• Will New Zealand follow suit of Wales and regulate landlords?

  • We believe the Rental Warrant of Fitness will be used as a tool to measure enforcement of Healthy Homes standards

After much discussion and debate, finally, we have the proposed standards announced for the Healthy Homes Guarantee Bill (HHG). The deadline will come a lot quicker for most landlords than what they will realise, particularly because any fixed term tenancies will have to comply within 90 days of a tenancy being renewed post 1st July 2021. We actually believe that it may not be achievable if landlords up and down the country do not act now and in particular with moisture barriers and insulation top ups.

However, what has yet to be decided is how the Healthy Homes Guarantee will be enforced and policed.

The Tenancy Compliance and Investigation Team (TCIT) are simply not going to have the resources to ensure that all properties comply with the HHG standards and an alternative tool for measuring compliance will have to be developed and implemented to ensure that landlords fulfil their obligations under the new standards.

This is where the Rental Warrant of Fitness (RWOF) will likely finally find its home.

Wellington introduced the voluntary Rental Warrant of Fitness scheme. Take up has been virtually zero

Whilst the dates have been confirmed for compliance, Government is still to decide on what documentation the landlord will have to provide to prove compliance. However, the obvious document to use will be the RWOF which was developed by Prof. Phillipa Howden-Chapman and her team at Otago University. The RWOF has been over a decade in the making and has been financed by public funding. It was developed due to the poor condition of many of our rental properties across the country and the obvious health concerns of people living in these properties. It has powerful support within the political circles both at a local and national level.

Wellington City Council launched a voluntary RWOF scheme after Mayor Justin Lester was elected nearly three years ago, though it has to be said, take up has been embarrassingly poor and the scheme can only be described as a flop. However, that is not to say that the scheme will not work or will not find a purpose if it is made compulsory. The HHG standards will have to be monitored and policed with implementation being registered, and the RWOF could be the perfect tool to do this.

How will the Rental Warrant of Fitness work?

 The RWOF manual makes a recommendation that rental properties will need to be assessed every three years and the concept is similar to the Warrant of Fitness you undertake for your car. At this stage, the RWOF covers 29 separate criteria and is a simple pass/fail concept, meaning that the property will have to clear every one of the 29 criteria to pass.

Although the criteria will have to amend slightly to cover off the Healthy Homes standards, it will become the perfect tool to cover off compliance of rental properties. Similar proposals are being made in the UK where we see more compliance around rental properties. Each property has to have an Energy Performance Certification (EPC) and this must reach a minimum standard in order to be rented out. On top of this, there has been a proposal that all rental properties undertake a ‘Property MoT test’ to tackle sub-standard rental properties. Here in New Zealand, we seem to follow similar trends in regard to the UK property legislation and we see no reason why this wouldn’t be the case here.

What the process may look like

  • At commencement date of standards, all rental properties will have to undertake the RWOF to assess compliance.
  • If they pass, a certificate of approval will be issued and displayed so any tenant or prospective tenant will see that the house is compliant.
  • If they fail, the landlord will be given a timeframe to ensure that the property comes up to standard or they will be in breach of Landlords Responsibilities and may face exemplary damages as the house will not be fit for purpose.
  • If the house continues to fail the RWOF, Tenancy Tribunal may issue a work order to ensure that maintenance is carried out so it will pass or else it will not be able to be rented.
  • Assessors will be trained, certified and registered. These potentially could be Property Managers though there may be issues around a ‘conflict of interest’ if they are managing the properties that they are assessing for compliance.
  • Every three years, a WOF will be undertaken which will include measurement of insulation to ensure that any degradation is identified and ‘top-ups’ are undertaken as and when necessary.
  • Tenanted properties that do not have a WOF undertaken will be ‘red-flagged’ and will be reported to the Tenancy Compliance and Investigation Team.

Should a national database of landlords be developed?

 The obvious issue that arises with the implementation of such a policy is how do you identify the rental properties? The likelihood is rogue landlords will simply just ignore the scheme and will take the punt that they will not get caught out. With an estimated 400,000 landlords in New Zealand, there will be obvious issues around monitoring and identifying everyone. If only a handful of landlords participate in the scheme, then it will lose all credibility as has been the case in Wellington.

One solution could be to have a national register of landlords who will either have to undergo some basic training under the Residential Tenancies Act or they will have to engage a fully qualified Property Manager.

Once they have undertaken the training, landlords will go onto the national register as will their properties. Property Management companies who manage properties for landlords will also have to register the properties under management as well.

Wales regulates landlords

There is a similar scheme that has been developed in Wales. Rent Smart Wales was set up in 2015. If you are a landlord or an agent for the landlord, you have to be licensed under the Welsh Assembly to operate and this means compulsory training.

Frank Webster from the UK explains how Rent Smart Wales works at the Generation of Change Conference

There are clear benefits to implementing such a scheme. This means that landlords are better educated and understand what their rights and responsibilities are, and the initiative seems to have had some success. If a landlord does not want to undertake the training, they simply engage a qualified and registered Property Manager to take on the responsibility. The upshot is that tenants will be better serviced living in better quality rental properties and cowboy operators will be identified and put out of business.

There are other benefits as well.

At the moment, there is limited data available to monitor the actual real-time number of rental properties in New Zealand. Such a scheme will mean that regulators will be able to identify potential issues around supply and demand for rental properties and whether there are any trends around lack of compliance. We will also be able to identify easily what percentage of the housing stock is in the private rental sector.

If a landlord fails to register under this scheme, they will face exemplary damages, though the penalties landlords face at the moment simply do not go far enough.

At the recent Generation of Change Property Management Conference in Wellington, the keynote speaker from England, Frank Webster highlighted that authorities in the UK now have the ability to fine non-compliant landlords on the spot with penalties of up to 20,000 GBP. In New Zealand, landlords face a fraction of this under the Residential Tenancies Act and some landlords will analyse the cost versus risk and simply not bother. If penalties were more aligned to the UK, then many landlords will see the risk being too great and will comply.

The Rent Smart Wales scheme could be the answer to regulating landlords

There is obvious concern that many landlords may just sell up, leading to a greater shortage of rental properties across New Zealand. This is already happening, leading to unprecedented rent rises in many of our centres. In some central suburbs of Wellington, median rents have increased by as much as 25% in the last twelve months. This is unsustainable and not healthy for the country.

Other risks are that landlords will choose to use platforms such as Airbnb as there are not the same legislation requirements that landlords have to abide by. Governments around the world are tackling the Airbnb conundrum as this is also contributing to a shortage of rental accommodation in other places around the world. Our Government will need to be decisive to ensure that we do not see too much stock moving to the short-term market. Taxation and limits around the use of Airbnb are ways that cities and countries are dealing with this issue.

Are we overcomplicating the issue?

Throughout all the hot air that comes from both sides of the debate, there is a simple question that seems to be ignored.

Is it too much to ask that every New Zealander lives in a warm, dry and safe home?

In our opinion, this should not be too much to ask. Every Kiwi should be able to live in a home that is warm and dry.

If you are a landlord who thinks otherwise, then in you should really sell up and put your money elsewhere. If you are a Property Manager, leave the industry and get another job.

In our opinion, the Government has got the standards right and any good landlord who maintains their property should have no issue in complying with the new standards. The timeframe may be an issue as most tenancies we see are fixed term, meaning that compliance will be closer to 2021 rather than 2024. We also would not be surprised to see longer fixed term tenancies being utilised more to take the pressure off landlords so they can comply by 1 July 2024.

Places like Dunedin or in the deep south may struggle, especially many of the old student properties and we have highlighted this in previous articles, but long term, New Zealand as a whole will benefit.

What we have to ensure is that compliance is effectively enforced, and this will not be easy to do. The whole credibility of the standards will be put at risk if we fail to enforce these standards and New Zealand’s most vulnerable citizens continue to live in substandard accommodation.

The Timeline to compliance

Type of tenancy or landlord
The date of compliance
Private Rental Sector
  • The rental property will have to comply with the standards within 90 days of the renewal or start of a new tenancy after 1st July 2021.
  • All other cases will be 1st July 2024
Boarding Houses
  • A single compliance date of 1 July 2021
Tenancies under Housing New Zealand
  • These tenancies must comply by 1 July 2023

The Standards for the Healthy Homes Guarantee Bill

Standards Requirements
Heating The minimum achievable indoor temperature must 18-degree Celsius. A fixed form of approved heating in living spaces
Insulation The minimum level of the ceiling and underfloor insulation must have a minimum thickness of 120mm
Ventilation Ventilation must include openable windows in the living room, dining room, kitchen and bedrooms. Also, an appropriately sized extractor fan in rooms with a bath or shower or indoor cooktop
Moisture Landlords must ensure efficient drainage and guttering, downpipes and drains. If a rental property has an enclosed subfloor, it must have a ground moisture barrier if it’s possible to install one
Draught stopping Landlords must stop any unnecessary gaps or holes in walls, ceilings, windows, floors, and doors that cause noticeable draughts. All unused chimneys and fireplaces must be blocked.

 

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