Sunday, March 23, 2014

Mike Butler: Readers oppose rental WOFs

A NZ Herald editorial last month titled "Warrants of fitness a must for all rental homes" which opined that “It is time to place some obligations on those offering homes for rent. Already, they benefit from tax breaks and untaxed capital gains” sparked 97 comments most of which were hostile to such WOFs. Many related the time and money spent cleaning up after tenants trashed the place, a number thought any rental property WOF should be on the tenant not the building, and one asked why, since people had lived in houses for 10,000 years, should there suddenly be a need for a rental WOF.

The objections are illuminating and entertaining. Read on:

As a landlord we have just had to spend $42,000 fixing up our home after tenants moved in and by neglect created an unsafe environment for them and their children. They did no intentional damage. Neglect, not opening windows, not cleaning, apparently locking one of their children in his bedroom (so he used the carpet as a toilet) changed a new home built to high standards to a house needing extensive repairs.
New carpet throughout, new blinds, repaint inside so kill the mold that they had on the walls, new oven - they had a fire in the previous one -, new waste disposal unit, cleaning the 3 bathrooms alone took over 40 hours, etc.
The house when they moved in was 2 years old (built in 2005) brick and tile and in excellent order.

Sounds good in theory but will be unworkable in practice. Firstly there is a shortage of rental properties. Secondly the cost of building is so high that 'affordable new builds' is a joke as new affordable houses are starting at $500k.
Currently most landlords are losing money for the first 10 years on a property, if you then add compliance costs, upgrade costs and risk (being unable to rent your property due to failing an inspection) then many landlords will simply retire and sell their houses making the shortage further.
Overseas owners often choose not to rent their properties at all and leave them vacant. Many of the cheaper homes are not strictly legal (granny flats, home & incomes etc) and so by having the council come to 'approve' them will take out this often very comfortable option for low income people.
Apartments are often not suitable for children. The proposed 49 point checklist sounds very comprehensive beyond just being safe and sanitary. It is talking rails, steps etc that many older houses will not be compliant on. In my opinion about 30% of houses will not meet the standard and the idea of the council being involved will scare many landlords off.

While i understand why a warrant of fitness seems like a good idea, i can guarantee that it will not have the desired effect. Currently the houses poorer people tend to rent are the cheaper properties because of their condition.
All this will do is eliminate the lower tiers of housing and push the rent up. Students, criminals, people renting for the first time and those with past tenancy issues will find themselves unable to secure rentals due to the risk they pose and landlords being a lot more picky on who they rent to.
The biggest problem in my opinion is that the bond currently allowed under law, will likely not even come close to returning the house to a warrantable level if the tenants do not look after the place and this additional risk will likely be added to the rent along with any additonal costs for inspections and obtaining a warrant.
For most landlords the rent will not even cover the mortgage so all you would need would be to add a CGT into the mix and just watch rent prices rise to match the cost of supplying the property. in short this is a plan that sounds good on paper but will disadvantage those it aims to help the most.

As long as there is a WOF for the tenants as well.

The idea is great but why would you saddle renters with this cost and lnadlords with the hassle. If it anything like the commercial building WoFs that I have seen close up as an IQP person for some features most of the people treat it like a cash cow and do much of the work with disdain, especially if it is not safety related, just a bureacratic exercise.
The proponents of this PC rubbish do not live in the real world, there is so much unnecessary expense in rental maintenance for item a home owner would do themselves this would add several dollars per week to this and create an army of people as inspectors.
It is great bsiness opportunity as the inspections could be completed by the cynical in less than 30mins on site and total time around 1 hour for several hundred dollars.

I have just finished cleaning up a rental again after a family of tenants have just trashed it. Its the third tome ive had to go in and clean up after people. That house was clean, tidy and recently renovated, freshly painted and carpeted, with all the holes that previous tenants had bashed in walls filled and even a bath replaced because previous tenants had seen fit to bash holes in that too.
You can WOF my rentals by all means - they are warm and dry and safe - but nothing can or will stop some tenants turning clean, warm, tidy houses into pig-styes. I can only go to the Tribunal and try and get the actual cost of the repairs and cleaning back - but probably at a pathetic $5 a week.
And these tenants will go on to trash another perfectly acceptable rental, and walk away from their mess leaving it to the "greedy landlord" to clean up after them.
And for every hole these people punched in my walls - how many landed on their kids? Because while you are focusing on the Landlord providing a warm house for them (which I do), they shouldn't have to live with parents who are clearly thugs and would rather their kids live in dirt and violence than clean safe houses.

The Herald writer is correct that children should not live in cold damp houses. At first glance a rental property WOF seems like a good idea, but it doesn't stand up to closer examination.
A blanket WOF is expensive and doesn't target the children that this editorial aims to protect. The problem will not be fixed by a WOF, it will make matters worse. Insulating rentals is a first step, but it isn't enough.
Part of the problem is that low income families do not heat their homes because it costs too much. No amount of insulation will make a house warm and dry if it isn't heated and the cost of a WOF will increase rental prices for everyone & make it even harder for low income tenants to turn on their heater.
Rather than a WOF, we should target the actual problem and focus on insulation and heating. Installing insulation and heating in a rental property is not tax deductible. If it was, more owners would provide it and it would help minimise rental price increases.
Low income Tenants should receive electricity vouchers over winter to help them heat their homes. Tenants need education on how to run their homes and keep them warmer and drier. There are better ways to help than a WOF.
Andrew King

Can you explain why I should have to get a rental WOF for 2 of my rentals built only 5 yrs ago? Overkill?? What of the many houses in private ownership and not rented - is it the next step to WOF them?
Why penalize responsible landlords with more bureaucracy? Also the cost will get passed onto tenants as will rents when they rise when houses are upgraded? Don't blame the rest of the country for the student flat problem in Dunedin.- what landlord would pour money into a house there to have it destroyed by scarfies!

On balance, the WOF is a bad idea. The WOF will probably cost $600 to $800 a year in city council fees and inspection fees. The trial checklist contains items not required for building consent, e.g. 2 proper exits from apartment. Some items might be tenant's responsibility, e.g. curtains, mould in bathroom.
I forsee corrupt inspectors in Auckland taking money for a clean inspection report. The Tenancy Act over-protects tenants. Many tenants are not house trained, never open windows, never clean, fill the house with garbage, fleas, flies, etc.
Of course, too many landlords offer substandard housing. Many provincial landlords have moved towns, and cannot sell their old house, and reluctantly rent it out.
The real problem is that many New Zealanders are relatively poor, cannot save money, any cannot afford to buy their own house.

The more you load costs onto landlords, the more rents will go up to cover them. Simple as that. economist
State Houses should already be up to scratch. If not, a WoF scheme is not needed to put things right. A Wof scheme does, however, give the government an excuse to pat itself on the back and say, "Didn't we do well?" It is, after all, an election year.
Private landlords are, by and large, National voters and a WoF scheme for private rentals would cost them money. It is, after all, an election year.
John Northcott

The more expense that is put on a landlord the higher the rent. People who live in sub standard houses now do so because they can not afford a better house. Putting wof's on houses will make the house they are in now unaffordable and they will be on the streets. We have people living in abandoned houses in Northland, so what will happen to them? they will have to live in a cardboard box because the house does not have a wof.
It is a stupid idea, better to bring in policies that encourage personal responsibility and thrift and better education and stop welfare as a lifestyle choice and then landlords will be improving their houses just to try and get tenants.
Also a lot of tenants are rubbish tenants, they trash the place, they will be homeless under this policy.

"...It is time to place some obligations on those offering homes for rent. Already, they benefit from tax breaks and untaxed capital gains..."
Another unnecessary, intrusive, expensive Government busybody program.
As usual with Government programs it is dressed up as a humanitarian exercise (X% of children live in poverty blah blah blah) and anyone disagreeing must be cold, heartless and cruel.
For around 10,000 years people have been living in houses; at no point during those 10,000 years has a WoF for houses been required; why has it suddenly become necessary?
Why, for instance, during the 35 years Labour has been in Government since 1935 has no one felt this necessary?
Answer: because it ISN'T necessary - and is simply another election bribe

Great idea ... also how about grading the tenants A, B & C and then match the quality of housing to the quality of tenants.
tax robbed

Poverty is another unmeasurable term that is subject to opinion, 99% of humanity has lived in "poverty" throughout our history, the colonists lived in poverty etc, you can have everything you need and live below the P line. China has brought millions out of "poverty" yet they had everything they needed in they country. Leave poverty alone. Let there be the poor.
Wilson Samuel

You have to question the validity of the argument that insulation results in a warm damp free house. Up until the time I bought a new home unit I had never lived in an insulated house so we insulated the home unit as it was being built.
It turned out the be the dampest property we ever lived in with condensation on windows ruining carpet within 2 years. the house we have lived in for the past 23 years was not insulated until 2 years ago and does not seem any warmer now than it was before then except in summer when the heat is trapped and cant get out.
My generation were all brought up in houses without insulation and in most cases had drafty wooden windows. It seems sickness like asthma is more prevalent now than it was when we lived in uninsulated houses.

Every good landlord would agree , a WOF is a good idea .. But , can the lawmakers think about a warrant of fitness for tenants as well and legal support for the landlord when the rent is ignored or when damage is excessive .. Like it or not, there are a number of tenants who prey on landlords, game the system knowing its weighted in their favor.
The favorite among new arrivals is to sub let the house while you don't know and the original tenant lives rent free. The tenants advocates always put the tenant as a victim, the courts just usually rule in their favor, if its time for a change then good , but lets be fair to those who have invested in dealing with trust worthy people only to find they are left out of pocket.

Some just like to live rough. My bro bought rental investment, a new lovely house in manurewa. After a couple years the house was wrecked. The boyfriend rammed his car into the automatic door, they walked oil through the house from a leaking car ruining all the carpets, they damaged an internal water pipe and left leaking water until the wall rotted away, the kids put thousands of pin holes in every wall (no kidding barely a square inch of wall was untouched), beer bottles were opened on window sills leaving their tell tale sign etc
They had a lovely new house at a reasonable rent and they just trashed it, the real estate managers (a well known company) just let them get away with murder. My bro had no idea what was happening. They left without paying weeks of rent and water rates. He now leases it through Housing NZ and they take all responsibility which means the tax payer.
Before requiring WOFs how about some crack downs on bad tenants and holding them accountable for their part in this whole sorry mess. Cops weren't interested in charging them with criminal damage, it's a civil matter and you've no chance of getting any money back.
What we need is a WOF for tenants first!

Dear Granny (Herald), you might want to get your facts straight before saying the Gummint provides a heating and insulation package subsidy, or describing it as 'generous'. Neither statements are correct. The insulation subsidies did not cover even half of the properties eligible, and the subsidy for landlords were 33 per cent of the cost, while home owners got 66 per cent or more.
You also need to reflect that any cost on a rental property goes directly onto the cost of renting that property, since landlords are not charities or social institutions. So the cost of insulation or heating upgrades is bumping up rental costs already, and the cost of being inspected every three years will also be applied to the rent on a given property.
Ford Prefect

How about educating tenants on how to behave like civilized human beings instead of feral animals. There should be a national register of feral tenants run through the Tenancy Tribunal. Their bond should be 10 times normal and landlords given the right to refuse to rent to these ferals. References can be forged.

Warrants of fitness a must for all rental homes, NZ Herald, February 24, 2014.


paul scott said...

OK, lets cut to the chase fast. I am in Christchurch offering my nice two bedroom home ,with really cool office, big grounds ,
close to City pet friendly home for rent/lease each year.
My competitors are better than me, they have luxury homes while they go overseas.
We ask about $NZ900. a week, big rip off. The earthquake refugee market favours motels because they are visible. We are pet friendly because dogs do bot write crayons on the walls .I am lucky to get 50% occupation. That’s $450per week or $1800 per month. For that I have to provide internet , and power, and firewood and motel level back up service, That’s power $350 per month , internet $150 back up and agent associated cost $150 per month. Go with me on these eccurate figures reader.

eturns gross $1800 less $640 costs per month, that’s say $1200 per month . Hey but wait on, remember Christchurch Council and all those other leaches, that’s another several thousand per year. return gross $1000 per month. Now just so you know, I work for four weeks steady getting the place ready for them,
and another four weeks when they are gone fixing things up.
If you don’t believe that try renting. Lets say my little life is worth $2000 a month.
Return is $10,000 per year .
How happy I am not. The only reason I do it is because Christchurch is a dog, and it is worth any price to get out of it.
I am T3 zone, my valuation is land price only, thanks New Zealand Government you had a National disaster but you didn’t have the guts to call it a national disaster and socialise the costs. Instead you cordoned off Christchurch. Would you wonder I won’t vote for you.
Paul Scott

Anonymous said...

John the Jew should know better.

What we are seeing here is an out-and-out Fascist proposal.

As Friedrich Hayek reminds us: “Fascism [aka National Socialism] is the stage reached after Communism has proved an illusion.”

Hitler had a similar view of private property rights to that being peddled by those favouring WOFs for privately owned rental housing:

“I want everyone to keep the property he has acquired for himself according to the principle: benefit to the community precedes benefit to the individual. But the state should retain supervision and each property owner should consider himself appointed by the state. It is his duty not to use his property against the interests of others among his own people. This is the crucial matter. The Third Reich will always retain its right to control the owners of property.” -- Adolf Hitler, Mein Kampf (1931)

“Let them own land or factories as much as they please. The decisive factor is that the State, through the Party, is supreme over them regardless of whether they are owners or workers.” -- Adolf Hitler from a letter to Herman Rauschning, quoted in Why Does Socialism Continue to Appeal to Anyone? by Robert Hessen

“Why need we trouble to socialize banks and factories? We socialize human beings.” -- Adolf Hitler from a letter to Herman Rauschning, quoted in Why Does Socialism Continue to Appeal to Anyone? by Robert Hessen

I will let the last word be Hayek’s: “It seems to be almost a law of human nature that it is easier for people to agree on a negative program – on the hatred of an enemy, on the envy of those better off – than on any positive task.”


Unknown said...

Lets go to the bottom line.
A home should be a warm affordable roof over your head not an investment opportunity. By letting speculators run rampant in this country on second hand housing we have created the cost of housing problem in the first place.Nothing is produced when a property is valued at 150,000 one year and 200,000 the next year with no improvements made to the property to increase its value. The sell off of our coastline to foreign investors was outrageous. It is your home and if you want a bigger one then you earn some more money by work or investment in production and buy up not by speculating on real estate. The disposable money not available to the economy because of huge mortgages on inflated real estate prices could be used in manufacturing created jobs for the good of the whole country not just to a bunch of greedy bankers and speculators. It is crazy for a countries economy to send the message that you can make huge profits in non real estate resell. Can`t see that the currency trading speculator banker running this country at the moment would countenance that idea though. After all he made his money that way in non production. Greed and lack of concern about your countries future,as usual, has caused the basic problem. Another method of helping honest landlords is to start a national register of people who trash rental properties and don`t pay for repairs. Landlords could then consult this before they make up their minds who their tenants should be.
All these problems could be solved next election if our apathetic electorate would vote in common sense people with common decency and intelligence to run the country. You will not find many of those people in political parties. Vote independent if you agree. Any Governments first two priorities should be affordable roof over head and then affordable food in belly. Both of which should be easily achieved in New Zealand. They are the basic needs for human survival.Then all the other stuff to administer the land. Last of all should be messing with my freedoms as a New Zealander with laws that restrict my rights and freedoms because someone else won`t behave themselves. If people are doing things we don`t want in our society then apply the law properly.Catch these pricks at it, kick their arses real hard and leave my freedoms intact.

Anonymous said...

"He now leases it through Housing NZ and they take all responsibility which means the tax payer."

Be careful what you wish for because you may just get it! Heaven forbid that some political party in election year mode might get the hare-brained idea of nationalising all tenancies - i.e. just like 1840 land sales, you can only lease a (compliant) rental property to the government, which then rents it out to 'deserving tenants'. A great way of protecting landlords from rapacious tenants. But it perpetually disadvantages property owners by controlling their incomes and what can be done with their property. Sound familiar?

Unknown said...

My idea to limit the cost of housing which cost 26% of net disposable income in NZ at the moment and release more money for investment in production. Running a home at 26% is one of the highest in the world and purely because of unregulated greed. Why not have the sale of a house looked at when the title is transferred and only allow an increase in the value of a house if improvements have been done to the property and that cost added to the last sale price of the house along with adjustments for inflation. This would keep houses affordable for buyers and tenants and get the parasitic speculators out of the business and back into a real job producing something.

Peter said...

Nanny State gone mad!!!! Others have stated - WOF for tenants. The best tenants are those who have owned a property ; yet have to rent for whatever reason. If tenants feel victimised they need to take a better look at what they are renting. They have the right to vote with their feet. Terminate the lease if they don't like it. If the conditions violate Health and Safety standards, they have the right to complain.

Enough already, it is time that tenants learned they have to be responsible. A WOF only increases the cost of rental properties is that what they want?

Unknown said...

Well said Peter. Christchurch is a special case of course and landlords there are taking the piss. As usual of course it is Government , local and national that are making it hard on landlords. The solution to that of course is in all our hands. I have a niece trying to survive in CH-CH with rentals of 1200 Dollars a month for a poxy little 2 bed flat and 2 kids to share looking after.She is working when she can find it and is looking after the property as it took her forever to find that flat.