Landlords to offer long-term tenancies?

More tenants need homes for longer, property investors say.
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More tenants need homes for longer, property investors say.

Picture this: You find the perfect rental property for your family, in a great school zone and near your office.

You put in an application and hear you're approved to sign a lease … for a 10-year term.

In New Zealand at the moment, this is unheard of. While other countries around the world have a culture of long-term renting, most Kiwis sign up for periodic tenancies that can be cancelled with a notice period that is just a matter of weeks.

But now a group of property investors is suggesting a change.

READ MORE: Auckland house tenancies average two years: Barfoot & Thompson

The Auckland Property Investors Association (APIA) is calling for tenants to be offered much longer leases in return for taking over some of the responsibility for maintaining the property.

Shamubeel Eaqub is suspicious of investors' motivations.
SUPPLIED

Shamubeel Eaqub is suspicious of investors' motivations.

It comes as Philanthropy New Zealand promotes the idea of private investment in social housing.

APIA vice-president Peter Lewis said an overhaul of the Residential Tenancies Act would be a better way to solve New Zealand's housing problems.

His association said this country could follow German and Austrian tenancy models.

Tenants would be allowed to fit out the house how they liked, have pets if they wanted to,  and live in it for a decade or more.

In return, they would take care of the interior maintenance, insurance and rates.

This would remove much of the day-to-day work of residential landlords, which made it unfeasible for private operators to offer large numbers of houses for rent, Lewis said.

With the maintenance required under current rules, he spent about two or three hours a week on each property he owned.

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But with the changes proposed, a  professionally-run residential rental business could enter the market, he said, and house a large number of people.

Those operators could end up listed on the share market in the same way many commercial property investment companies are, and investors could buy shares in them.

"That would allow you to go and lie on the beach rather than dealing with phone calls at 6am on a Sunday from tenants because the toilet isn't working."

Landlords and tenants who wished to would still be able to sign agreements under the current model.

But such a move would require a law change.

The Residential Tenancies Act as it stands only allows periodic tenancies or fixed-term tenancies - intended to cover a year or two. No other types of tenancies are permitted and landlords are required to keep up the interior of properties to a certain standard, such as providing insulation, options for heating and cooking.

Lewis said he expected more tenants to want long-term options in future, as high property prices kept more people out of ownership. "People are going to be growing old in rental accommodation."

But economist and commentator Shamubeel Eaqub was sceptical about the suggestion. He said while he supported the idea of tenure security, it seemed to be a case of foxes guarding chicken coops.

"Unless there is rent control and all the other stuff that goes with a German model - it wouldn't work. It would just make things even worse. It just looks like passing on risks to tenants."

Property manager Richard Evans, of Rotorua Rentals, said there might not be demand from tenants, either.

He said he tried to get new tenants to sign up to fixed-term agreements of one- or two-years but most did not want to make that commitment. "Their circumstances might change, they might be made redundant, fall ill or want to move."

The average tenancy was only eight months, he said. "We prefer fixed-term tenancies but most people don't take them."

Building and Housing Minister Nick Smith said there was nothing in the law to stop a longer tenancy agreement, if landlords and tenants wanted it.

He said he was cautious about suggestions that the law be changed to allow tenants to be handed responsibility for things such as insurance and rates. In a tight housing market, with limited rental supply, that expectation could become the norm, he said.

But he said he was open to establishing a working party with tenants, investors and social organisations to look at whether there were improvements that could be made. 

 - Stuff

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