Major announcement: landlords and tenants face sweeping changes to the Residential Tenancies Act

The latest data released by CoreLogic last month showed rents rose 6% in the year to February, “well above the long-term average”. This growth reflected rising wages and a “tightening balance between housing supply and demand”.

 

Housing Minister Chris Bishop said the new coalition Government’s changes to the Residential Tenancies Act would help encourage landlords back into the property market and increase housing supply. Other changes include adjustments to social housing rules and the reinstatement of interest deductibility for landlords. Prime Minister Christopher Luxon said renters would be “very grateful” for these housing policy changes.

 

The tenancy law changes include:

 

Bishop said many landlords complained that the previous Government had effectively waged a “war” on them, prompting them to leave the rental market altogether. He believed this had also led to worse outcomes for tenants: since 2017, weekly rents had risen by NZ$170, around twenty thousand more households had joined the social housing waiting list, and thousands of homeless families had ended up in emergency accommodation in motels.

 

Bishop claimed the coalition Government was making sensible changes to the Residential Tenancies Act that would benefit tenants by helping increase the supply of rental homes. He explained that the Government expected the changes to make it easier for investors to enter the market and help increase rental property supply. Many landlords had told him that without provisions allowing 90 days’ no-cause termination, they were unwilling to risk renting to a prospective tenant who lacked “perfect” references or stable employment.

 

Current Housing Minister Chris Bishop

 

He said the new Government was committed to addressing New Zealand’s housing crisis as part of its plan to get the economy back on track, restore law and order, and deliver the public services New Zealanders deserved. He reiterated that ending the housing crisis required the Government to use every available means to increase supply. These changes, alongside the restoration of mortgage interest deductibility for residential investment properties, were part of the Government’s plan to encourage landlords back into the rental property market and increase the number of homes available to rent.

 

CoreLogic Chief Property Economist Kelvin Davidson

 

One commentator said conditions were shifting in investors’ favour, but high interest rates remained a problem.

 

CoreLogic Chief Property Economist Kelvin Davidson said the policy changes could attract more landlords into the market and provide additional rental homes, but were unlikely to transform the market on their own.

 

Davidson explained that the combined impact could be more significant when considering the wider range of changes, including rising rents, an easing of low-priced tenancies around mid-year, the return of interest deductibility, a shorter bright-line test, and now these changes to tenancy and landlord arrangements.

 

There was no denying the need for a well-functioning private rental market, but he still believed the main obstacle for ordinary investors was the substantial cash shortfall between rental yields and mortgage interest rates. Even with future tenancy law changes, investors would still have to contribute hundreds of New Zealand dollars each week towards interest on newly purchased investment properties. For ordinary investors, that remained an insurmountable barrier.

 

There have, of course, also been many opposing views. Renters United spokesperson Ashok Jacob believed National’s policies would be “disheartening”. He told the media that the current rules were designed to stop misconduct by bad landlords. He believed the actual grounds for eviction under the current rules were entirely reasonable: landlords could evict unwanted tenants for unpaid rent or antisocial behaviour. But he believed that with these changes, the Government was effectively saying: “When people’s livelihoods are at stake, we should protect landlords from punishment for anything they do.”

 

So, what do you think of these sweeping changes to the Residential Tenancies Act?