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Andrea Blackmore
Barriers and solutions to improving rental housing

As I’ve just loaded the Performance of Rental Housing Resource to the Hub, I thought I’d get you thinking by posting an extract from the resource:1930 - 1950 state house

At first glance, improving outcomes for social housing (defined as  “housing provided for people on low incomes or with particular needs by government agencies and non-profit organisations”) is straightforward as government is active in all parts of the dynamic. In theory the government sets the rules for itself, so it could implement high housing quality requirements, and some would argue, given this market is responsible for our most vulnerable citizens, it should. The Warrant of Fitness is a start in clearing out the houses that are not fit for healthy living. Ideally this is the first step in an asset management programme that builds on good maintenance and progressively intervenes to improve housing outcomes with performance upgrades. The social housing sector would be the easiest place to establish robust knowledge, gather data, and understand how to optimise the parts of the rental dynamic to improve outcomes. In reality, it is more complex. There is not one central government agency managing the dynamic: tenants fall under MSD; HNZ is both landlord and manager of house quality.

The private market is complex and informal: Anyone who owns a house can be a landlord and the role is sometimes, but not always, backed up by property management While house quality should meet council safe and sanitary regulations, these rules are rarely invoked and only in desperate situations. Tenants operate in the market with no formal information to underpin their decisions to rent one house over another. Tenants in Auckland and Christchurch have little choice due to the housing shortages in these cities: this will relegate home quality down the decision-making process. Tenants have little easy redress in the private market: they can go to the Tenancy Tribunal or vote with their feet.

The retrofit market is immature: landlords have very low awareness of requirements to maintain the asset, let alone performance upgrade interventions. There is low landlord engagement with independent advice and low capacity to fund interventions. The majority of landlords own rental properties for capital gain. This means few make budget allowance for maintenance and upgrades of their rentals. The New Zealand market does not value home performance; land price dominates sale price, which reduces a landlord’s financial incentive to invest in upgrades (true for all New Zealand stock).

A Warrant of Fitness is the most often cited solution to rental housing performance. The public debate surrounding the current trials has arguably raised awareness of housing quality among both landlords and tenants. Beacon would argue that while the WoF is an important step to catch the truly appalling accommodation offered for rent, it is a bare minimum. Houses that pass the WoF may still be cold and damp and deliver poor outcomes for tenants. Ideally, a WoF would be the first step on a longer maintenance and upgrade journey for landlords and their rental houses.

Several issues remain to be resolved in the fledgling WoF initiatives. These need informed public debate and political engagement:

  • What is the optimal status for a NZ WoF – voluntary or mandatory?
  • Independence – the WoF should be independent of any product or solution.
  • Whether mandatory or voluntary, what might a landlord do who fails a WoF?
  • What are the potential unintended consequences?

The mixed rental segment (defined as rentals where the landlord is a private person; tenants pay market rent but receive government accommodation assistance or support)   has an added layer of complexity; the private rental market houses tenants who receive government support. This means government has a real stake in this housing, tenants while not in the social housing sector are still considered vulnerable, and while landlords are managing tenants who may have high needs, they do have some security of rent. While sharing elements of both the private market (technically landlords and house quality are private) and the social housing segment (tenants), this is quite a unique dynamic when considering how to improve housing outcomes.

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