Tuesday, May 6, 2014

Mike Butler: WOF would increase rents



Tenants should be very alarmed at rent increases and more stringent standards that would come with a proposed warrant-of-fitness scheme. Upgrades averaging $9700 per rental property, a possibly unreasonable estimate by the Building Research Association of New Zealand after a survey of 491 properties throughout New Zealand, would increase rents by around $20 a week thus disadvantaging the people a WOF scheme purports to help.

The $20 extra is derived from an expected return of 10 percent per year from $9700 in remedial work that could be required to make a property comply with warrant-of-fitness standards. While $20 per week may not appear much, fuel poverty protesters would really kick up a fuss if a $20-a-week increase in the price of electricity was on the cards.

A further negative unintended consequence for tenants is the checklist requirement for a dwelling to be reasonable free of visible mould. Once property owners become responsible for tenant-caused mould, a prudent property owner would be sure that neither mould, not a mould-causing tenant, would occupy any building that would be subject to a WOF test.

Furthermore, a rough cost-benefit analysis based on information from the Children's Commissioner shows that the total cost to owners of the 465,000 rental properties throughout New Zealand, at an average of $9700 per property, would be $4.5-billion, while benefits would only total just $16.1-million a year.

The WOF scheme should either be scrapped, or, if the government is really keen for $4.5-billion to be spent to save $16.1-million a year, the government should pay for private sector upgrades.

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