Rental sector changes to regulate residential property managers, clear up meth confusion and ease pressure on landlords
A suite of measures to improve the lives of renters and landlords has been announced by Housing Minister Dr Megan Woods as the Government makes more progress on reform of the rental sector.
“Nearly 600,000 households rent in New Zealand and these measures will result in regulated oversight of residential property managers, science-based rules on meth residue testing and a reprieve for landlords in meeting a compliance deadline,” says Megan Woods.
“The Government aims to ensure every New Zealander has a warm, dry, and safe place to call home, regardless of whether they own or rent. These initiatives build on the important work we’ve already done in the rental sector which all ultimately serve to improve the lives and outcomes of renting New Zealanders and their whānau,” Megan Woods said.
Residential property management regulations
The Government will regulate residential property managers so they are registered, trained and licensed, and complaints and disciplinary matters will be dealt with through a new regulatory framework.
“Sometimes tenants are vulnerable to poor behaviour from residential property managers, especially in a tight rental market. Following our moves to give tenants more protection through the Residential Tenancies Act, we made a manifesto commitment in 2020 to regulate residential property managers,” Megan Woods said.
“This means that like many other professions such as real estate agents, builders and lawyers, they will have conduct and competency standards to abide by and if they don’t, they can be held to account.
“Nearly one in three households rent their homes and 42 per cent of these tenancies are managed by residential property managers, so they have a lot of access to rental homes and interaction with tenants. Having safeguards to ensure they meet minimum conduct and competency standards is in the best interests of both property owners and tenants,” says Megan Woods.
Cabinet has agreed the Real Estate Authority will be the regulator and that the Real Estate Agents Disciplinary Tribunal will have an expanded role as Disciplinary Tribunal for residential property management-related complaints.
Public consultation on proposals to manage methamphetamine contamination
The Government will consult the public before making binding rules on what an acceptable maximum allowable level of methamphetamine residue is, at what levels those homes need to be decontaminated to, and when tenancies can be terminated due to high levels of residue.
“Currently there are two levels used - neither of which are legally binding – which create uncertainty for landlords and tenants,” Megan Woods said.
“We have proposals that are informed by science, on screening, testing, and decontamination, with clear obligations for landlords.
“Under National, this issue was a dog’s breakfast; hundreds of tenants were unnecessarily evicted from public housing through the application of pseudo-science and we are cleaning up that mess.
“While the witch hunt on public housing tenants stopped under this Government and the former Chief Science Advisor Sir Peter Gluckman’s 2018 report resulted in a more scientific approach to residue dangers, it’s time to settle the rules once and for all.
“In the proposals, a maximum acceptable level of surface methamphetamine residue is proposed to be set at 15 micrograms per 100 square centimetres, which is also the level which a property needs to be decontaminated back to, or below.
“This level of residue is consistent with the findings of Sir Peter Gluckman’s report and advice from ESR.
“The sector needs certainty on what level of methamphetamine residue requires decontamination, so making regulations to clarify this is a priority,” Megan Woods said.
Once relevant regulations are in place, landlords will not be able to knowingly rent out premises that are contaminated above the prescribed levels (as set out in the regulations), without decontaminating in accordance with the regulations. They will be liable for a financial penalty of up to $4,000 if they do so.
Detail on the proposed Methamphetamine regulations and an opportunity to submit feedback can be found on the Te Tūāpapa Kura Kāinga – Ministry of Housing and Urban Development website. Feedback is welcome up to 5pm, Friday February 20, 2023.
Extension to the Healthy Homes Standards
The Government is giving private landlords, Kāinga Ora – Homes and Communities, and Community Housing Providers more time to comply with the healthy homes standards. Legislation will be introduced in the House today and passed under urgency before the end of the Parliamentary year, to ensure certainty for landlords.
“We recognise the impact that COVID-19 has had on getting this work done because of global supply-chain and delivery challenges, including limited workforce challenges,” Megan Woods said.
“It makes sense to be pragmatic as most landlords are genuinely trying to comply with their obligations but are at risk of breaching them because of issues outside of their control,” Megan Woods said.
“The change means private landlords have one more year to comply, so all private rentals must comply by 1 July 2025, instead of 1 July 2024. The timeframe for compliance for a new or renewed tenancy* shifts from 90 days to 120 days.
“For Kāinga Ora and Community Housing Providers, the timeframe for compliance shifts from 1 July 2023 to a new date of 1 July 2024.
“We are monitoring how the private sector is tracking for compliance; the last survey in 2021 indicated 85 percent of private rentals met, or had action underway to meet the standards.
“Similarly, 84% of Kāinga Ora homes either meet the standards or there is work in progress to meet them. Currently Kāinga Ora are bringing around 600 homes a week up to the new standard, as part of a wider programme that is making the biggest improvement to the quality of public housing in a generation.
“Pragmatically delaying the timeframes for compliance will ease pressure on landlords, however we do expect Kāinga Ora to aim to have as many properties as possible to be compliant by the original deadline of July next year. Projections indicate they could achieve around 95 percent compliance by the original date,” Megan Woods said.
Notes for Editor
*From 1 July 2021, landlords who had new or renewed tenancies were required to ensure their rentals met the standards within 90 days. This is being extended to 120 days.
The healthy homes standards create minimum standards for heating, insulation, ventilation, draught stopping, moisture ingress and drainage in rental properties.
Kāinga Ora homes – Of the 84% currently meeting or work underway to meet the standards: 43,775 (68%) tenanted properties meet the standards and 10,600 (16.39%) are in progress. As of October 2022, Kāinga Ora has been delivering HHS upgrades of about 600 homes per week.
Reform of the rental sector since October 2017
- Banning letting fees - In December 2018 the Residential Tenancies (Prohibiting Letting Fees) Amendment Act 2018 amended the Residential Tenancies Act 1986 (RTA) to prohibit any person, including property managers, from requiring a tenant to pay a letting fee in relation to a tenancy.
- Residential Tenancies Amendment Act 2019 – In 2019, the government passed the Residential Tenancies Amendment Act 2019, which dealt with tenant liability for damage, unlawful residential premises, and contamination of rental properties.
- Introduction of the healthy homes standards - In 2019 we introduced the standards designed to improve the quality of rental properties and help ensure that all New Zealanders have a warm, dry home that doesn’t make them sick, regardless of whether they rent or own.
- Residential Tenancies Amendment Act 2020 (RTA reform) - In 2020, the government passed the Residential Tenancies Amendment Act 2020, with a key focus on improving security of tenure for tenants. Most of the changes came into effect in February 2021.
- As part of the government housing package in 2021 the Government limited the tax deductibility of interest expenditure for residential property investors. From 1 October 2021, interest expenditure related to a residential property acquired on or after 27 March 2021 is no longer deductible at all. The deductibility of interest expenditure related to properties acquired before this date will be gradually phased out. To encourage new housing supply, property developers and owners of new builds are exempt from the interest limitation rules.
The Government has also announced that build-to-rent properties will be exempt from the rules. The limitation of interest deductibility is intended to support more sustainable house prices by dampening investor demand for existing housing stock, and to improve affordability for first-home buyers.
- The Government has also doubled the bright-line period from five to ten years for properties acquired on or after 27 March 2021 – this means that profits from residential investment properties which are bought and sold within ten years will generally be taxable. To encourage new housing supply, the bright-line period for new builds acquired on or after 27 March 2021 has remained at five years.