Labour plans could force out landlords

Labour’s newly announced rental market plans could scare existing landlords out of the market and will lead to increased costs for tenants, industry experts say.

Monday, September 4th 2017, 9:00AM

by Miriam Bell

Property Institute chief executive Ashley Church

Under Labour’s proposals, landlord notice periods will be increased to 90 days, “no-cause’ tenancy terminations will be abolished, rental increases will be limited to once a year, and letting fees will be banned.

The Party also recommitted to passing its Healthy Homes Bill into law and requiring rental properties to be warm, dry and healthy.

Landlords will still be able to get rid of tenants who breach their tenancy agreements by damaging the property or not paying rent and Labour committed to resourcing the Tenancy Tribunal to ensure quick action in such cases.

Grants of up to $2000 to upgrade insulation and heating will also be made available to landlords.

Labour Party leader Jacinda Ardern said they want the rental system to be fair and to take away stress for both tenants and landlords.

“This package has been designed, based on international examples, to get the balance between tenants and landlords right. It’s time to make renting a stable, healthy option for families.”

However, property industry experts have condemned Labour’s proposals.

Property Institute chief executive Ashley Church said the plan will scare existing landlords out of the rental market and will make the current housing crisis even worse – particularly in Auckland.

Landlords already have the deck stacked against them, due to the slower market, LVRs impacting negatively on equity positions, and tighter bank credit rationing in place, he said.

“Now, Labour is telling you that, if elected, they’ll take away your right to terminate a tenancy and they’ll regulate the circumstances under which you can increase rents to make them comply with some as-yet-undefined Big Brother formula”.

Labour has also put the possibility of a Capital Gains Tax back on the table, which sends a negative warning message to investors, Church said.

“Private investment is the key to solving the housing crisis but no one is going to invest in property if they’re worried that they’re going to be regulated and taxed to death”.

First National Real Estate chief executive Bob Brereton agreed that Labour’s plans will hurt the market.

He said the proposals will severely and negatively impact on landlords’ ability to protect their investment and will result in increased rents for tenants.

Removing the right to end a tenancy, with 90 days’ notice, without cause and increasing the provision to end a tenancy after 42 days to 90 days were a direct challenge to private property rights.

Brereton said Labour’s policies come on top of other pressures, already faced by landlords, and they risked being “the straw that breaks the camel’s back”.

“Landlords are facing negative returns, flat prices and the threat of a capital gains tax. If interest rates go up, as predicted, it would only take a small move in a flat market to convince many landlords to get out of the market.”

Prime Minister Bill English told media that, in National’s view, the current tenancy law is about right when it comes to balancing the rights of landlords and tenants.

Read more:

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Minimum standards for insulation and heating a step closer 

TOP tenancy policy ignores rental realities 

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