Damage, meth tinkering tangles tenancy law

Political meddling with the Residential Tenancies Act regarding damage to rental properties, meth contamination, and living in garages, has just made tenancy law more complex and litigious, Tenancies War spokesman Mike Butler said today

Residential Tenancies Amendment Bill (No 2), which seeks to address issues related to liability for damage, methamphetamine contamination, and living in garages, passed its third reading on Wednesday. The bill:

  1. Makes tenants liable for careless damage up to four weeks of rent or their landlord’s insurance excess, whichever is lower.
  2. Extends the definition of “residential premises” to ensure that all premises which are used or intended to be used for residential occupation are covered by the Residential Tenancies Act,
  3. Provides yet another regime to address any health risks of any harmful substance in rental properties, including methamphetamine.
  4. Enables tenancies where contamination has been established to be terminated in two days.

“The architect of this bill, Nick Smith, and the current Minister responsible, Kris Faafoi, should explain how limiting a tenant’s liability for accidental destruction of, let’s say, a $500,000 house, to four week’s rent, is either fair or just,” Mr Butler said.

Tenancy Tribunal hearings concerning damage will become more complex and many more cases will be appealed through the court system, as you can see from the following clause that says:

(a) it is for the landlord to prove—
(i) that any damage is not fair wear and tear; and
(ii) that any destruction or damage occurred in circumstances described in subsection (1)(b); and
(iii) that any insurance moneys are irrecoverable for the reasons described in subsection (3A)(a); and
(b) it is for the tenant to prove—
(i) that any destruction or damage was not intentionally done or caused as described in subsection (1)(a); and
(ii) that any destruction or damage was not caused by a careless act or omission described in subsection (2).

“Moreover, the bill fails to address a substantial legal anomaly in that people who wilfully damage rental property manage to escape the consequences of a wilful damage conviction under the Crime Act, which carries a jail term of seven years,” he said.

“Regarding contaminants, the issue of evidence of harm has been avoided, and the bill assumes that current level of 15 millionths of a gram per 100 square centimetres is a meaningful indicator of harm, which it is not,” Mr Butler said.

“The bill should have simply stated that the onus was on anyone claiming harm from a contaminated tenancy to provide evidence of harm,” Mr Butler said.

Treating garages as residential premises to extend coverage of the RTA to them so that they confirmed as non-residential is the sort of thing that gives rise to the expression “the law is an ass”, he said.

“This bill, that seeks to clean up messes created by the Tenancy Tribunal, the Court of Appeal, and the previous Government, has just made the issues more unfair and complex and litigious,” 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 and law.

Loss ring-fencing ups war on renters and owners

The largely unreported end of the ability of rental property owners to claim losses against other income shows that the Government is unaware of the scale of the problem it is creating with accommodation, Tenancies War spokesman Mike Butler said today

The Taxation (Annual Rates for 2019–20, GST Offshore Supplier Registration, and Remedial Matters) Bill quietly became law while we were distracted with a Cabinet reshuffle that demoted Housing Minister Phil Twyford.

Under the vague sub heading “Allocation of deductions for excess residential land expenditure”, the omnibus tax Act:

(a) limits a person’s deductions for expenditure incurred in relation to residential land to income derived from the land;

(b) suspends deductions for the excess expenditure for the income year in which the expenditure is incurred;

(c) provides that the excess amounts are carried forward to later income years in which the person derives residential income; and

(d) releases the excess amounts on fully-taxed disposals of land.

Inland Revenue said in various statements that 116,000 owners declared an average loss of $7138 ($137 a week) on earnings in the 2016/17 tax year, bringing an average tax benefit of $2000 a year to each, creating a total cost of $232-million to them.

“The Minister responsible for this, Revenue Minister Stuart Nash, is probably unaware that losses accrue at the first stages of a property investing career, and that as debt is reduced and income increases, investors become taxpayers, with some paying tens of thousands of dollars in tax each year,” Mr Butler said.

“Rental property owners who are losing money now face a choice — raise the rent to cover the loss, absorb the loss to apply it in the future to any profit, or sell,” he said.

“With rents at historic highs it is unlikely owners could add an average extra $137 every week to rents,” Mr Butler said.

“This means owners must choose between hanging on or selling,” he said. “The short answer is to sell, with stand-alone dwellings going to first home buyers.”

“With loss-making owners selling and the prospect of an extended and more fraught period of trading at a loss creating a barrier to new investors, the Minister has just sped up the reduction of the supply of rental property,” Mr Butler said.

“As a result, rents will continue to rise and homelessness will increase,” he said.

The problem for everyone is that the Government is in denial that the policies it is enacting to solve a housing crisis are making the crisis exponentially worse, Mr Butler said.

Labour, New Zealand First, and the Green Party voted in favour on the third reading of the bill on June 20, while National and Jamie Lee Ross voted against it. Hansard has no record of a vote by the ACT Party.

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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