State Control of Rental Housing

New Zealand Centre for Political Research

The New Zealand Centre for Political Research is a web-based think tank that takes a research-based approach to public policy matters and encourages the free and open debate of political issues.

 

WoF_x_250Sir Bob Jones told property investors at a conference last year that he was sick of landlords being called evil persons and getting attacked by politicians. “You are providing a terrific service. You have to get politicised. Government’s declaring war on you. You have to kick back.”[1]

Sir Bob is correct – property investors provide a crucial service to society by supplying housing to almost half a million New Zealanders who do not own their own home. Yet politicians across the political divide treat property investors as a whipping boy, knowing they won’t get much of a fight and that landlords will not get much sympathy from the public at large.

They are under attack again – this time from groups who want state control of the rental property sector. But first, some facts.

There are more than 1.8 million houses in New Zealand – around 1,769,600 are private dwellings, 70,000 are state houses, and 12,000 are council housing units. Of the privately owned houses, 67 percent are owner-occupied, 29 percent are rented, and the remaining 4 percent are provided free of charge to occupants – by individuals, trusts, businesses or the government.[2]

Only 4 percent of New Zealand households live in state or council houses – the lion’s share of rental accommodation is provided by private sector landlords. It is they who are being targeted by child health, safety and environmental lobby groups that want to impose a Warrant of Fitness (WoF) on their rental properties.

The concept of a WoF for housing has a long history both in New Zealand and internationally. Tenants’ rights advocates have long pushed for a compulsory scheme for rental houses, but until now, governments have rejected such advocacy on the basis that the Residential Tenancies Act already ensures tenants have the right to habitable housing.

Under the Act, a landlord must provide habitable premises in a reasonable state of cleanliness and repair (considering the premise’s age and character), that complies with building, health, and safety requirements. In return, tenants are required to pay the rent, keep the premises reasonably clean and tidy, and ensure that their tenancy is not used for unlawful purposes – nor interferes with the reasonable peace, comfort, or privacy of anyone in their neighbourhood.[3]

The fact that the only around 10 percent of the cases that come before the Tenancy Tribunal are taken by tenants against landlords – while 90 percent are claims taken by landlords against tenants for damage to property and failure to pay rent – is indicative of the reality that the majority of problems associated with the rental housing sector are tenant related and behavioural in nature. It is however, notoriously difficult for public officials to initiate behavioural change on a national scale – imposing a mandatory WoF is clearly seen as an easier option, even though it is unlikely to change behaviour.

Presently two housing WoF trials are underway.

The government’s programme was launched last month and covers 500 Housing New Zealand properties. These houses are being assessed against a 49-point checklist that covers insulation, security, and amenities. In six months, the results will be used to determine whether housing WoFs are practical and cost-effective – and whether the scheme should be applied to private sector rental housing.

The second trial involves a private WoF pilot with five city councils – Auckland, Tauranga, Wellington, Christchurch and Dunedin. The initiative is being driven by environmental and public health groups, along with ACC.

This week’s NZCPR Guest Commentator Frank Newman explains that this second trial involves 125 private and council owned rentals (25 in each city) and covers 31 warrant of fitness criteria, which will be assessed by council-appointed inspectors:

“The viability of your rental will be in the hands of a person hiding behind a clip board. If in their opinion your rental has inadequate space for food preparation, the bathroom is not suitably located, the space heating is not effective, the lighting is not adequate, or the house is not in a reasonable state of repair, then you will have to do what they say or lose the right to rent out your property.

“All of these subjective judgements will be taken from you and your tenant and given to someone with a clip board; someone who may well be fresh out of university with a resource management degree on their wall and a commitment in their heart to protect society from evil and greedy landlords (unfortunately I am not exaggerating).”

While Housing Minister Nick Smith is reserving judgement on the scheme until the state house trial is completed – the Minister of Social Development and Local Government, Paula Bennett, is strongly in favour of rental housing WoF checks.[4] This would amount to state control of New Zealand’s private rental accommodation sector, since the state could, by subjective judgement, tell property owners exactly what they can and cannot do – whether the hot water in the house is too hot or too cold, whether a glass door needs a safety visibility strip, or whether the height of the handrail on a deck complies with the new building code requirement of 1 metre, instead of the old building code standard of 0.8 metre.

If National decides to impose WoF checks on rental housing, we will face the bizarre situation where a government that claims to be opposed to excessive compliance and bureaucracy would unleash an expensive army of clipboard carrying officials – likely to be 1,000 strong – onto private property investors. The impact on rent increases and rental housing shortages would be significant. Not only would the cost of having to assess and upgrade homes be passed on to tenants through higher rents, but large numbers of houses would be removed from the rental pool while they are being upgraded. Older homes, that would prove too costly to comply, would be removed permanently. This would create a housing shortage and push up rental prices even higher.

The timing of this couldn’t be worse for the government. This push for a WoF is coming at a time when Housing New Zealand is launching their reviewable tenancies programme, to change the perception that a state house is a rental for life. They intend moving several hundred tenants, who already pay market or near-market rents, into private rentals. Having rental housing shortages, while this is going on, is the very last thing the government needs.

What is missing from this whole debate however, is evidence. Where is the evidence that imposing this blanket requirement on almost half a million rental houses, at a cost of hundreds of millions of dollars, will in fact deliver the better health and environmental outcomes that advocates claim?

It appears that the main justification for WoF checks comes from the recommendations of the Children’s Commissioner’s Advisory Group on Child Poverty. However, this group cannot be taken seriously, since their claim that 285,000 children live in poverty is not credible, but has been engineered by manipulating the definition of poverty to extend beyond the minority of families experiencing severe deprivation, to include a large proportion of low income families.

Vested interests are also behind the push for rental WoF checks. The Green Building Council, which runs the Homestar home improvement subscription programme, has been working with councils to develop a technical methodology which will lead to “higher Homestar ratings.” They are also working behind the scenes with the Ministry of Building, Innovation, and Employment to “build Ministerial consensus on the objectives and scope of a centrally-led WoF.”[5]

The Housing and Health Research Programme – led by Philippa Howden-Chapman, a long-term WoF advocate, who is a professor of public health at the University of Otago and a director of the New Zealand Centre for Sustainable Cities – is also involved. Her membership of the Children’s Commissioner’s Expert Advisory Group on Child Poverty is no doubt the reason for that group’s strong WoF advocacy.

Councils are understandably very supportive of the scheme as they can see WoF policing will generate a lucrative income stream in perpetuity.

And ACC is involved – they believe there are too many accidental injuries around the home and have suggested a range of additional requirements for future warrant of fitness criteria. For example, in order to reduce the 385 hospitalisations between 2002 and 2011 of children aged 0-4 years that have resulted from falls on steps or stairs, they want all steps and stairs in a house to comply with the latest building regulations. To reduce the 64 hospitalisations that resulted when children fell out of trees, they want building standards applied to all outdoor play areas. And to prevent the tragic 184 deaths and 22 hospitalisations due to the accidental suffocation and strangulation of young children in bed over that period, they want new WoF criteria introduced: “Check there is sufficient room in house for a predetermined number of tenants to avoid overcrowding; sufficient affordable heating to avoid the need to minimise rooms used which can lead to overcrowding in spaces at night”.[6]

But where does it end? If a warrant of fitness scheme is introduced, just as night follows day, it will be expanded as more lobby groups get in on the act. And why not a warrant of fitness scheme for private houses? Will that be next?

The reality is that a sophisticated political campaign is being run to persuade the government that a compulsory WoF scheme is needed. But given that many poor outcomes are behavioural, there is no guarantee that costly home interventions will work. For instance, if tenants are living in a well insulated home, but don’t use heating in winter, their house will be like an icebox. Mould will grow in any home that is not properly ventilated. Fire alarms will not save lives if tenants have removed the batteries. It is an unfortunate fact of life that young children pick up infections and pass them on to other family members – no matter what the home environment. The crucial thing is to make sure a doctor is visited when necessary. Unless people are wrapped up in cotton wool they will still stumble, slip, fall, and injure themselves – nothing can prevent accidents from happening.

While it is understandable that public officials want to minimise accidents, injuries and poor health, imposing an array of expensive interventions on half a million homes is not the way to do it. Public education, and targeting the minority of families who are most at risk with specific remedies to suit their individual circumstances, is the only sensible option.

In New Zealand, the rights of tenants and landlords are well established through an act of Parliament. Disputes are dealt with through the courts. The law allows for flexibility, such as cheaper rents for poorer quality houses, but by making such agreements illegal, a WoF would undermine fundamental private property rights and freedoms.

A compulsory WoF scheme for private sector rental housing should be rejected. Any justifiable changes to the responsibilities of landlords or tenants should be incorporated into the Residential Tenancies Act.

But property investors need to speak out against the scheme – if MPs think landlords are happy with the warrant of fitness proposal, with such strong vested interest lobby groups pushing this agenda, it would be easy for them to go with the flow.

To help, the NZCPR has launched an on-line petition calling on the Minister of Housing to reject the call for a warrant of fitness for rental housing. You can sign HERE. Please help us demonstrate real people power by inviting your networks to sign too.

And if you would like to let MPs know how you feel about this or any other issue, the NZCPR has developed a facility to simplify emailing all MPs – see HERE.

THIS WEEK’S POLL ASKS:

Do you support the introduction of a compulsory warrant of fitness scheme for private sector rental housing?

 

Click HERE to vote

         

 Read this week’s poll comments daily HERE  

 

Click HERE to see all NZCPR poll results

 

FOOTNOTES:

1. Tauranga and Rotorua Property Investor (Autumn 2014), Bob Jones Come Out Punching
2. Statistics NZ, Dwelling and Household Estimates
3. NZ Legislation, Residential Tenancies Act
4. TVNZ, Bennett: ‘I’m an advocate’ for Warrant of Fitness on private rental housing
5. NZ Green Business Council, Homestar helps develop Warrants of Fitness for rentals
6. Bonnie White, A Warrant of Fitness to Improve Housing Quality for Child Safety

 
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