4 Reasons why rent will rise

John Crocker and Associates (property consultants) director David Faulkner predicts that rents will rise as much as 10 per cent across New Zealand before year’s end.

Here’s why:
The new Health and Safety at Work Act (HSWA)
The new law identifies that a Person Conducting a Business or Undertaking (PCBU) has a duty of care to its workers and to other people, and must provide a safe workplace. A PCBU is a business or a sole trader – that includes private landlords.

Section 45 of the Residential Tenancies Act (RTA) states that landlords must comply with all requirements of building, health and safety and any enactment.

The RTA and the HSWA talk to each other. If a house is noncompliant then a landlord may be in breach of the HSWA as well as the RTA.

Fines for non-compliance with the HSWA are enormous and will frighten many landlords. We will see an increase in landlords getting their properties professionally managed.

The cost of running a business will increase and so property management fees will rise. You will also see tradies increase their fees to cover the costs of compliance.

Landlords are likely to pass these costs on to tenants in rent rises.

Changes to the Residential Tenancies Act (RTA) around insulation and smoke alarms
As of July 2016, landlords have to state the level of insulation in the property on tenancy agreements. Then, by July 2019, all rental properties are required to have underfloor and ceilings insulated. The cost of doing this will be about $4000 per property.

The changes to the RTA also clarify who’s responsible for smoke alarms and where they have to be located. Landlords are responsible at the commencement of the tenancy and tenants are responsible during the tenancy. Expect to see the tenant wear the cost of this, though power bills will be reduced as the quality of our rental stock gradually improves.

Tenants no longer liable for accidental damages
A landmark case recently ruled in favour of tenants who accidentally caused more than $200,000 damages to a property through fire. This means that tenants will no longer be responsible for damages that they have caused through negligence. Again, the consequences of this landmark ruling are huge. Tenants can cause damage to properties and claim it was accidental.

Insurance companies will no doubt increase premiums to cover the increased risk that they are exposed to. Again, landlords are likely to offset these costs to the tenant.

Fear of methamphetamine contamination
We constantly hear in the news of properties being gutted due to methamphetamine contamination. There has also been debate as to whether houses will need to be tested for meth in between tenancies so that the house will comply with the RTA and the HSWA. This has yet to be legislated, but more and more houses are testing positive for meth and more and more landlords are opting to test properties between tenancies for insurance purposes.

Expect tenants to wear the costs of this, and also the likely rise in rental insurance prices due to the risk of meth.