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Peter Lewis: Social housing and long term tenancies

Wednesday, February 01, 2017

 


At a recent seminar, Philanthropy New Zealand promoted the idea of private investment into social housing.

However, under the current Residential Tenancy Act legislation, it is unlikely that these efforts will be successful as there will be minimal return available to such investors given current rental legislation.

Contrary to public perception, residential property investment in New Zealand is a high work low margin activity. There are many requirements, obligations, and restriction imposed on residential landlords which ensure that landlording is exclusively a small-scale Ma and Pa activity. While commercial landlords are often large-scale businesses running under professional management, the landlord involvement required by the RTA would make residential investment along similar lines a profit-less activity.

Currently, under the residential Act, a landlord can offer either a periodic tenancy (which can be terminated at short notice by either tenant or landlord) or a fixed term tenancy which is intended to create a finite tenancy of just one or two years. No other types of tenancies are permitted under the Act as it is now written.

We believe that there should be the third option of offering a residential tenancy of some five or ten years duration, thus giving the tenant security of tenure. In return the tenant would be responsible for payment of all the overheads of the property (such as rates and insurance cover) in addition to their rent, and also would fit out the interior of the property with their fixtures and fittings at the commencement of the tenancy.

Thus the landlord would maintain the exterior of the building, and any interior maintenance or repair would then be entirely the tenant's responsibility, relieving the landlord of this burden and giving scope for large-scale professionally run residential rental business that could offer a marketable return on investment to the public market.

This form of tenancy, which is the norm available to tenants in such countries as Germany and Austria, given legislative approval here may increase the supply of social housing and go some way towards easing the housing crisis.


Peter Lewis is the Vice President of the Auckland Property Investors' Association. 

 

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