Tuesday, February 20, 2024

New Tenancy Changes May Ease Supply Issues of Rentals

Nelson New Rental properties being built.

New government, new rules: what it means for landlords

February 2024

The recent coalition deal between National, NZ First, and ACT has ushered in a range of changes, aimed at addressing concerns in the rental market. The focus revolves around four key areas for investors, including mortgage interest deductibility, no-cause evictions, reduced notice periods and the introduction of a pet bond.

Sue Harrison from the New Zealand Property Investors Federation has expressed support for the changes, saying she believes they’ll help ease supply issues, and stem the flow of properties leaving the rental marketplace. Restoring mortgage interest deductibility in particular is a relief, she says, citing this as the “single biggest thing” that would help owners of rental properties and incentivise landlords to keep rental properties, in light of high mortgage rates. 

Under the new coalition government, mortgage interest deductibility will be raised to 60% this tax year, 80% in 2024/25, and then restored to 100% in 2025/26 - reversing Labour’s plans to remove the scheme completely by 2025. 

Rental rates have increased rapidly over the past few years, with some saying this is partly a result of the removal of interest deductibility, with landlords passing costs on - so potentially the reversal could help stabilise prices, and have a positive flow-on effect for renters, too.

Another change the new government has introduced is repealing the amendment that requires landlords to give a reason when they issue a tenant with a 90-day eviction notice.

This has drawn attention for potentially creating an imbalance of power, where tenants might be reluctant to voice concerns, make requests, or negotiate rental terms. However National MP Chris Bishop has maintained that reintroducing no-cause evictions is "pro-tenant", arguing it would make landlords more likely to take a risk on renting to people if they knew they could easily be removed if they felt it wasn’t working out.

One more policy change involves reducing the notice periods for both tenants and landlords.

Under the former Labour government, tenants needed to give four weeks' notice, while landlords required three months for eviction. The new coalition deal reduces these periods to 21 days for tenants, and 42 days for landlords if they intend to move into the property or sell it - allowing a little more flexibility on both sides.

In terms of new legislation, the coalition government is set to introduce a “pet bond”, allowing tenants and landlords to agree on a larger bond sum (over and above the usual four weeks’ worth), to accommodate pets in rental properties and help protect against related damages. This policy, originally proposed by ACT, aims to expand the availability of pet-friendly rental options, fostering a more negotiable approach towards having pets, as opposed to the usual “no go”.

If you have any queries or concerns about the new legislation, please feel free to contact our professional property management team. We make it our business to stay in the know.

Property Management Insider Barfoot & Thomson

Pigeon Post News, Richmond. 

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