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How much to increase rent by in response to RTAA 2020

Monday, January 04, 2021
IMG SOURCE: UPSLASH 

This week's question comes from Joss:  

What rent premiums are landlords typically applying to addressed increased risks associated with the Residential Tenancies Amendment Act 2020?

Without a doubt, certain provisions of the Residential Tenancies Amendment Act 2020 (RTAA 2020) shift the balance of risk and reward against landlords. Anecdotally many of our members have indicated that they are considering increasing rents to ameliorate the new risks. We expect the broader landlord community to share similar sentiments.

The anti-cartel provisions under the Commerce Act prohibit organisations like ours from giving price prescriptions for rents or in any way influence individual pricing decisions by landlords (when setting rent). Every landlord has to come to his/her own pricing decisions independently and within the parameters* set out in the Residential Tenancies Act. In any event, risk is a subjective measure. Accordingly, the appropriate and corresponding premium associated to an increase of risk should also be priced on a case-by-case basis.

In saying that, RTAA 2020 hasn’t changed the way landlords research and set rent. There are ample sources of publically available data that give a good indication of current market rents. We recommend landlords to stay across the following sources of information paying particular attention to more current listings as well as those belonging to accounts with larger rental portfolios (e.g. professional property mangers and larger-scale landlords are more likely to re-set rent in anticipation of the effects of RTAA 2020).

  1. TradeMe and realestate.co.nz;
  2. Tenancy Services market rent that is updated monthly;
  3. Agency owned market rent reports - pay particular attention to publications from the most prominent/prolific rental agencies in the area; 
  4. Rent appraisal by rental agencies - many of them offers this as a free service; and 
  5. NZPIF rental calculator.

*Parameters include:

  • a level that a willing landlord would expect to receive and a willing tenant expect to pay for the tenancy
  • that is comparable to comparable tenancies at comparable premises in a similar location
  • rents that are substantially excessive to market rent can be reduced by order from the Tenancy Tribunal
Do you have any tenancy related questions? Write to us at [email protected] or hit us up on our social channels here and here.

 

 

 

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