Make private sector renting better

People who are renting need to experience the security of having a ‘home’. It is the quality and stability of a housing arrangement that is most important, rather than whether a house is owned or not. The home ownership rate is dropping and expected to continue to drop in the future makes providing better and more stable tenancy arrangements vital.

More than a third of New Zealand’s 1.7 million households are renting their home and most of them must do this through the private rental market. A central issue in the housing affordability problem is that the private rental market is not working for renters or the owners of the properties.

Most low-income families renting in the private market must rely on the assistance of the Accommodation Supplement. The Accommodation Supplement (AS) does not work well for many low-income renters because it does not match the gap between incomes and rents. Compared to people living in Housing NZ (HNZ) housing, who pay income-related rents, they are often considerably worse off. Low income tenants need housing assistance policy that works better for them.

Telling the story of renting on a low-income

Life as a renter holds up the enticing possibilities of freedom and choice about when to move and where to live without the burdens of property ownership, debt and maintenance. The reality is that for many people on low incomes choice is seldom the case. The 90-day notice option for landlords hangs over every renter’s head. The desire to maintain social and community networks often means accepting sub-standard housing. Changing personal circumstances (separation, becoming a sole-parent, growing families, disability or illness) can suddenly threaten the ability to stay in your chosen home. The average tenancy lasts around 18 months which points to the transient and short-term nature of the NZ rental housing market.

Landlord’s perspective

The overwhelming majority of private sector rentals are with the so-called “Mum & Dad” landlords. The National Landlords Survey (2003) showed that most (82%) of rental property owners own four or fewer properties and 70% of rental properties are managed by the owner. Owning one or two houses as investments and/or eventual retirement fund, they often struggle with all the challenges of selecting and managing tenants and property maintenance.

Landlords told the survey that the things they disliked the most around being a landlord were tenants and property management, which begs the question – why are they doing this!? Motivations for many landlords are around seeking capital gains and owning a property for retirement. This means that many landlords, often with the best of intentions, still need support and encouragement to understand being a landlord as providing a service and that they need help to learn the skills necessary to fulfil this role well.

This weakness in the quality of housing service by landlords to their tenants plays out in the experience of those on the margins of the housing market, who face exploitation and insecurity in their rental housing situations.

What needs to happen to help the most vulnerable?

Kay Saville Smith, housing researcher, has set out some steps that would help improve rental affordability:

  1. Increase the diversity and performance (e.g. energy efficiency, dampness, warmth) of the rental housing stock to better cater for the needs of renters.
  2. Develop the service capability of the sector (i.e. property agency skills).
  3. Recognise and support the intermediate market into housing purchase.
  4. Improve the service capability of the sector (i.e. landlord’s property agency skills).
  5. Improve the rental housing stock to better cater for the needs of renters (e.g. energy efficiency, dampness, warmth):
    1. More robust and fair Residential Tenancies Act.
    2. Proactive support for landlords and tenants.
    3. Better management of the accommodation supplement to encourage investment by landlords in stock improvement and reduce rent premiums used by landlords to cover the risk of rent loss between tenancies.
    4. Developing credible mechanisms to consolidate investment of property (e.g. quality property investment funds).

Legislation has only gone part of the way

The Residential Tenancies Act (RTA) was amended in 2010 after an extensive consultation process lead by the Department of Building and Housing. It has improved some aspects renting for vulnerable tenants but NZCCSS and others working with vulnerable tenants believe more needs to be done. Read the NZCCSS Submission on the Bill and the Select Committee report on the Bill.