt, its a hot potato. Housing ownership while declining is still the majority, upset that and your history

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#2632044 7-Jan-2021 20:56

tdgeek:

sir1963:

And labour is following an ideology that is making things worse.

What ideology is that? They aren't doing anything, which as with every other past Govt, its a hot potato. Housing ownership while declining is still the majority, upset that and your history

The ideology that means they attack landlords property rights

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#2632060 7-Jan-2021 21:06

sir1963:

The ideology that means they attack landlords property rights

Ah ok, agree on that, I was diverted by another poster using this as a housing shortage problem, which it isnt. If we shun landlords we may open up housing for FHB's, but then renters are shut out, less landlords renting means higher rents due to higher demand, same issue, supply. Housing needs more supply to retrain prices, renters need more supply (landlords) to steady rents

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#2632140 8-Jan-2021 00:21

tdgeek:

sir1963:

The ideology that means they attack landlords property rights

Ah ok, agree on that, I was diverted by another poster using this as a housing shortage problem, which it isnt. If we shun landlords we may open up housing for FHB's, but then renters are shut out, less landlords renting means higher rents due to higher demand, same issue, supply. Housing needs more supply to retrain prices, renters need more supply (landlords) to steady rents

I don't thing anyone disagrees that it is a supply problem with housing. This, combined with the dropping interest rates and FOMO, is what is driving house prices higher and higher, and locking out first home buyers, and creating this huge house pricing bubble, which appears to be more inflated than any other country, inclduing Australia. Even the prime minister has said that house prices can't keep going up as much as they have been. This is a clear signal IMO that these types of capital gains politically may not be palatable in the future.

But there is only a supply problem because we have been artificially increasing our population. There doesn't seem to be any connection between allowing new people to come and live in NZ, and there actually being enough houses for them to live in. Instead it seems to be about the number of jobs avaliable. This IMO is a major part of what has caused this problem.

We also don't have any official figures (apart from previous census's) on how many people are turning their houses into Ghost houses, so those houses have been left empty, but are fully capable of people living in them. Certainly there should be enough ghost homes to house those people who are living in motels at the taxpayer expense.

We did also ban foreign home buyers, albeit it well after the horse had bolted. This was partly because some were also buying up our relatively cheap houses at the time, and potentially landbanking them, and some were also left empty. But some NZers are doing exactly the same thing, so are just continuing to cause the same problem with removing these homes from the building stock. The reason this is a big problem is because another house needs to be built to replace that ghost home, and also the infrastructure to support it. Those new homes are also more likely to have to be built further out of town, and need more roads, services, and other public services, which all cost the tax and ratepayer. Countries where they have brought in Ghost house tax, it has made a significant difference in bringing these houses back online.

As people have said, Capital gain tax won't make any difference in terms of house prices. But a loan to income ratio could, and that seems to be what property investors are scared of. The Reserve bank apparently wants a loan to income ratio to come in ,and they want the government to do more. It is a government problem to fix, and FHBs could send a clear message to the government and the central bank, by refusing to buy. They are the ones who will be most affected if houses drop in price. The vast majority of home owners won't be affected at all if the average price drops 20% , as the prices have gone up 20% in a year. So it will mainly only affect those who purchased in the last year, or people who have borrowed against their house and are using their house as a bank. But I fear it is a house of cards, but can't see this growth slowing down for the next 6 months unless the economy tanks which is possible

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#2632142 8-Jan-2021 00:50

Coming from someone who doesn't own a rental property I can't speak too much on the part of my own experience. I did rent for a number of years and think I was a model tenant.

My take:

Unless there is more punishment and responsibility on the part of bad tenants, more regulations will only make it harder for them to rent. If they are now more difficult to remove and damage they cause is capped, does it not make sense for landlords to be even more cautious about offering them a rental? When I applied to rent previously I had to provide employment records, bank statements etc. which the property manager I presume used to judge my character and reliability.

I can imagine that with these new laws - that may now be full interviews with previous employers, colleagues, friends, criminal background checks, extensive social media data-mining etc.. Maybe "mum and dad" investors who haven't been stung by band tenants won't be onto this yet but over time I suspect this may become the norm or push towards companies playing a bigger role in the market.

And it sounds like there is insurance for tenants not paying and perhaps more comprehensive insurance for damage. Would landlords who are targetting the more uncouth tenant take this out and add it onto the price of the rental? Maybe it's not legal to do this directly but like employment law it will just go on behind the scenes wrapped up in a way that is legal.

I guess the big downside will come from the good tenants who will be paying higher rents to offset the new regulations.....

My landlord was fine and while it does sound like there are some tough landlords out there, the costs of new regulations will ultimately be borne in some form by tenants at large.

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#2632147 8-Jan-2021 07:05

sir1963:

Perhaps people will want to give up education, health, welfare, etc to pay for it.

The status quo at the moment is an anomaly bought about by the GFC and Covid resulting in historically low interest/mortgage rates, previously there was a far better long term return in the share market.

But everyone wants it "now"

Other countries manage this far better than we do. Australia has student loans, a health system, student welfare and manages to keep housing at or below Auckland levels.

The 'status quo' has been building since the GFC and no one has shown any interest in doing anything about it.

As for wanting it 'now' - the millennials people love to trash are turning 40. How long should they reasonably be expected to wait for affordable housing?

tdgeek

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#2632150 8-Jan-2021 07:32

mattwnz:

But there is only a supply problem because we have been artificially increasing our population. There doesn't seem to be any connection between allowing new people to come and live in NZ, and there actually being enough houses for them to live in. Instead it seems to be about the number of jobs avaliable. This IMO is a major part of what has caused this problem.

Thats it. Ive often commented that immigrants are banned from buying. They rent or they build. Existing citizens should be incentivise to build, penalised to buy, that swings the pendulum to new stocks. FHB can be exempt from buy penalties as they need access to older, cheaper homes. True ghost houses can be taxed. One thing we cannot do is to make it easier to buy, which seems counter intuitive, but if you do that, you exacerbate the problem, too much demand for too little stocks. Incentivise new builds and you then dont affect demand as you aren't competing wth other buyers, and you just added one new home, and you just released a rental, so rentals demand reduces, easing the cost of renting.

How do you incentives new builds?

1. LOW deposit. The Govt can underwrite that, which is not a cost unless it was foreclosed which is rare.

2. Interest rate subsidy. if mortage rates were say 5% then new builds are 3% existing homes is 7%. Revenue neutral to the bank.

3. Maybe stamp duty on purchases and a stamp duty credit on new builds

EDIT. The Covid returning Kiwis maybe need to be forced to rent or buy, too late now though of course. But that is a very real and very large sudden hit to demand. Circa 95,000 so far, and I assume much more cashed up than 95,000 traditional immigrants.

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#2632156 8-Jan-2021 07:48

mattwnz:

I don't thing anyone disagrees that it is a supply problem with housing. This, combined with the dropping interest rates and FOMO, is what is driving house prices higher and higher, and locking out first home buyers, and creating this huge house pricing bubble, which appears to be more inflated than any other country, inclduing Australia. Even the prime minister has said that house prices can't keep going up as much as they have been. This is a clear signal IMO that these types of capital gains politically may not be palatable in the future.

No prime minister can can predict the future. The reality is house prices will keep going up just like they have done for the past 20 years fueled by a lot of the changes made around 2000 by the government. While we live in an era with low interest rates there isn't a lot going to change.

Many people seem to believe LVL's are a magic fix, but they're not. For example I know two middle aged people who in recent months have purchased property and booted their kids out of home to live in them to avoid having tenants. This has then displaced other tenants who now need to find a property. Because these are people who have gone in with significant deposits (or even buying with cash) no LVL will affect them.

Their main reason for doing this was the fact money is delivering a negative return in the bank, so it doesn't actually matter how much housing prices go up, the reality is they're not going to drop in the short to medium term which will guarantee a better return. A bright-line test or CGT is a moot point in many respects, as you were paying tax anyway in the bank on returns.

Chatting to one a few weeks ago they know a few others who have done the same thing recently.

sir1963

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#2632337 8-Jan-2021 11:32

GV27:

sir1963:

Perhaps people will want to give up education, health, welfare, etc to pay for it.

The status quo at the moment is an anomaly bought about by the GFC and Covid resulting in historically low interest/mortgage rates, previously there was a far better long term return in the share market.

But everyone wants it "now"

Other countries manage this far better than we do. Australia has student loans, a health system, student welfare and manages to keep housing at or below Auckland levels.

The 'status quo' has been building since the GFC and no one has shown any interest in doing anything about it.

As for wanting it 'now' - the millennials people love to trash are turning 40. How long should they reasonably be expected to wait for affordable housing?

Other countries have more money.

I know people in their 80's who have never owned a home, There is no special entitlement for millennials.

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