Tenants in our own landby Rebecca Macfie
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Half of New Zealanders are renters, but lack of secure tenure leaves many feeling like second-class citizens, reports Rebecca Macfie. Is there a better way?
She knew her landlord had the house on the market, but had been led to believe by the property managers it would be sold with an ongoing tenancy agreement. As it has turned out, the new owners want vacant possession so they can live in it themselves.
The six-week notice period is entirely lawful in those circumstances, but that doesn’t ease the stress and upheaval for Anderson. “Seventeen years is a long time,” says the 57-year-old. “I said to the property manager, ‘You’re kicking me out like I’m nothing.’”
Not that there’s anything marvellous about the place. The kitchen and bathroom are long overdue for having some money spent on them, but Anderson has kept the property tidy, and it has a log burner and insulation. Most importantly, it’s the place where she has raised her two sons and kept her two cats.
The younger of her boys was five when they moved into the house, and both went to the local primary and secondary schools. Both – one now an apprentice baker, the other a worker at The Warehouse – still live with Anderson, paying board.
When the boys were young, Anderson served as a volunteer at the local community op shop. Until a couple of months ago, when she was made redundant, she was employed at a cabinet-making factory. She received her eviction notice just a few days before she was due to start a new job washing dishes in a bakery.
It’s not just that she’s losing her home, but the lack of consideration and respect that hurts. If only she had known during the weeks when she was out of work, instead of being given notice just as she was about to start a new job. After eight hours on her feet at work every day, she has to head out each afternoon and look for a new home to rent.
And then there’s the $650 worth of firewood that she’d just got in. Assuming she can get another place with a log burner, she’ll have to shift that. She has the accumulated furniture and possessions of 17 years of home-making, but she doesn’t have a trailer to move them and her Toyota Starlet doesn’t have a towbar. Shifting will be expensive, too. She’ll have to come up with about $2500 in cash to cover the bond, letting fee and advance rent on a new place – not an easy sum to accumulate on a wage of $14.75 an hour.
She could do with, at least, a written reference from the property manager, but it won’t give her one until after she has vacated. And that’s not much help as she faces the challenge of quickly finding somewhere suitable – preferably in the same community – in Christchurch’s highly competitive rental market. Three weeks after receiving the notice to vacate, she’d looked at about 20 places. Many were in poor condition and failed to live up to their advertised description, or the letting agents didn’t have all the information available to enable her to apply.
“I have found it draining,” she says. “I think all tenants should have at least three months’ notice, minimum.”
Home is where the heart is
A safe and secure place to call home. It’s something Patrick and Ariane Tuapola want just as much as Anderson. In the past, professional couples like them would have found the stability they seek through home ownership. Patrick, 34, is a manager at a web and design company, and Ariane, 29, has a PhD in biomedical science and works for a medical imaging company.
They aspire to eventually own their own home, but are resigned to renting for several years yet. They acknowledge they’ve made decisions that have delayed their ability to save a deposit for a house: they got married (and paid for their own wedding) earlier this year; they’re having their first baby early next year, which will mean dropping back to one income; and Ariane would like to make a dent in her remaining $26,000 student loan before taking on a mortgage.
Even in Wellington, where real estate values have been relatively flat in recent years, it strains their sense of financial prudence to invest in a market that is so out of whack with what people earn. “House prices are six times average annual incomes [nationally]. So it’s a risky investment. You’re putting all that capital into one thing, and if something goes wrong, you’re buggered,” says Patrick.
“Among my peer group, home ownership is not common unless they’ve had help from their parents or received a bequest,” he says. In the Tuapolas’ case, a leg-up from family is not possible.
The couple recently moved out of a cold, damp one-bedroom Wellington flat that was costing $295 a week into a tidy, warm two-bedroom townhouse for which they pay $435. They’ve no reason to think they will have anything other than a happy relationship with their landlord, but they’d prefer a greater sense of security over their tenure. Ariane says she asked for a two-year lease but the landlord was reluctant and a standard 12-month contract was signed.
“That’s maybe understandable, since [the landlord] didn’t know us,” she says. “But at the end of the tenancy will the rent go up, or will the place be sold and we’ll have to move?”
They say they never feel at ease raising issues or complaints with landlords. “You don’t want to make too much fuss. They might see you as needy tenants and you might damage your reputation. You never really have that certainty of tenure. That always plays on your mind. You think, ‘Gosh, wouldn’t it be nice if this or that thing was fixed’, but then if it was, would the rent be put up?” says Patrick, a supporter of newly formed Wellington tenant activist group Renters United.
He says the Government’s planned tightening of the rules barring landlords from retaliating against tenants for exercising their rights under the Residential Tenancies Act – for instance, by taking a complaint to the Tenancy Tribunal over the condition of a house – doesn’t address tenants’ fear of “effective eviction” in cases where a landlord hikes the rent after remedying the defect.
Economists Shamubeel and Selena Eaqub – possibly New Zealand’s most prominent residential tenants – point out in their book Generation Rent that insecure tenure is no longer a problem just for a minority of New Zealanders. Since the early 1990s, when three-quarters of the adult population owned their own house, home ownership has been steadily falling as real estate prices have become increasingly out of touch with wages and salaries.
According to the latest Census, less than two-thirds of houses are owner occupied. And the Eaqubs point out that if we look at the data in terms of individuals rather than households, more than half of Kiwis live in a rented house. Young people like the Tuapolas are significantly less likely to be homeowners today than in the past. In 2001, 48% of 30- to 34-year-olds owned, compared with 36% in 2013.
The Eaqubs have made a conscious choice to rent because they believe real estate values are unjustifiably high, rents haven’t risen as fast as house values (making it a cheaper option) and it frees them up to invest in assets other than housing. But for most tenants, renting is a second-best option and many of those interviewed by the Listener reported feeling treated by some landlords, the community and New Zealand’s tenancy laws as second-class citizens.
Lack of secure tenure is a key concern, with renters moving house far more often than owners. Tenancy bond data supplied to the Listener by the Ministry of Business, Innovation and Employment for the 2014 year shows over half of tenancies lasted less than 15 months, and only 15% last longer than two years. By contrast, owner-occupiers spend on average five years living in a house, says researcher Sarah Bierre of the University of Otago’s Housing and Health Research Programme.
Frequent moves are tough on both young and old. As the Productivity Commission’s 2012 report on housing affordability noted, multiple changes of address are bad for children’s continuity of schooling and health care, while for older people shifting can mean losing important community links and familiar medical services.
The Growing Up In New Zealand longitudinal study found half of private renters had moved house between the birth of a child and the infant’s first birthday, compared with less than one in five home owners and one in four households in social housing.
As Bierre points out, New Zealanders have traditionally achieved secure tenure through owning their home, but falling ownership rates means more households will have to find ways of “achieving permanence and security of tenure in a rental house”.
But that’s hard to do when the Residential Tenancies Act permits a tenant on a periodic lease to be evicted with 42 days’ notice if the owner wants to move in themselves or a family member to do so, or at 90 days’ notice for no reason at all. As the Eaqubs point out, the law can leave landlords high and dry too, with tenants able to move out with 21 days’ notice, leaving little time to find new tenants to fill a vacant property.
Different in Germany
The situation facing Anderson, with her anxious search for a new home, or the Tuapolas, with their sense of frustration and insecurity, seems incomprehensible to 45-year-old Christian Macht, for whom life as a tenant is completely secure.
Macht and his family, like 57% of German households, are renters. “I have never lived in a house I have owned,” Macht, an engineer, told the Listener from his “flat” in Potsdam. His parents still live in the rented Berlin house they moved into 46 years ago and in which he grew up.
Macht, his wife, Manuela, and their three children have lived in their elegant turn-of-the-century home for only a year or so, having returned to Germany after a few years working in Switzerland. In common with about 17% of German residential rental properties, the 15-apartment building is owned by a corporate investor – in this case, a Danish company. The role of institutional investors in Germany’s residential rental market is just one of many stark differences between that country and New Zealand. Here, corporate investors and investment funds are absent from the market, which is dominated by so-called “ma and pa” landlords with just one or two properties and whose main goal is capital gain.
Macht says he is happy to continue renting, which is a trouble-free way to live. “The owner has no right to throw you out unless you don’t pay the rent or unless he can claim it for his own personal use,” he explains. In the case of a corporate landlord, the latter claim simply could not be made. And even where private landlords do try to evict tenants because they want to move in themselves, they have to prove they have legitimate need and it can take a year or two to establish a case through the courts.
If the landlord does have genuine cause to terminate a lease, the notice period increases depending on how long the lease has been in place, ranging from three months for a lease of five years duration to nine months for a lease of longer than eight years.
“It’s simply impossible to evict a tenant in order to get another who pays a higher rent,” notes a recent study of European tenancy regimes by the London School of Economics. Also, if a property is sold, the existing lease is not terminated and it remains binding on the new landlord.
Other grounds on which landlords can evict tenants include if they damage the property or sub-let without permission. Tenants can own pets, make small alterations and decorate (although they’re generally required to leave it freshly painted white when they leave). These are rare privileges in New Zealand’s rental market where, as the Tuapolas note, even hanging pictures on the walls can involve a difficult negotiation with a landlord.
Macht says that in Germany if there’s a problem with a property that reduces the occupant’s full use of the place, the tenant can reduce the rent. He and his family once rented a flat in Hanover, and a lengthy renovation of the exterior meant the windows on one side couldn’t be used, so he asked for a rent reduction and the landlord agreed.
Controls bar a landlord from lifting the rent on an existing tenancy by more than 20% over three years. And, in response to concerns about rising rents in the major cities, the German Government recently brought in a rule barring landlords from lifting rents more than 10% above the average for comparable houses when taking on new tenants.
Aside from the benefits to renters of secure tenure, Germany’s tightly regulated private rental market is also thought to have helped protect the economy from the speculative property bubbles that caused such damage in countries including Spain and Ireland.
In a recent address to the Bank for International Settlements, Stefan Gerlach, deputy governor of the Central Bank of Ireland, said countries that had large, deep rental markets suffered less than other countries in the global financial crisis, suggesting well-regulated residential rental systems promote resilience to economic shocks. He said longer, more secure tenancy agreements would allay the major worry for tenants in countries such as Ireland – where, as in New Zealand, one-year leases are standard – making renting a more attractive option and reducing the pressure to own.
Shamubeel Eaqub says New Zealand needs an “equilibrium shift” towards something more like the German model. That change could theoretically come from market pressure or from tighter regulation – but despite the rising number of households renting, the market has so far failed to adjust to renters’ desire for greater security. “Markets can be difficult to move, and that’s why governments regulate,” says Eaqub. “The question is, what’s the right level of regulation?”
He thinks one simple change could make a difference: alter the template tenancy agreement promoted by the Ministry of Business Innovation and Employment from a one-year term to a three-year term. “We’re not talking about wholesale changes. What we’re talking about is nudging the market to something a bit more long term.”
Housing Minister Nick Smith agrees there is a need to “shift the culture of tenancy arrangements in New Zealand towards more long-term arrangements”. He says a lease is a private contract between tenant and landlord, which the Government would not override. But he says has asked officials to explore non-legislative tools, such as changing the standard tenancy contract to a longer term, with a longer notice period. Landlords and tenants could contract out of that if they chose.
As Eaqub points out, it makes solid political sense for the Government to listen to the needs of tenants. “Renters are actually the majority now, which I think is extraordinarily powerful. It makes sense politically to look after this group of people … We are talking about a political system that has long favoured property owners, and that worked because they were the majority of New Zealanders and voters. But now the balance is shifting and it’s creating all these social and economic pressures.
“The question is, will we find a political movement within current politicians, or a new party, that makes it part of its manifesto. There’s a parallel with the labour movement, which emerged to represent voiceless workers. This is similar in that tenants are also a largely voiceless and large group and the wealthy vested interests are so powerful they resist all change, even if it might actually be good for them.”
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