Editorial: NZ will need a new deal for rental homes

Auckland has become one of the hardest places in the world to afford a house. Photo / Janna Dixon

A conference of property investors in Auckland this weekend is liable to hear some tough talking about rental houses along the lines of the warning issued by one landlord in the Herald yesterday.

The owner of 37 rental homes in Auckland and Waikato advised owners to beware of becoming too friendly with tenants lest they come up with hard-luck stories for not paying the rent or expect services such as clearing their rubbish.

If the Property Investors Federation is wise, it will cut short the usual gripes heard when landlords or tenants get together and start preparing its members for the future.

Auckland has become one of the hardest places in the world to afford a house. The median house price is now $755,000 and rising. The median income is $78,500. A house is reckoned "affordable" at three times the buyer's annual income, or five times at a stretch. A multiple of 10 puts Auckland houses well out of reach.

The steps the Government has taken to permit more house building in Auckland and to tax capital gains are expected to do no more than slow the rate at which house prices have been rising in recent years.

Meanwhile, incomes are unlikely to rise at a rate that would reduce the affordability gap. Hard as it is to accept, a great many of Auckland's young population appear destined for a lifetime in rented housing. It is time to think seriously about the respective rights and responsibilities of landlords and long-term tenants.

The first requirement is a law that recognises the need for long-term tenancies. Everyone needs the security of a home, which they do not have if they can be evicted any time the house is sold. Countries in which a large proportion of the population lives in rented accommodation provide much more security for them. Tenancy contracts do not end with the sale of the house: the buyer takes on the contract and all its terms until its expiry or the tenants choose to leave.

The owner should have the right to evict if the property has been seriously damaged or the rent is not paid, but serious damage or neglect would be much less likely under a secure, long-term tenancy that encourages residents to treat the house as if it was their own. And with a secure tenancy they could consider it their own. So long as they kept up the rent, they would be in a similar position as mortgaged home-owners whose security depends on meeting repayments.

In some places, where renting is the predominant housing arrangement, tenants are entitled to refurbish the house as they wish. Tenants in Germany can paint walls and make minor alterations, even install kitset kitchens, provided they restore the house to what it was when they leave.

New Zealand took its first, tentative, steps this year towards a better deal for private tenants. Landlords will be required to install smoke alarms in all houses by next July, and retro-fit ceiling and underfloor insulation by July, 2019.

It should be just the beginning. Investors in rental housing should be prepared for much more.