Saturday, November 24, 2018

Frank Newman: More RMA reforms and letting fees

The Resource Management Act (RMA) is being amended - yet again! Hardly a year goes by without the Act being changed. One would normally expect changes to improve legislation. Sadly, that's not the case with the RMA.

The Act was fundamentally flawed when it was first introduced, and remains so today. Although it was conceived with aspiration and good intent, the +20 or so amendments to the Act have been a series of backward steps that have given absolute discretion to regiments of we-know-best planners. The effect has been a transfer of property rights from landowners to council staff that has paralysed progress and seriously inflated land and building costs.

The new Minister for the Environment, David Parker, has put a paper to Cabinet proposing a two-staged approach to "improving the resource management system".

Stage one would repeal some of the changes made in April 2017 by the then National government. Their changes were:

  • A requirement that councils follow national planning templates.
  • A faster consents process.
  • Reduced requirements for consents.
  • Greater involvement of iwi in the planning process.
Unfortunately, it appears the changes now proposed by the Minister would repeal those introduced in 2017 that were positive. He is now seeking Cabinet approval to:

  • Remove certain ministerial regulation-making powers;
  • Remove the limitation on public notification and appeals for certain types of resource consent applications;
  • Reinstate the presumption that subdivision is restricted unless expressly permitted by a plan rule, national environmental standard or resource consent; and
  • Reinstate the option for councils to require financial contributions from consent applicants.
In other words, he is proposing to reduce the ability of central government to influence local planning rules, expand the opportunity for the public to be treated as an affected party, and give local councils greater opportunity to collect more money from consent applicants. These are the very issues that have created the risks and uncertainties that have increased land and building costs.

Stage 2 of the proposed changes will review issues like freshwater management and "high-risk land use activities". From this we can assume the Minister wants to give iwi management (and remuneration) rights over fresh water, and it also seems that he has his sights set on introducing new regulations for farming!

Let's be upfront about this: The RMA is a racket for lawyers, self-acclaimed experts on all manner of esoteric concepts, planners, commissioners, judges, and iwi. Many of these racketeers have become rich, at the expense of inflated land and house prices, and consent applicants.

What I find amazing is that politicians have allowed this exploitative industry to perpetuate for so long - decades - when the RMAs failings are quite obvious to anyone and everyone that has had the misfortune to go through the tortuous resource consent process. Few are prepared to be openly critical - developers and the like are perhaps afraid to speak out for fear that they will "get in the bad books" of council staff who will then "give greater attention" to their consent applications in the future. From experience, I have to say those concerns are justified, which makes it even more imperative that the call for an overhaul of the Act is taken up by our politicians who are paid to speak out on behalf of others. Sadly, I cannot think of a single politician who has the common sense and the spine to make a stand on this issue.

Maybe National will have the courage to take up that challenge and call for comprehensive RMA reform as a point of difference between it and the coalition government. That would however, require quite a shift from the position it adopted when it was in coalition with the Maori Party, where its approach was appeasement rather than reform.
Letting fees

A couple of weeks back I wrote about the abolition of letting fees, and the likely response from property managers. As mentioned, property managers make between 15% to 20% of their total income from letting fees, which as from 12 December can't be recovered from tenants.

This week a number of the larger property management companies have confirmed they will now be passing letting costs on to landlords, although their approach varies.

One said they will charge landlords a flat rate "tenancy fee" of $550 plus GST for each new tenancy. Another is charging all of the landlords a monthly administration fee of $20 plus GST a month regardless of whether a tenancy has changed. Given the average tenancy is said to be around two years, that's an effective cost of $480. Others are increasing their management fee.

I suspect we may see specialist tenant finders appear in the marketplace to offer a robust vetting and documentation service to DIY landlords and property managers. It seems pretty clear to me that a specialist operator could do so for a lot less than $480!

The bottom line is all property managers are going to charge their landlords more, and landlords will recover that from tenants.

Frank Newman, an investment analyst and former councillor on the Whangarei District Council, writes a weekly article for Property Plus.

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