Submission to Residential Tenancies (Prohibiting Letting Fees) Amendment Bill
Habitat for Humanity New Zealand and Affiliated Companies
23rd May 2018
Habitat for Humanity New Zealand (Habitat) and its 11 affiliated regional companies, welcome the Amendment to the Residential Tenancies Act to prohibit letting fees. Habitat’s vision is “a world where everyone has a decent place to live.” We believe that this Bill contributes towards this vision and consequently support this Bill for the following reasons:
- Habitat has defined “decent” on the basis of the 6 dimensions of housing adequacy. This is comprised of: affordability, suitability, habitability, tenure security, freedom from crowding and freedom from discrimination. We believe that the presence of letting fees intersects with all of these dimensions of housing adequacy. However, this intersection is driven by affordability. Housing affordability relates to the ability of households to rent or purchase housing in a locality of choice at a reasonable price, the capacity of households to meet ongoing housing costs, and the degree that discretionary income is available to achieve an acceptable standard of living. Affordable housing should leave enough residual income to cover other basic living costs, as well as allowing households to save for irregular but unavoidable costs such as medical and dental care. Prohibiting letting fees will remove one obstacle to accessing affordable housing.
- As the government is aware, a number of cities in New Zealand are facing a housing affordability crisis. This has meant that people are slipping down the housing continuum. Those who would usually be a candidate for home ownership, struggle to find an affordable home to purchase and end up in long-term rental arrangements. This increased competition in the rental market leads to higher rents and consequently reduces affordability for many. Letting fees further compound this, as they are equivalent to approximately one week’s rent that tenants must pay upfront. Furthermore, each time a fixed term tenancy is renewed, tenants may be required to pay the letting fee again, putting them further out of pocket, in a home they are already living in.
Case Story 1
Frank* is a client of one of Habitat’s directors who works for an agency that provides social support for people with disabilities. Unable to pay the letting fee upfront, he borrowed the amount from a local finance company and had to repay it over six weeks. The finance company charged him 600% interest. The initial amount that Frank borrowed was $200. By the time he repaid the loan, it had grown to $1,100.
*Names changed to protect the privacy of the client.
- The presence of letting fees also worsens the effects of a lack of security of tenure. With pressure in the rental market in many New Zealand cities, we are finding that individuals and families – particularly those who are the most vulnerable are having to move frequently. With every new property that people move into, they need to pay a new set of letting fees. Therefore, this adds another cost to people which ultimately impacts their ability to find decent housing. Habitat is aware that people who receive support from Work and Income, do not have their letting fees covered. For some clients of Work and Income, the income that they receive is less than the letting fee. This means that some clients end up going without food for at least two weeks after moving into their new rental home.
Case Story 2
Sandra* is a client of one of Habitat’s directors who works for an agency that provides social support for people with disabilities. Through no fault of her own, Sandra has had to move 3 times in one year. In the first property, the landlord sold the house and she had to move. In the second property, the landlord decided to move their own family into the house and Sandra was given a 90-day notice to move. In the last property, the landlord died and the property became a deceased estate. Sandra had to move again.As a result of all the moving, Sandra had to pay 3 sets of letting fees in one year.*Names changed to protect the privacy of the client.
- As a landlord housing approximately 200 families around New Zealand today, Habitat knows that the value of letting fees is immaterial to the cost of operating housing. Furthermore, it is primarily the property agents that benefit from letting fees. The presence of letting fees rewards property agents for keeping fixed-term tenancies short. This enables them to either continue to charge letting fees to the same tenants, or encourage churn of tenants for the purposes of further fee generation. This is counter to the needs of both landlords and tenants, where long term tenancies bring stability of income for landlords and security of tenure for tenants.
- Habitat notes that the Residential Tenancies Act places limitations on the amount of bond and rent in advance that tenants must pay. It is obvious that this is motivated by the need to ensure housing affordability. However, the current system does not place a cap on letting fees, leaving property agents open to charging potentially usurious amounts. Therefore, Habitat agrees with the prohibition of letting fees.
Once again, Habitat for Humanity New Zealand and its Affiliates welcomes Residential Tenancies (Prohibiting Letting Fees) Amendment Bill. However, we see this amendment bill as the first step in addressing a range of issues that tenants face in accessing decent housing.
Chief Executive Officer
Habitat for Humanity New Zealand
Habitat for Humanity New Zealand
On behalf of:
|Habitat for Humanity New Zealand
Habitat for Humanity Northland
Habitat for Humanity Auckland
Habitat for Humanity Central North Island
Habitat for Humanity Tauranga
Habitat for Humanity Eastern Bay of Plenty
|Habitat for Humanity Taranaki
Habitat for Humanity Lower North Island
Habitat for Humanity Nelson
Habitat for Humanity Christchurch
Habitat for Humanity Dunedin
Habitat for Humanity Invercargill
 Developed by Statistics New Zealand, based on the United Nations Right to Adequate Housing.
 Where the housing continuum describes the pathway from homelessness and emergency shelters, through assisted rental or assisted ownership, to private renting and ownership options in the market.