Rental Property WOF has serious flaws

12 Dec 2012

Rental Property WOF has serious flaws

The concept of New Zealand children living in poverty is extremely emotive, as no-one likes the idea of children living in poverty. At first glance the recommendation by the Children’s Commissioner to introduce a Warrant of Fitness for rental properties appears sensible, but unfortunately it is poorly researched and will not help low income families to have a better life.

Insulation on its own will not produce a warm, dry and healthy home. The number of insulated rental properties has been grossly underestimated to increase the case for more regulation. There are better ways to encourage more insulation in rental properties that will not increase the burden for tenants through higher rental prices.

In their report, the Expert Advisory Group state that “a significant proportion of the rental stock – especially the private rental stock – is of low quality, un-insulated, and poorly maintained”. The reference for this statement was a 2010 BRANZ House Condition Survey. This survey included only 108 private sector rental properties or 0.03% of the rental properties in New Zealand.

The BRANZ survey states that “in the case of rental properties, approximately 80% of the occupants considered the property in good condition, and only 2% believed their property was in poor condition.”

The BRANZ report also stated that “A slightly higher proportion of rental properties... had full ceiling and floor insulation and more had ceiling insulation over 100mm thick”.

It is difficult to see how the Expert Advisory Group can conclude that the rental stock – especially the private rental stock – is of low quality, un-insulated, and poorly maintained. The BRANZ survey that they quote does not appear to back this up.

The NZPIF has also researched the level of Private Sector Rental Property Insulation in a September 2012 survey of 5,319 rental properties. This is nearly 50 times as many as the BRANZ survey.

The NZPIF survey found that 83.1% of the properties were insulated. 75.2% of rental properties were supplied with some source of heating, the two most common forms being heat pumps (38.6%) and energy efficient wood burners (23.6%).

The research shows that there are many insulated rental properties available in New Zealand.

NZPIF President, Andrew King, say’s that “when talking with proponents of a Rental Property WOF I have often said that if tenants are not happy with their accommodation they can find another rental property that meets their needs. The answer I usually get is that the tenant cannot afford to move and this indicates the real problem. Rent on an insulated property is more expensive. Forcing landlords to insulate their rentals will not make them any cheaper to insulate.”

“The bigger impediment to having warm, dry rental properties is heating” says King. “There is no point in insulating a property if the occupier doesn’t heat it. They may as well have an un-insulated rental property and a lower rental price”.

“Another impediment for warm, dry rental properties is occupiers keeping curtains closed during the day and not letting the sun heat their homes. Not ventilating the property plus drying clothes inside and using portable gas heaters also makes the home damp and harder to heat”.

In addition to the cost of installing insulation, the Commission recommends regular checks on rental property to ensure they meet the WOF standards. The cost of this will further increase the cost of providing rental property and again lead to higher rental prices. Higher rental prices make it even less likely that tenants will be able to pay for heating in their home.

The NZPIF believes there are better ways than a rental property WOF to achieve warmer, dryer rental properties that will cost tenants less.

The Minister of Housing has said that Government can save five times the cost of insulating and heating rental properties in NZ homes through reduced medical costs. If this is the case then the NZPIF believes that Government should provide more financial help in order to achieve these health cost savings.

• Make the cost of insulation products and installation tax deductible. This would lower the cost by around a third and require a lower rent increase for tenants.
• Make the cost of providing energy efficient heating tax deductible.
• Introduce a home heating subsidy for low income families paid directly to their utility supplier.
• Develop an information pamphlet for tenants on how they can keep their homes warmer and drier, distributed through Tenant Associations, budget advisors, citizens advice and members of Property Investor Associations around New Zealand.

The introduction of these recommendations to encourage warmer, drier homes rather than a Rental Property WOF would reduce the impact of rental price increases by around 75%.

A further concern to the NZPIF is the Commissions statement that the standards in their proposed Rental Property WOF should be “gradually increased over time”.

This is a serious concern as past proponents of a Rental Property WOF have wanted items such as minimum bedroom sizes, full insulation and a limit on the age of the property included in the standards. Standards such as these could see the cost of rental property increase dramatically over time with many rental properties simply unable to comply and therefore unavailable for tenants. This would be a disaster for everyone, tenants and rental property owners alike.

ENDS

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