The Evolution of Renting In New Zealand

Will Alexander

New Zealand’s current dynamic property market might be excitement enough for property investors and renters, but to add to that are the changes within the Real Estate industry, and specifically the Property Management Sector brought about by the amendments to the Residential Tenancies Act. Will Alexander, General Manager of Property Management at Property Brokers talks us through what these changes actually mean and what the future of property management and renting in New Zealand looks like.

Why is everyone so concerned about the recent changes within the Real Estate industry, and specifically the Property Management Sector?

The concerns are all about the unknowns. There are significant changes, and often when changes are made, areas can be taken out of context. The recent amendments to the Residential Tenancies Act are extensive, and particular perspectives have cast a negative light on what the potential implications will be. An example of an area that has been put under the spotlight, and that has also captured the imaginations of many stakeholders, is the removal of a no-clause termination (No longer can a tenancy be ended by providing the tenant with a 90 days to vacate notice).

In addition to the recent amendments, you have Healthy Homes Standards, and now the move to regulate the industry. That is what is happening now, but don’t forget that over the last few years, we have seen a steady change across all areas of Real Estate. Keeping focused on Property Management, we have had Smoke Alarms, Methamphetamine, Insulation Standards 2016, Liability of Damage, removal of letting fees, and other small changes to the Residential Tenancies Act.

What we see across the sector is a classic case of change fatigue. No one is arguing that what has changed isn’t needed; it is merely the cadence of change over the last five years that has resulted in concerned landlords, tenants, agencies and tradespeople. The concerns are different for each stakeholder; and as the industry becomes more litigious, the dynamic is changing and so are people’s perception.

Why are the government making all these changes to the industry?

The changes underpin the shift in how New Zealanders live and are designed to support Kiwis as we move more towards ‘generation rent’. Renting in this country is continually changing; however, when you look back to 1986 when the Residential Tenancies Act came into legislation, we are talking about two very different times in society.

Approximately a decade ago, the average tenancy term was around six months. It is now close to surpassing 30 months when looking at all rental properties across New Zealand. If you remove specific markets such as student accommodation, the average term may well be closer to three years. And this trend is going to continue.

The changes are about providing robust legislation to support this shift. The amendments to the Residential Tenancies Act are primarily focused on the security of tenure, and the Healthy Homes Standards are about raising the overall housing standards to help people create homes for themselves and their families. No one would argue that these are not positive changes for New Zealanders.

And, the final part of these changes is accountability. For the changes to become part of renting and living throughout New Zealand, the government has rightly identified that the property management industry needs governance via a regulatory body. In 2010, the property management sector was deregulated, and everyone within the industry has been advocating for it to be licensed ever since. Regulation and licensing requirements will only but compliment the changes, and it will hold landlords, tenants, and agencies accountable.

How is Property Brokers approaching all these changes?

Fortunately, the industry has experience on their side, and after working through many of the changes over the last few years; we can take what we have learned and apply it to what is happening now.

Property Brokers is fiercely motivated to educate our clients and to remove many of the unknowns and misconceptions. The recent changes have garnered interest within the media, and many of our clients have raised concerns.

Throughout the last few months of 2020, Property Brokers has been holding events across provincial New Zealand to discuss the three major areas of change. These are; RTA Amendments, Healthy Homes Standards, and Regulation. The events have been well received, and the stand-out for us is the level of engagement and questions during the presentations. People are genuinely interested and are looking for more information to make informed decisions as we advance.

The Roadshows have helped to remove misinformation and alleviated concerns. In general; clients have walked away feeling confident.

Property Brokers has also taken a unique approach to the assessment of Healthy Homes Standards. We have worked with Tether to develop an application to allow property managers to assess properties during inspections.

This approach is unprecedented when considering how the industry has adapted to change in the past. But, the difference now, is we have experience on our side. Changes in the past, such as Methamphetamine, Insulation Standards 2019, or even the Healthy Homes Standards have come out in an original form; but the goalposts move, and the legislation evolves.
For example; insulation was required to be a minimum of 70mm in the roof for Insulation Regulations 2016; however, when the Healthy Homes Standards were released three years later in 2019, the level was increased to 120mm.

Knowing what we know, we expect changes to happen; and by doing assessments ourselves, we can easily update our software, and re-evaluate the property during the next routine inspection. This saves time, additional costs for the owner and disruption for the tenants.

What are the implications of getting these changes wrong or missing deadlines in the future?

When you read the changes to the Residential Tenancies Act carefully, it becomes evident that the change in legislation is not necessarily targeted towards everyone. The landlords and agencies that operate lawfully don’t have much to worry about.

The changes in legislation are aimed at lifting the overall standard to a level where most landlords and agencies already operate at. The landlords, tenants and agencies that contract outside of the act, or disregard the RTA entirely, will need to change under this new regime.

Part of these changes sees a big step up in the legislative powers and jurisdiction of MBIE and the Tenancy Tribunal. Owners with six or more properties (private or professional) are considered to be large landlords and are subjected to higher fees and fines. Across the board, the amendments see an increase of 50-80% in fines imposable by the Tribunal. Repeat offenders can be fined up to $50,000.

With the introduction of regulation and licensing requirements for property managers, the changes will also see a big shift in the overall professionalism of the industry. It will help to remove bad operators, but it will also help to attract a new calibre of property manager to the industry. And the benefits of this will have a positive impact on everyone.