Residential Tenancies (Prohibiting Letting Fees) Amendment Bill

Members, we turn now to the debate on clauses 9 and 10 and the schedule—Part 2.

Thank you, Madam Chair. I stand and rise to take a speech on Part 2 and, in particular, clause 10, where it indicates that schedule 1A be amended: “In Schedule 1A, after the item relating to section 17, insert: ‘Section 17A (Requiring let fee)’ ”. In particular, the penalty cost of $1,000 is what it indicates there. In my speech in the debate, I’d like to indicate the fact of the cost and the burden that will have on those that are actually inside this sector and, in particular, those of the property management sector.

The reports to us have indicated that in 2017, there were 175,081 bonds lodged, with 53 percent of those from property managers, so we know that the burden already is actually on those property managers. Their role of responsibility is to both the tenant and also the landlord. In particular, it’s around ensuring that both have the responsibilities before them to be a good tenant and a good landlord—in this case, the burden of that cost in regards to Part 2, which is the requirement of the letting fee in regards to that $1,000 and the burden that that could cost. But it’s the impact that I think has not been talked about, and I want to add something extra to the debates that have been happening in the House in regards to this Residential Tenancies Act.

Some of the comments in the submissions that relate to that part are from a Wellington property management company that says “If Labour’s changes go ahead it’s unfortunate, but inevitable, that some owners will exit the rental market [therefore] reducing the number of homes available for rent,” which will then see a rent increase for all of those that are there. I’ve met many of those that are in our communities—even in west Auckland, in Te Atatū—who have said they’re now putting their properties on the market. They’re afraid of where the direction of this current Government is going, not only in regards to the prohibition of letting fees and the burden of costs to that but also to, potentially, the new Tax Working Group—the capital gains tax that could be there. So this burden is being felt now. When I have spoken to those in Harcourts and even those in Ray White, they’re now saying that the auction houses are starting to fill and, in particular, they are with those landlords who have a real concern about the direction that this Government is taking.

To add to their point, and to give some substance and weight to that, a lot has been made by the ministry and the Minister in the example of Scotland, who banned the letting fees in November of 2012. My colleague the Hon Louise Upston talked about this, but I want to add another component to this debate in regards to that. Tony Williams, the managing director of referencing firm UK Tenant Data said, “The loss of fees has had a profound effect on the rental sector in Scotland.” So, while they’ve removed these fees and while this has been looked at as an exemplar of an approach that can be taken by the current Government, initially the ban hit agency revenue, resulting in increased fees to landlords and in rents rising to mitigate some of these costs. But what’s really interesting is that what is happening years down—now, this is post the ban, nearly five years down the track or nearly six years, we’re all aware of the obvious fallout in terms of lost jobs, increased rents, and so on. But what hasn’t been factored in and what is now being realised is the level of which there are a number of properties that are being withdrawn from the property market.

So my contribution on Part 2 and to this debate is on the impact that this will have in the long term. We’re talking about an exemplar that is being used by the current Government of Scotland, and of Shelter and their approach, which is to remove the letting fees, and yet the impact is quite clear. What they’ve indicated is the loss of jobs and the increase in rental prices but, more importantly now, the removal of those homes that had been available inside the property market.

I think it’s important that we need to be cognisant of that. These are the impacts that they are having and that they will continue to have in this sector, and we feel that it’s been something that hasn’t really been debated. I want to add this extra contribution to this debate because I think it’s significantly important, because the approach that the Minister has often talked about is that we should have a balanced approach. We should be ensuring that there’s a security of tenure for those residents, those tenants, and, at the same time too, we should be ensuring that there isn’t an added burden of cost on to landlords in their situation of providing the warm, dry, safe residential properties that are there.

So I add these contributions to the Part 2 debate in the committee. Thank you.

I want to take just a brief call in this second part of the Residential Tenancies (Prohibiting Letting Fees) Amendment Bill. I just bring the House’s attention to the penalty of $1,000 and come back to the point I made earlier around the very tight time frames in which this legislation is being passed and how I think it’s a terrible process for those who are affected by this—property managers as well as property owners or landlords

Let’s say, for example, this legislation doesn’t pass in this sitting of the House. Potentially, it doesn’t pass until late November - early December. It gets the assent by the Governor-General, and the implementation date is 12 December 2018. Nowhere—nowhere—is there the ability for the penalty to be waived in the instance where there is such a ridiculously short implementation date. I think that’s grossly unfair. For all of the landlords out there, this is absolutely outrageous.

As I said before, the majority of landlords don’t see them owning a rental property as a business. So these are not, you know, 270,000 business people sitting out there watching Parliament, getting legal updates on everything that affects their business. These are mum and dad investors who have worked hard and might have one property—two, if they’re lucky—and, all of a sudden, we’re talking about significant penalties in Part 2 of this legislation and a ridiculously short implementation date. I want to pick up the comments the Hon Alfred Ngaro spoke about around the number of these mum and dad investors who don’t treat their owning a rental property as a business who are now exiting or considering exiting the market.

So when we talk about the market, this is the person who has a rental property. Chlöe Swarbrick, in her contribution in an earlier part, considered that was a good thing—considered it was a good thing that landlords exit the rental housing market. Well, I think that’s a bad thing for tenants, because if they think currently the pool of houses available to them to rent is small, guess what—guess what. This Government is making it harder for people to own properties that they make available to others to rent. If it is that much more difficult, they will exit—so there’ll be even fewer properties available for people to rent.

So this particular piece of legislation, although, you know, it sounds good—prohibiting letting fees sounds good, and, in terms of the submitters that appeared before us, there’s no denying, from the side of the House, that there are some challenges, there are some problems, with some of the letting fees. The Minister himself said in an earlier contribution that greater transparency of the letting fee is something that could have been resolved through this particular piece of legislation. But no; instead, the simpler option, which has unintended consequences, was just to ban them—to outright ban them.

So, instead, it means those individuals who have worked hard and own an additional property in addition to their own that in most cases is their retirement savings fund—as opposed to a business entity—will be punished. They will be punished by legislation that has a ridiculously short commencement date of 12 December this year. It could have easily have been next year. Had the Minister been insistent on 12 December, why didn’t the Minister put a Supplementary Order Paper to enable or to ensure that people who were adjusting to this change weren’t ridiculously punished with the $1,000 fine purely because of the short time frame of the implementation?

So I do want the Minister to respond to that. My question is, very specifically, why did he not consider the need for a transition when this is a ridiculously short time frame, 12 December—either having had a later implementation date or allowing for a transition to ensure that New Zealanders are able to comply?

The question was put that the amendment set out on Supplementary Order Paper 142 in the name of the Hon Phil Twyford to Part 2 be agreed to.