Speech to NZPIF AGM 2018

Thank you for inviting me here this evening to speak to you. Thank you Andrew for your introduction and thank you Cliff Seque and the Otago Property Investors’ Association for hosting us in Dunedin. I’d also like to acknowledge Sharon Cullwick, President of the Property Investors Federation.

The Government has a vision of helping more New Zealanders into their first homes and making housing more affordable. But we can’t forget that long term renting has become a reality for more New Zealanders. We need to modernise our tenancy laws to reflect that reality.

This work is part of a bold, comprehensive plan of reform across housing, urban development and transport.

To bring leadership and focus to the housing and urban development parts of our plan, we united a range of previously fragmented housing policy, funding and regulatory functions from across government into the new Ministry for Housing and Urban Development.

The new Ministry will help us build New Zealand out of the national housing crisis and restore the basic right to healthy, affordable housing for all New Zealanders.

I understand and acknowledge that landlords like you play an integral part in helping us address some of the housing challenges we are facing as a country.

You are key players in a market that is experiencing some quite dramatic changes – some of these happening at a fast pace.

Homeownership rates are the lowest they have been in 66 years. As home ownership has decreased, renting has become the norm for many people – rather than just a temporary thing before they buy their own home.

It is important to bear in mind which kinds of New Zealanders are living in the private rental market. Census data tells us that 63 percent of the households that rent primarily identify as being single family units.

It is becoming more common for children to be raised in rental properties. 43 percent of children live in rental households, and in Auckland this figure sits at 53 percent of children.

These families are mainly renting from private landlords, like yourselves.

Only around 11 percent of renters are in public housing.

People on low incomes are more likely to rent.

Māori, Pacific people and disabled people are disproportionately represented in the renting population.

People who rent move more often. Tenancy agreements are rarely long-term in New Zealand and tenure can be insecure. For some tenants this may not be a problem, but increasingly people are looking for security of tenure – particularly families with children.

The 2013 Census data shows that approximately 60 percent of renters had lived in their current properties for less than three years, compared with 30 percent of owner occupiers.

By examining bonds lodged at MBIE, the most common length of a tenancy in the private rental market between 2010 and 2017 was just less than 12 months.

Research into housing quality demonstrates that rental properties generally tend to be in poorer condition than owner-occupied houses.

There is a greater prevalence of mould and damp, which can cause serious health conditions and illnesses. These houses also tend to be harder to heat and have inadequate insulation.

The main piece of law governing interactions between landlords and tenants – the Residential Tenancies Act 1986 (RTA), is over 30 years old.

When the law came into force, a quarter of all households rented, now, over a third do.

This changing nature of our rental market makes it timely to assess whether our laws are fit for purpose.

There is a raft of RTA reforms coming, as well as others relating to healthy homes – all designed to improve the lives of renters and to ensure they are able to make a home in a place that is warm, dry and healthy.

They are also about improving the relationships between tenants and landlords while ensuring there are appropriate protections in place.

We want landlords to be confident that their property will be well looked after as well as more easily deal with rogue tenants.

We’re trying to strike the right balance between rights which help tenants feel at home and their responsibility to look after the rental they’re in.

My officials at the Ministry of Housing and Urban Development are currently consulting on the Reform of the RTA that focuses on priority areas to:

• improve the security and stability for tenants while maintaining adequate protection of landlords’ interests
• balance the rights and responsibilities of tenants and landlords to promote good faith tenancy relationships
• ensure the legislation can respond to changing trends in rental markets
• improve the quality standards of boarding houses and the accountability of their operators.

Officials are looking at a number of areas of the legislation to meet these objectives as part of the reform.

There are many property investors and landlords, like you here today, who operate their businesses with integrity and professionalism. The reforms are not about punishing you.

It is about trying to bring others in the industry, including some tenants, up to a higher level of performance.

We know that security of tenure is vital to people’s wellbeing. It helps kids do better in school; parents to maintain stable employment, and whole families contribute to their communities. Secure tenancies also make good business sense. Long term tenants are more likely to care for their rental properties like they would their own home.

The reform looks at removing ‘no cause’ terminations, and extending notice periods for ending periodic tenancies in general from 42 to 90 days.

I understand that landlords still need to be able to effectively run their business, and that there will be legitimate reasons why tenancies need to end at times.

We are seeking feedback on what grounds should be included in the RTA to ensure that landlords’ interests are adequately protected. I encourage you to look at the proposed grounds in the discussion document and let us know how these align with your experiences.

Other issues we are seeking feedback on include:

• Whether the rights and responsibilities that tenants have are well understood and whether they are reflective of the modern renting environment.
• The circumstances under which tenants should be allowed to keep pets in rental.
• The existing modifications provisions. Currently, a landlord cannot unreasonably decline a tenants request to make modifications. Our aim is to not give tenants the ability to make significant or structural changes to a property. It’s about letting tenants make minor modifications that will help them feel safer and more at home. For example, hanging pictures, baby proofing, and securing furniture to walls to prevent it falling over in an earthquake.
• Limiting rent increases to once per year.                                                                  
• How boarding houses are defined and looking at options to improve the quality of boarding houses.
• Finally, the reform looks at enforcement powers currently available to the Ministry of Business, Innovation and Employment. We are seeking your feedback on whether a wider range of enforcement powers and compliance tools would lead to greater levels of compliance.

Officials have advised me that making changes to the termination provisions for periodic agreements could lead to wider use of shorter, fixed-term agreements which could have negative outcomes for tenure security if it results in greater turnover of tenancies. So, we are also looking at whether changes should be made to the existing types of tenancy agreements that are on offer to ensure we achieve the desired security of tenure outcomes.

I understand that many of you have already submitted on the reforms. For those of you who have not yet been involved, submissions are open until 21 October and I encourage you to have your say on the proposed reforms. 

I expect a Bill to be introduced to Parliament in the second half of 2019 with changes being implemented in 2020.

We are also consulting on the healthy homes standards under the Healthy Homes Guarantee Act.  

The Act enables the government to set minimum standards that rental properties must meet through regulations in relation to heating, insulation, ventilation, moisture control and drainage, and draught stopping.

We wouldn’t allow a restaurant to sell food that was unsafe, but for too long we have allowed people to rent houses that are a threat to their health. We are proposing to create standards across all these areas, and are currently consulting on what should be included in those standards.

One of the first points I want to make here is that the existing requirements for insulation and smoke alarms are still in place. The proposed Healthy Homes Standards do not change the 1 July 2019 deadline for them.

We are seeking feedback on a new insulation standard but under all proposed insulation options, landlords who install new ceiling and underfloor insulation to comply with the current insulation requirements would not need to carry out further work on that insulation to comply with the healthy homes standards as long as the insulation remains in reasonable condition.

In the discussion document, we are seeking feedback on the following:

• The type of heater landlords should be required to provide and where they should be located

• The insulation standard - we are asking questions about whether the minimum level for ceiling and underfloor insulation should align with the 1978 Building Code Insulation Standard, as it does currently, or whether the 2001 or 2008 standard should be used.

• Ventilation - we are seeking feedback on what the method of ventilation should be in rental homes – are openable windows enough or should rental properties also have extractor fans in kitchen and bathrooms.
• We are also consulting on whether landlords should be required to install ground moisture barriers or have vents under the floor to protect against moisture entering the home, and seeking feedback on whether any unnecessary gaps or holes that cause noticeable draughts should be stopped.

Regulations will also provide for compliance dates. While the Act contains an overarching 2024 compliance date deadline, regulations could bring some of these aspects into force sooner. We want to hear from you on three options for the compliance dates

• Applying the standards to all new tenancies from a set date, such as July 2021.Once a new tenancy has started there would be a grace period after which the home would have to comply with the standards.
• Applying the standards to all tenancies from a set date such as July 2022.
• Phasing them in between July 2019 and July 2024. This option could be based on the standard or by the location of the rental home.

Consultation on the Healthy Homes Standards is open until 22 October 2018. I am expecting to have the new requirements decided by 1 July next year.

I appreciate that most of you will be engaging in the consultation process for both the Healthy Homes Standards and the RTA Reform, I thank you for that. Having practical knowledge from experienced landlords in the sector is really important and will ensure the legislation is fit for purpose. 

We have a range of other reforms that will affect the residential property market, including:

• The Residential Tenancies Amendment Bill (No 2) which will make amendments to the RTA related to contamination (including methamphetamine), liability damage to rental properties caused by a tenant, and tenancies over rental properties that are unlawful for residential use.
• We are putting an end to letting fees.
• We are discouraging speculation in the housing market through the extension of the bright line test out to five years, and through our adjustments to the tax settings and ban on foreign buyers.
• We are working to improve the fairness in the tax system and remove the loss ring fencing provisions that create an unfair advantage over first home buyers.
• We aim to rein in the worst excesses of the demand pressures that have seen in our most expensive market – house prices double and double again in the last two decades.

Between these tax initiatives and our foreign buyers ban, we are aiming to tilt the playing field away from real estate speculation and land banking and towards a more productive economy that creates jobs and exports.

Another part of our comprehensive plan to tackle the housing crisis is KiwiBuild. Our KiwiBuild programme will build 1000 KiwiBuild homes in the first year, with the full ramp up of construction reaching 5000 homes by June 2020 and 10,000 homes by June 2021.

It’s important to remember that KiwiBuild is just part of a larger effort to increase the overall supply of housing in New Zealand. Although KiwiBuild is specifically for first home owner-occupiers, it sits alongside efforts to transform the wider building and construction industry including workforce development, more efficient consenting, efforts to establish off-site manufacturing, and a UDA to lead large scale developments.

The goals of our reform agenda are:

• To reset and rebalance the rights and responsibilities shared by landlords and tenants, and make them fit for purpose for the 21st century.
• Clean out rogue operators at the bottom end of the market who are giving your industry a bad name.
• To encourage more security of tenure and the ability for tenants to feel at home, to make renting life better.
• And to raise the standard of rental properties currently the cause for the shocking public health statistics that are no longer tolerable in the 21st century.

We know these changes need to be practical and workable for landlords and tenants.

Thank you for your time this evening and I hope you all submit on the RTA Reforms and the Healthy Homes Standards. I wish you well for your conference this evening.