Let it Be

Written By: - Date published: 8:44 am, December 12th, 2018 - 56 comments
Categories: class war, Economy, housing, infrastructure, labour, phil twyford, poverty, tenants' rights, workers' rights - Tags: ,

Rejoice! The Labour led Government has just removed a completely unfair tax on accommodation renters, ending the practice of rental firms ripping off tenants by charging a bogus upfront ‘letting’ fee. No doubt the Taxpayers Onion will be overjoyed.

Until today, most property management firms charged new tenants a fee for, er, doing nothing. The letting fee, usually equivalent to a weeks rent, was simply a tax on the vulnerable and powerless, levied out of greed.

Tenants already struggling to find bond in advance, usually before any previous bond was returned, will be relieved that the financial burden has been lessened. It is possible that some rents will increase to cover the supposed loss to the agents, however that is still preferable to paying upfront for a non existent service.

Renters United spokesperson Robert Whitaker is in favour:

“The first thing is, they can actually compare apples with apples in the rental market and not have to worry about letting fees being piled on top of all of their other moving costs.”.

Barfoot and Thompson director Kiri Barfoot says they run a business and provide a service, and it doesn’t worry them who pays for it.

“There are costs to find tenants for a property and someone has to pay for it, so if we can’t charge the tenants, landlords will be looking to pay.”

Which raises an interesting legal question. If the tenants pay for this service, doesn’t that establish a commercial relationship between the agent and the tenant? Doesn’t it follow that the agent has an immediate conflict of interest, because they are clipping the ticket both ways?

Minister Phil Twyford’s is upbeat about the change:

“The previous way that these letting fees were handled was totally unfair to tenants. They were hit with one week’s rent plus GST at the very time they could least afford it. When they were having to pay rent in advance and bond and all the costs of moving.”

Minister Twyford doesn’t think tenants will end up paying more.

“Landlords are already charging as much as they can within supply and demand. So it’s not at all clear that because the small minority of landlords who use property managers want to pass on those fees through rent, it’s not at all clear that they’ll be able to.”

The Misery Party’s Judith Collins cheerfully lied about the dropping of the charge, with a bizarre claim about CGT:

“Now that this government is coming in with even more things like a capital gains tax, there’s not a lot of money in it – so that’s why they have to pass it on.”

In the real world, there are no plans to extend CGT, though it is part of the Tax Working Group’s discussions.

All in all, this is a small, but welcome step in the Government’s overall housing plan. Bringing fairness to the rental market by removing a significant financial hurdle for tenants shows that Labour is taking a global view of our accommodation needs and not just relying on the market to self regulate.

With Kiwibuild underway, house prices rises steadying and Housing NZ revitalised, this is the first Government in 40 years to seriously tackle our housing crisis. In fact, this may be the first Government in a generation that does not actively make the problem worse.

 

56 comments on “Let it Be ”

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  1. Andre 1
    12 December 2018 at 9:18 am

    The cost of attracting customers is usually borne by whomever is selling and is part of being in business. Would petrol stations be able to charge a “forecourt fee” just to pull up to the pump, or could a supermarket charge a “door fee” to cover their various expenses?

    I’m having trouble coming up with other examples of private businesses being able to charge a fee before you even start using any of their service or product. Mostly it’s former or current government monopolies that can get away with “lines charges” or similar.

    And if it costs landlords to lose their existing tenants and get new ones, maybe they will become more interested in longer tenancies.

    • Muttonbird 1.1
      12 December 2018 at 9:32 am

      +1 on the last one para.

      There were instances in Christchurch where the agent was charging a new letting fee for rolling over the lease. That’s the stuff of Satan.

      I don’t think rents will rise across the board. Rental owners don’t raise the rent every time they fix a tap.

    • Blazer 1.2
      12 December 2018 at 10:27 am

      Auckland airport charges taxi drivers a $2 fee for dropping passengers off!!

    • KJT 1.3
      12 December 2018 at 7:01 pm

      Banks do it all the time.

  2. Ankerrawshark 2
    12 December 2018 at 9:28 am

    I know this will likely incur the Roth of puckish but Judith is becoming more trump Like by the day, with lies, quoting fake news and personal attacks (young KiwiBuild buyers)

    • Clive Macann 2.1
      12 December 2018 at 9:38 am

      Trump like? The opposition there is just as bad or worse. Are you suggesting it’s the same here in NZ?

      • ankerawshark 2.1.1
        12 December 2018 at 12:12 pm

        Clive, what I meant was Judith’s tactics are beginning to look Trump like. eg quoting a fake news website about the age of consent in France and asking Jacinda to comment on it. Implying that a CGT was already a done deal, criticizing the young Kiwibuild couple on their social media (or her social media)………

    • Puckish Rogue 2.2
      12 December 2018 at 10:40 am

      Blasphemy! You bad, evil doer. Get down on your knees, repent and ask our lord for her forgiveness!

      Our Jude, who art in heaven,
      hallowed be thy Name,
      thy government come,
      thy will be done,
      on earth as it is in caucus.

      Give us this day our daily postings.
      And forgive us our trespasses,
      as we forgive those
      who trespass against us. (That’s reference to you)

      And lead us not into socialism,
      but deliver us from communism.

      For thine is the kingdom,
      and the power, and the glory,
      for ever and ever. Amen.

      • ankerawshark 2.2.1
        12 December 2018 at 10:45 am

        Pukish, I am glad you feel able to forgive me. But I realized in posting what I did could cause some upset for you. That was not my intent. And I almost hate to say this but stand by my statements.

        I also have to say I admire your tenacity and devotion to your cause.

        • Puckish Rogue 2.2.1.1
          12 December 2018 at 10:51 am

          “I also have to say I admire your tenacity and devotion to your cause.”

          Its not hard, I mean when you meet a goddess its as natural as breathing to worship them

    • Cinny 2.3
      12 December 2018 at 11:53 am

      trump like judith…. nek minute she’ll be endorsing mike hosking for the UN.

  3. Robert Guyton 3
    12 December 2018 at 9:31 am

    Pucky’s Roth?
    David Lee?

  4. Siobhan 4
    12 December 2018 at 10:01 am

    Personally I always found the only “significant financial hurdle” I faced as a tenant was paying ever increasing rents.

    But sure, its some nice optics I guess. Give National voting landlords another excuse to feel like the commies are at the door and up the rent (as if they need one), and allow Labour supporting landlords to feel they are nobly taking a presumably ‘significant financial’ hit for the greater good (and upping the rent, but for entirely unrelated reasons I’m sure).

    (On my fb this article appears with the classic photograph of Savage delivering the breakfast table to a new State House.
    That would have to be the most misused photo in the History of New Zealand Labour Party.
    Why on earth do people insist on matching current Labour policy around housing, especially rental stories, with a picture of a family, a single income, tram drivers family, no less, moving into their own home?
    If there is a connection between renting and State houses then It would be more relevant to match these articles with something more current…like a picture of Jacinda delivering a mandarin tree to the nice professional couple moving into their kiwibuild. I wonder if that image will ever become iconic in the struggle of the working classes?)

    • te reo putake 4.1
      12 December 2018 at 10:24 am

      Re: the photo of the Blessed Mickey, the last paragraph of the post explains all:

      With Kiwibuild underway, house prices rises steadying and Housing NZ revitalised, this is the first Government in 40 years to seriously tackle our housing crisis. In fact, this may be the first Government in a generation that does not actively make the problem worse.

      • Antoine 4.1.1
        12 December 2018 at 10:54 am

        What we really need is City Councils to seriously tackle our housing crisis

        It’s largely their problem to solve

        A.

      • Siobhan 4.1.2
        12 December 2018 at 11:30 am

        No, it doesn’t.

        “In fact, this may be the first Government in a generation that does not actively make the problem worse”.

        ..for life time renters that statement may seem a touch…lackluster. And its certainly not the sort of sentiment that got Savage voted in.

        “Vote for us…we’re better than that bunch of psychos and at least we won’t make things worse, at least not actively, though we will keep to their genius financial constraints” jeez, that’s not really getting me fired up

      • Infused 4.1.3
        12 December 2018 at 7:58 pm

        None of that is doing anything. Prices are steadying because Auckland been booming for the last 7 years.nits dipping now Wellington is still cranking and rents are getti g higher.

  5. Antoine 5
    12 December 2018 at 10:53 am

    All I can say is that if my property manager ups their %, it’s going straight to the tenant, who will pay.

    A.

    • Cinny 5.1
      12 December 2018 at 11:55 am

      Why do you use a property manager please Antoine?

      We ditched ours and it’s worked out so much better for all. Highly recommend it if you’ve got good long term tenants.

      • David Mac 5.1.1
        12 December 2018 at 12:14 pm

        If an owner is out of the country longer than 3 months it is illegal for the owner to manage their own property.

        We have lots of overseas owners.

        If a comfortable drive away and a strong working understanding of the residential tenancy act I think there is a strong case for an owner to mange their own rental.

        If my deceased Grandma left me a house in Kaitaia and I lived in Christchurch, I think I would be foolish not to appoint a manager.

        • Antoine 5.1.1.1
          12 December 2018 at 1:35 pm

          Some good points there David

          A.

        • Brigid 5.1.1.2
          12 December 2018 at 8:57 pm

          “If an owner is out of the country longer than 3 months it is illegal for the owner to manage their own property.”
          I don’t think there is any legislation that governs property management. If I’m wrong, could you provide a link that shows there is?

        • Cinny 5.1.1.3
          13 December 2018 at 7:37 am

          Thanks David, I didn’t know that re overseas for 3mths rule.

          Our rental is in Welly, so it’s pretty easy to get there from Motueka/Nelson.

          Good point re location.

          We had a bad experience with Quinovic, so ditched them, it’s worked out better for us all. For example, tenants advise if they are going on holiday, and we head over there and do improvements. Mum has always said, if we don’t want to live in the rental, why should we expect anyone else to. As a result have always kept the property in good condition and updated it regularly.

          Are lucky enough to have primo tenants that have been there for years now. They look after the place and we look after them, the rent is low compared to market rates and we give them a week rent free at Christmas.

          Good communication is key.

      • Tricledrown 5.1.2
        12 December 2018 at 9:29 pm

        No profit if you pay a property manager and most of them just take the money and do nothing not even regular check ups.

        • Antoine 5.1.2.1
          12 December 2018 at 9:48 pm

          All false there tricldrown, there is still profit and at least some of them demonstrably do stuff

          • Tricledrown 5.1.2.1.1
            12 December 2018 at 9:59 pm

            If you are an investor you want 6% return on capital minimum if you are landlord paying a mortgage /rates /insurance/maintenance/upgrades to meet new regulations. There is no profit or return on capital if you have to pay a property manager most are just ticket clippers. Antione I work in the building industry and know what happens. Most landlords don’t do regular maintenance they just do patch up jobs to placate tenants that’s the only way they can make a profit.

            • Antoine 5.1.2.1.1.1
              13 December 2018 at 4:49 am

              I have a rental property, use a property manager, make a profit, and they do regular checkups and provide photographic evidence among other things.

              A.

    • ankerawshark 5.2
      12 December 2018 at 12:15 pm

      Antoine are your profit margins so tight on your rental that you have to do this???? I know that is a personal question and I respect that you may not want to answer it.

      I just don’t believe that profit margins are tight at all for landlords. I was one myself a few years back. Unless landlords have over extended themselves in which case my advice is get out of the business.

      • indiana 5.2.1
        12 December 2018 at 1:06 pm

        There was a time when a Labour government introduced LAQC – Loss Attributing Qualifying Companies. Property investors used this legally and government encouraged avenue to negatively gear themselves so that they could reduce their taxable income. Effectively, the idea was not to be making a profit, but a loss.

      • Antoine 5.2.2
        12 December 2018 at 1:38 pm

        >Antoine are your profit margins so tight on your rental that you have to do this?

        I’m honestly not sure what my profit margin is, but I’m not inclined to reduce it!

        A.

  6. Mr Marshy 6
    12 December 2018 at 11:56 am

    Lol, this reporter really has zero economic nous if he thinks its worth rejoicing. A landlord fee is coming and that will simply be passed on to the tenant. Its called business. You dim socialists really shouldn’t comment on anything business related as your clouded ideology just shows your ineptitude. Report back in a years time when rental stock has shrunk as landlords sell up, and rents rise. See if you are rejoicing then …

    • ankerawshark 6.1
      12 December 2018 at 12:18 pm

      Actually Mr Marshy, you are making grave assumptions here. I am a business owner and have been a landlord. I have always factored in fairness to tennant customers, and I am doing very well thank you very much. I feel more than entitled to comment on such thing. So actually, and I don’t usually say this sort of thing, shut up.

    • Red Blooded One 6.2
      12 December 2018 at 12:55 pm

      Wow, so angry with your dim socialists comment Mr Marshy. My property managers have advised that I will be paying a weeks rent if they secure me a tenant in the future. It is not going to be a regular charge (hopefully) as I would much rather my tenants are happy enough to stay long term. The charge will only transfer through to tenants if/when market rent rises occur. If you see a one week charge once in a blue moon as an excuse for you or other landlords to wail, moan and sell up, I suggest you do. The rental market is obviously not conducive to your ethics or lack of.

    • Draco T Bastard 6.3
      12 December 2018 at 1:03 pm

      If a person is paid by both the landlord and the tenant then who’s he working for?

      • David Mac 6.3.1
        12 December 2018 at 1:11 pm

        The house.

        Property managers represent the house. Good ones are in the business of creating lovely places to live. Their meagre income comes in from all over the place. Some of the GST on that packet of long grain rice you bought this morning is in a PM’s pocket.

        • Draco T Bastard 6.3.1.1
          12 December 2018 at 1:16 pm

          If that is true then we don’t need the landlord. The landlord just represents an unnecessary layer of bureaucracy.

          • David Mac 6.3.1.1.1
            12 December 2018 at 1:35 pm

            Yep, we get how it would work in the Dracosphere.

            The fact remains, there is a layer of landlords because their rental house is a little business and history hurts landlords that don’t approach ownership as a little business.

            • Draco T Bastard 6.3.1.1.1.1
              12 December 2018 at 2:24 pm

              Yep, we get how it would work in the Dracosphere.

              It’d be cheaper, less expensive and have better results.

              The fact remains, there is a layer of landlords because their rental house is a little business

              That’s not actually a fact. It’s a misunderstanding of history and capitalism.

              If housing was provided by the state then there wouldn’t be any capitalist business available. It is only through the changing of laws (such as the Inclosure Laws etcetera) that allowed rentier capitalism to bloom. Of course, the feudalism that came before was worse but not by much.

  7. David Mac 7
    12 December 2018 at 12:01 pm

    Property Management is a crap vocation for the greedy. The margins are tiny in that business. They’ve become dependent on letting fees to keep their mouths above the water line.

    Property management income is generally split 50/50 between the franchise holder and the ‘in the field’ property managers. They generally charge about 8% of the rental income. So if a house is returning rent of $300 per week, there’s $24 income for the office. Split 50/50, the property manager is making $12.

    An average roll of 50 rentals x $12 = $600 per week for the manager. Often contractors, they have to pay for their extensive car and phone usage from their $600 per week, then their taxes. Even if managing 100 rentals, that would be a 65 hours a week job to do properly, after overheads, the money is still pretty ordinary.

    For the greed inclined, begging outside a shop pays better than residential Property Management. I don’t think PM’s are looking for letting fee replacements because they’re greedy, I think they’re doing it so that they don’t starve to death.

    • Draco T Bastard 7.1
      12 December 2018 at 1:08 pm

      For the greed inclined, begging outside a shop pays better than residential Property Management. I don’t think PM’s are looking for letting fee replacements because they’re greedy, I think they’re doing it so that they don’t starve to death.

      I was doing better as a contract pizza delivery driver.

      If your figures are correct then PMs shouldn’t actually exist as they’re not getting enough income to cover their expenses.

      • David Mac 7.1.1
        12 December 2018 at 1:38 pm

        Ha, yeah exactly, as business models go, the margins are super model skinny.

        • Wensleydale 7.1.1.1
          13 December 2018 at 3:19 pm

          If it’s such a shit gig, why does anyone do it? Genuine question. What do they get out of it other than stress and a meagre income?

    • Infused 7.2
      12 December 2018 at 8:02 pm

      My fee is 3%. Landlords need to learn how to negotiate

  8. Draco T Bastard 8
    12 December 2018 at 12:25 pm

    Minister Twyford doesn’t think tenants will end up paying more.

    “Landlords are already charging as much as they can within supply and demand. So it’s not at all clear that because the small minority of landlords who use property managers want to pass on those fees through rent, it’s not at all clear that they’ll be able to.”

    I think the Minister needs to be appraised of Steve Keen’s work on supply and demand. This short article at Unlearning Economics is probably a good place to start:

    The second reason is to show that, despite economist’s assertions to the contrary, it cannot be proved that a market economy will necessarily maximise social welfare, as, even on their own terms, it is logically possible to have multiple equilibria, some of which are more socially desirable.

    All in all, this is a small, but welcome step in the Government’s overall housing plan. Bringing fairness to the rental market by removing a significant financial hurdle for tenants shows that Labour is taking a global view of our accommodation needs and not just relying on the market to self regulate.

    The market has never self-regulated. When left to their own devices the capitalists become Robber Barons.

    IMO, it is the regulations that define the market and make it fair and even workable. It is only through proper regulation that all costs can be properly accounted for.

    • David Mac 8.1
      12 December 2018 at 12:53 pm

      Unfortunately I don’t think rents are as high as the market will absorb.

      Any rental anywhere, 1000’s of Trademe views, 100’s of email enquiries, scores of application forms presented.

      Rental listings don’t stick around long, up one week, gone the next. Any rental listing that is up longer than a month is a white elephant.

      I think rental asks are about 25-35% cheaper than what the market is currently dictating. Demand is stomping all over Supply.

      Additional forces come into play: In times of abundant rentals, a $25 rent rise notice might prompt a search for a new place. In these times of rental scarcity we’re more likely to cop a $50 rise on the chin.

      I wouldn’t be holding your breath if you’re waiting for regulators to enforce how much someone can make from their private legitimate business Draco.

      Damn, I’d love to visualise a happy ending to ‘The next decade of rental housing in NZ’ but I struggle.

      • Draco T Bastard 8.1.1
        12 December 2018 at 1:14 pm

        I wouldn’t be holding your breath if you’re waiting for regulators to enforce how much someone can make from their private legitimate business Draco.

        I’m not.

        Regulations are there to cover fairness, health and safety and to ensure costs are properly accounted for and that the right person is paying them.

        It’s supposedly competition that will reduce profit to zero and that’s never going to work as there simply isn’t enough resources or competition.

      • Antoine 8.1.2
        12 December 2018 at 1:37 pm

        > Unfortunately I don’t think rents are as high as the market will absorb.

        Clearly not.

        We cannot really fix the rental situation until we improve the supply demand balance. All the power is on the supply side (landlords) and little tweaks like the letting fees thing will not really change anything.

        A.

  9. Pete 9
    12 December 2018 at 1:44 pm

    I heard various grizzlers yesterday on about how the rental market would collapse because of the change. And that renters will see their rents go soaring. And I’m sure I heard someone intimate the world would end.

    • Muttonbird 9.1
      12 December 2018 at 10:26 pm

      I heard Hades himself was to ride forth from the underworld on a chariot of babies’ skulls upon the passing of this law.

      I’ve been checking outside but still nothing.

      • Antoine 9.1.1
        13 December 2018 at 4:51 am

        I don’t think anyone is saying that this law is a disaster or will make things much worse. What we are saying is that it will not improve the situation substantially for renters, in some cases may make them worse off. We are rejecting TRP’s spin that this is something to ‘rejoice’ over.

        A.