The crisis the Housing Minister created

A report yesterday of a woman, 86, moving because of a 73 percent rent hike illustrates the crisis created by Housing Minister Phil Twyford, Tenancies War spokesman Mike Butler said today.

This story of a property being sold with the new owner hiking rent from $150 a week to $260 provides evidence of the consequences of Mr Twyford’s agenda that he refused to accept – that owners would sell and rents would rise.

The new owner said that the property needed work to be brought into line with the “healthy homes” standards, which was something he “supported”.

The new owner phrased his comment as if he had a choice, Mr Butler said.

In fact, rental property owners have no choice. They either comply with the standards that were imposed by regulation and include penalties of up to $200,000 for non-compliance, or sell, he said.

The out-going tenant did not say whether or not her flat was cold and damp, as the Minister alleged all rental properties were. Her only objection was the rent hike, Mr Butler said.

The property looks like a 1970s construction which may already comply with the 1978 insulation standard which achieves the greatest heat-loss prevention, he said.

The main justification for Mr Twyford’s standards was to prevent the hospitalisation each year of 6000 children for housing-sensitive illnesses.

As a one-bedroom flat, the flat under discussion would be unsuitable for children; this illustrates the short-sightedness of setting requirements for 588,700 properties for the supposed benefit of 6000, Mr Butler said.

Mr Twyford has created a new housing crisis and now both owners and tenants are paying the price, Mr Butler said.

Stop the War on Tenancies is a group that since last October has been highlighting the evidence that successive governments have ignored while creating rental property policy.

See CHB 86-year-old moves out https://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=12238724

Build-to-rent another expense for taxpayers

If Housing Minister Phil Twyford could do a few basic calculations, he would know that the “build-to-rent” proposal he is looking at would require substantial Government financial support and guarantees to get off the ground, Tenancies War spokesman Mike Butler said today.

Mr Twyford on Wednesday proposed encouraging more build-to-rent developments, involving Crown land, to be run as private rentals, and to serve as high-quality longer-term rental stock.

He has acknowledged the need for more rental property but apparently does not want the Mum-and-Dad taxpayers who own most of New Zealand’s 588,700 rental properties to do it, Mr Butler said.

Smaller rental property owners are adding more stock by way of infill housing but the high cost of land makes larger developments unviable, he said.

For instance, total annual upper-quartile rent on a 600-square-metre development of six two-bedroom flats in Hastings would be $109,200, according to market rent data lodged with Tenancy Services.

The cost to build at a national average of $2000 per square metre would be $1.2-million. The cost of land may be $700,000 for 1000 square metres.

Interest payments on a $1.2-million loan at 5 percent are $60,000 a year, which leaves $35,397 to pay for land, as well as fees and permits, administration costs, ground work, a BRANZ levy, and development contributions, as well as annual running costs of $8654 for rates and $5149 for insurance, plus repairs, plus costs of changing any tenancy.

This is all before any payments towards reducing the substantial debt without any margin for an increase in interest rates.

In other words, Mr Twyford’s proposal is not viable without substantial top-ups with taxpayer money, Mr Butler said.

Expensive rental property standards, tinkering with tenancy law, ring-fencing of rental property losses, and the end of letting fees have reduced rental property supply and hiked rents, he said.

Mr Twyford’s government has damaged a rental property system that operates largely without cost to the government and with a benefit to the government of tax revenue, Mr Butler said.

Irrationally, Mr Twyford appears to want to replace that low-cost fully functioning model with a high-cost new model that relies on financial support for the government, Mr Butler said.

Stop the War on Tenancies is a group that since last October has been highlighting the evidence that successive governments have ignored while creating rental property policy.

Double standard in rental privacy guidelines

The Privacy Commissioner’s list of data sought from prospective tenants that is “almost never justified” shows a “do as I say not as I do” double standard from a government that does not practise what it preaches, Tenancies War spokesman Mike Butler said today. The 19 categories of off-limits data include:

  • Broad consent to collect personal information from “other sources”
  • Driver licence number
  • Credit card information
  • Nationality, ethnicity, origin or citizenship
  • Physical or mental disability or illness
  • Personal beliefs or opinions
  • Marital and family status
  • Gender and sexual orientation
  • Rent paid at previous tenancy
  • Sports and hobbies
  • Current expenses
  • Conflicts with previous neighbour tenants or building managers
  • Proof of insurance
  • Languages spoken
  • Details about current accommodation
  • Banking history
  • Employment history
  • Age (apparently one can ask if they are over – 18. Just not exact age)
  • Employment status.

However, Government departments routinely collect such forbidden information. For instance, the questionnaire for those applying for super includes six of those categories:

  • Three forms of ID including date of birth
  • Partner’s three forms of ID including date of birth
  • Proof of bank account numbers
  • Whether you are male or female.
  • What date you married
  • Where you live and whether you live there with your partner

Since these are only guidelines to rental property owners and managers to avoid seeking such information, then should Government departments be “guided” to do the same, as well as banks and insurance companies, not to mention employers, and the mountain of information required under anti-money-laundering law.

Also, the Privacy Commissioner doesn’t seem to understand the process of selecting a tenant.

A spokesman said that “viewing proof of identity and checking the references should come after a preferred candidate has been decided on”.

But reaching a decision on a preferred candidate is based on information provided in the application that the commissioner wants to put off-limits.

Sigh!

See https://i.stuff.co.nz/business/112906661/privacy-rules-wont-stop-discrimination

Why the new standards are not the answer

The final version of the Government’s new Healthy Homes minimum standards came out last week. Stop the War on Tenancies spokesman Mike Butler tells us what he thinks about them…

Standards for rental property are necessary. The Residential Tenancies Act includes standards that have existed since the Home Improvement Regulations of 1947.

Since we are now in 2019, and since the open fireplaces that were OK in 1947 have been banned, there is a case for an update. But any update should be evidence-based.

Unfortunately, the standards created by Housing Minister Phil Twyford are dominated by woolly, nanny state thinking.

For example, let’s take the new 2008 insulation standard of R 2.9 in ceilings, or a thickness of 120mm, that has to be met in two years.

Ceiling insulation makes sense because as hot air rises, 35% of heat may be lost through an uninsulated ceiling.

The evidence that the Ministry of Business Innovation and Employment has is that the optimum for ceilings is the 1978 standard of R 1.9.

But anything over that has diminishing effectiveness which amounts to a waste of money.

The former government stuck to the 1978 standard of R 1.9 in ceilings in standards that must be met by July 1 this year.

The minister’s new requirement to top-up insulation to meet the 2008 standard of R 2.9 even though there is diminishing effectiveness ignores the evidence and is a waste of money.

This requirement is a kick in the guts for owners who have been insulating for years to the R1.9 standard.

Subfloor insulation also makes little sense because only 10% of heat is lost through the floors and many floors are already insulated by carpet. For this we can blame the former government.

The requirement to provide a “fixed heater” (which is taken as code for a heat pump) makes little sense when all sorts of heaters are readily available from less than $20 and people have been able to keep themselves warm since time immemorial.

Whether a heater is fixed or portable makes no difference to heat output.

A large heater is not necessary because many dwellings are not large, and the area to heat is a living room that may be less than 10 square metres. A big heat pump would be overkill.

The presence of an electric heater does not mean it will be used because electricity is expensive and doubled in price from 2004 to 2014.

The Government, which is a major electricity supplier and of which the minister is a part, says nothing about the high cost of electricity.

Heaters must be able to raise the temperature to 18C, which is described as healthy according to a World Health Organisation recommendation.

But a closer look at WHO documents reveals that “no conclusions could be reached on the average indoor ambient temperature below which the health of the general population may be considered endangered”.

The Minister justified the standards when they were announced in February by saying “6000 children are admitted each year for ‘housing-sensitive hospitalisations”. This is not backed by evidence.

Answers to questions under the Official Information Act revealed that just one of 244,152 children had a condition exacerbated by housing in the 2015/16 year. See https://www.health.govt.nz/nz-health-statistics/health-statistics-and-data-sets/hospital-event-data-and-stats?page=2.

The Minister’s full claim was that “6000 children are admitted each year for ‘housing-sensitive hospitalisations’, and that these children have been found to be nearly four times more likely to be re-hospitalised and 10 times more likely to die in the following 10 years”.

This was lifted from page 41 of A stocktake on New Zealand Housing (2018). Since this is a Government publication commissioned by the Minister who wrote the foreword it gives the appearance that the Minister was quoting himself.

That assertion was made with no supporting data other than a footnote titled “Risk of rehospitalisation and death for vulnerable New Zealand children”. That paper identifies crowding as the housing factor and said that death was rare. (See https://www.ncbi.nlm.nih.gov/pubmed/28735258).

The standards we now have are designed to combat a claimed prevalence of cold, damp housing in New Zealand.

But only 2.7% of tenants surveyed complained about cold, damp housing, according to a Building Research Association of New Zealand report. See https://www.branz.co.nz/cms_show_download.php?id=606738ff7cb47451e094ad80f39cc912fa18f7a8.

The standards will have limited effectiveness. Insulation top-ups merely ensure that the costs of heating are marginally reduced. A fixed heater does not ensure that it is used. Ventilation by turning on extractors to remove steam from kitchens and bathroom could be achieved by opening a window.

The standards will have no effect on hospitalisations resulting from disease-transmission in crowded houses, respiratory diseases resulting from indoor smoking and unflued portable gas heaters, or infections resulting from poor hygiene.

This means that a fully compliant but crowded dwelling would continue to drive high rates of close-contact infectious diseases such as pneumonia, meningococcal disease and tuberculosis.

This evaluation of the new standards is likely to go down like a cup of cold sick for rental property owners.

A rule of thumb for home improvements comes down to costs and benefits and whether an owner-occupier would freely choose to spend the amount required.

For instance, with solar heating, homeowners who know the cost of panels and installation and can calculate how long it would take to get the money back and therefore can make a rational decision on whether to proceed.

Instead, in nanny state fashion, the Minister has set aside rational decision-making for rental property, and taken it upon himself to decide what he thinks is best for tenants and forced owners to comply.

The “healthy homes” requirements all cost money. For rental property owners, this money will have to either come from savings or a loan and be recouped by way of rent increases. Owners have a choice – do the work or sell.

A number of owners I know have had a gutsful and have sold, reducing the supply of rentals at a time that New Zealand is facing a housing crisis.

By driving rental property owners out of the market, the Minister is doing precisely the opposite of what is required to encourage an increase in rental property supply.

The Minister appears to be living in denial that the costs incurred by his standards will increase rents and reduce the supply of rental property without making any difference to the health of those living in crowded dwellings.

*Mike Butler has owned and managed rental properties for 27 years and currently has 60 tenants in 12 buildings.

This article was first published in Landlords magazine at https://www.landlords.co.nz/article/976514916/comment-why-the-new-standards-are-not-the-answer

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