Hon Steve Maharey
Saturday 23 August 2003
Speech Notes

Why housing matters – a social and economic investment

Opening address to the New Zealand Property Investors Federation Our Industry – Our Future 2003 national conference. Hyatt Hotel, Auckland.

Welcome and Introduction

Good morning, and thank you for the invitation to join you to open your annual conference today. It is good to be in touch with so many property investor association members, from right around New Zealand.

Given my recent appointment to the Housing portfolio, this is an ideal opportunity to share my vision of where this vital sector of our social and economic environment fits in our future.

It is also an ideal way for me to build on my knowledge and understanding of investors’ perspectives, first-hand. I am aware the Federation is a highly professional organisation, demonstrating forward thinking throughout its activities, and working constructively with Government on sector issues.

I think it is very important that landlords, both new and experienced, have the opportunity to access the expertise of a professional body such as this. Given that the sector is made up largely of small investors, with just one or two properties to manage (often the average Kiwi couple planning for their retirement) access to the support of a network like yours is even more important.

Your conference over the coming days focuses you on the issues for your industry and its future. I want to talk more generally this morning about where that rental sector focus fits in the broader setting of the New Zealand housing sector, this Government’s goals for that sector, and why it is so important as an integral part of both our economy and our social infrastructure.

I also want to acknowledge the significant role the private sector plays in all this. The number of private rental homes grew by 24% between the 1996 and 2001 census with the private sector providing 74% of the total NZ rental housing stock at the time of the 2001 census. That figure certainly tells the story of a strong and growing private rental housing sector and I am interested in exploring some of the drivers and issues for that market later on.

The Importance of Housing

So, why is housing so important? And how does it link into Government’s goals of:
- growing an inclusive and innovative economy for the benefit of all,
- providing strong social services and
- reducing inequalities?

All New Zealanders are involved in housing as consumers, users or investors.

Housing contributes to both social and economic outcomes and as such sits at the nexus of social and economic policy.

It makes direct and indirect contributions to economic output and growth – and is the main source of capital investment for many New Zealanders, playing a role in wealth creation and retirement savings.

It is integral to the functioning and growth of the national economy, and currently contributes to more than 11 per cent of our GDP.

The adequacy of people’s housing affects all other aspects of their lives. Our homes influence our well-being, our sense of worth and our ties to our families, communities and work. If we live in stable, quality housing we are more likely to benefit from good health, higher educational attainment and better paid work.

The Role of Government

The Government seeks to influence the housing sector in different ways, in order to meet the key challenges of:
- providing quality affordable housing that meets demand and is appropriate for people’s needs, and
- making sure the housing market is working effectively.

Most people in New Zealand today are well housed and are able to satisfy their own housing needs within the private housing market. However, a sizeable minority face housing problems and we intervene to reduce those problems through targeted financial assistance and social housing.

In terms of the private rental housing market, Government’s goal is about getting a balance between the needs of those who need to manage their business investments effectively, and those who want, or need a stable, quality home to rent.

Changes in the Housing Sector

More and more New Zealanders are renting their homes, with rental housing increasingly provided by you, the private-sector landlord.

The housing sector, and the market in which you operate, is clearly changing. There is a range of complex reasons why that’s happening, but a drop in home ownership rates, changing household structures and other demographic changes such as migration and an ageing population, all play a role.

Private Landlords providing State housing

With the decline in home-ownership and a growing rental sector, landlords have a significant role to play in the provision of affordable housing into the future. Since coming into office in December 1999, the Government has sought to rebuild state housing stock. As well as building and buying, this has involved continuing to lease additional properties from the private sector.

This is a small but significant part of Housing New Zealand Corporation’s acquisition programme. At the moment about 2.4 per cent of their stock is leased (1481 units) and current projections are that this could move to nearly 4 per cent (2595 units) within four years. So you can see there are opportunities for investors here.

The programme provides a number of benefits.

The Corporation guarantees rent for 52 weeks a year, and covers any damage caused by the tenant that is not insurable by the investor. Tenant selection and tenant-related issues are also looked after by HNZC, so the arrangement provides a 'hands free' way of owning residential investment, minus the high level of management that is often required.

This is a good example of the public and private working together. And that team work will continue to be important as we develop the Government’s New Zealand Housing Strategy.

We are making sure the Strategy involves the key elements of the housing sector, including the building industry, lending and finance people, the real estate industry and, of course, landlords and tenants. This work has already included consultation with your membership and I know that positive relationship will continue.

The NZ Housing Strategy and Issues for Housing

The emerging trends present significant issues for Government to respond to through the Strategy, including housing quality and meeting demand, particularly in the ‘affordable’ bracket.

The New Zealand Housing Strategy will set out Government’s vision for housing policy for the next 10 years and we expect to complete it by early next year.

It will focus us in on these issues, ensuring that housing markets are working effectively and efficiently, and developing the capacity of the housing sector to respond to New Zealand’s changing needs, in an integrated way. To achieve this more integrated approach, the Government is looking towards a strengthened and more strategic leadership role in the sector, which contributes to sustainable social and economic development

Most people's housing needs are met in the private sector, and our provision of social housing makes up the difference. So the demographic and lifestyle changes I’ve already mentioned, along with growing issues around quality and affordability, mean we need to look toward innovative approaches to our interventions and partnerships, with an increased focus on an effective housing market.

Stable tenancies – making the whole system work for you

With more New Zealander's renting a home as a long term option, the Government wants to promote stable tenancies. Stable tenancies are a reflection of good relationships between landlords and tenants. Where there is a good relationship both parties win. For landlords this means a steady rental income and a well cared for asset; for tenants a secure, safe and well maintained home.

Being a professional landlord is a business, and it’s about staying in business.

The challenges presented by this particular line of business lie in the dual role of managing both property, and people.

And it is in this area of relationships, that Government is able to assist. We want to do as much as we can to help achieve that ‘balance’ I talked about earlier, between a tenant’s need for a home and yours for a successful and viable investment.

That’s why I’m pleased to be able to announce a package of initiatives this morning that will further strengthen your ability to mitigate your business risk through the Residential Tenancies Act. They are also designed to support you in understanding and acting on the full range of avenues open to you to prevent and deal with any problems in the landlord-tenant relationship.

We really have listened to your concerns and I know that you and others in the landlord community will welcome these changes, which are the result of a lot of ongoing work by many people, including your leadership, as well as officials from a number of government agencies.

Getting Tenancy Tribunal Orders enforced

Landlords’ ability to transform their Tenancy Tribunal orders into action, and get them enforced, has been a significant issue on the table for a while now - and I know it has been the cause of a high level of concern for many of you. We fully acknowledge the extent this issue has affected property investors’ ability to get full recourse to money they may be owed in outstanding rent, or for damage caused by a tenant.

We are acting on that concern. We will be legislating to offer you an improved and much more robust enforcement process, allowing you to request the release of some government held address information to the Department for Courts, to enforce a Tribunal Order, when you are unable to locate the debtor.

What this all means is: if you have a Tenancy Tribunal Order to enforce, that hasn’t been complied with, you will be able to get assistance through the Ministry of Housing to locate and access the address information for the person who the Order is against, if this is held.

We will seek to include an amendment to the Residential Tenancies Amendment Bill currently before the House to provide you with this improved enforcement option.

Until that Bill is passed, a comprehensive interim process has been set up to allow use of address information for enforcement. At this stage, the process will involve the Ministry of Housing’s Tenancy Services division, and then the Ministry of Social Development, when the Ministry of Housing doesn’t hold a current address. These agencies will pass appropriately identified address details on to the Department for Courts, who will manage the enforcement process.

Of course, certain criteria will need to be met. Nigel Bickle, head of Tenancy Services at the Ministry of Housing, will be able later in the conference to give you a lot more practical detail about how the interim and permanent processes will work.

Options for tenants in arrears

The ability for beneficiaries to have their rent paid directly from the Ministry of Social Development to their private sector landlords, is an option that has potential benefits for both parties by contributing to the sustainability of the tenancy.

‘Redirection’ is something that has been possible for a long time, where there is ‘good cause’. But a lot of work has been going on recently to develop a process that makes this an easier option to put in place for tenants who meet that criterion.

This means I am also able to confirm today that new procedures have been established, allowing the redirection of benefit to pay rent arrears and rent where good cause exists. That includes, where the alternative is a person not being able to remain in accommodation and potentially becoming homeless. This option for tenants is part of Work and Income’s new “Rent Help for Tenants in Difficulty” package.

Redirecting payments will continue to be at the discretion of Work and Income case managers, but we have implemented an additional stream to their assessment of good cause, so that this includes payment of arrears and rent to avoid eviction.

The new procedures are designed to help get those tenants who are experiencing difficulty in paying their rent to talk to Work and Income as soon as possible about potential solutions to that issue.

This is the first specific initiative aimed at informing tenants about a range of potential solutions to rent arrears, within the range of budget assistance that Work and Income has been able to provide for some time.

The letter that is sent to a tenant when a Tenancy Tribunal application has been made against them, will include information about the financial assistance that may be available to them through Work and Income if they are having difficulty paying rent.

Options Work and Income case managers will explore with such a tenant include:
- ensuring the tenant is receiving their full entitlement, including accommodation supplement;
- making an advance payment of benefit to cover part or all of the rent arrears
- approving a redirection from the tenant's benefit where there is good cause, such as avoiding eviction, for the arrears and rent to be paid directly.

Which option is the most viable depends on the individual circumstances of the tenant. Work and Income case managers will be responsible for deciding what will be the most appropriate mix of assistance they can provide.

Any tenant who seeks and receives such additional assistance, , will receive written confirmation of this from Work and Income. They can then take this confirmation with them to their tenancy mediation or Tribunal hearing to feed into the dispute resolution process.

Allowing beneficiaries to access redirection as a method of payment where good cause exists has the potential to give their landlords a higher degree of confidence that their rent will be paid. Given the legislation, there are some constraints around the circumstances under which redirection of benefit will be granted. I am confident, however, that in many cases, it will prove to be a practical solution to some of the problems experienced when the rent falls behind.

Access to Tenancy Tribunal Orders

A key pool of useful information for both landlords and tenants is held in the public records of the Tenancy Tribunal, in the form of Tribunal Orders made by adjudicators.

Access to these decisions is an important part of investors’ management of business risk. I have asked officials from the Ministry of Housing and the Department for Courts to provide a preliminary report on options for making Tenancy Tribunal decisions more readily accessible to both landlords and tenants.

Tenant selection, and ensuring you get the best tenants you can for your property, is a key component of your business risk management. These Orders are the public record and would be a useful tool for landlords seeking information about tenants who may expose them and their investment to high risk. For tenants too, these Orders can provide a useful insight into landlords who don’t manage their properties in a professional way, and may not have fulfilled their legal obligations under the Residential Tenancies Act.

There is still some work to do on this proposal, particularly around issues of privacy, security and cost. But it is certainly an option worth pursuing and one that could address a number of issues raised both in the media, and your own forums, about reducing, wherever possible, the risk to landlords of selecting problem tenants.

Education

A key aspect of improving outcomes for landlords, will be assisting them with developing and applying best practice to their initial tenant selection processes.

To provide that assistance the Ministry of Housing is adding a new component to its education programme. This means they will offer more education seminars, especially for first time landlords, focussing on good tenant selection and business management practices.

There will also be more advanced landlord seminars covering the ‘how to’ of running a successful property business and providing practical advice to landlords on selecting and managing tenants. This new seminar will be based on a very successful pilot that’s been run in conjunction with your Federation earlier this year.

The Government has given the Ministry additional funding in this year’s budget to do all this. That will also enable them to work more actively with target landlord and tenant groups, on tenancy rights and obligations. The Ministry will also be able to offer more opportunities for landlords to raise and discuss issues relating to the Act, and its related services.

Balance

My colleague Phil Goff introduced the Residential Tenancies Act 17 years ago. It was trail blazing legislation designed to strike a balance between the rights and responsibilities of landlords and tenants. The rental housing sector today is not the rental sector of 1986; it is amazing how much change the intervening seventeen years have brought to the sector for both landlords and tenants.

Therefore, it’s appropriate to ask whether the right balance is still being provided today. It is timely to look at the regulatory framework the Residential Tenancies Act provides and I have asked the Ministry of Housing do some preliminary work on this.

NZPIF in Partnership

This package of measures has not come about without considerable effort on all sides and I must acknowledge the significant partnership role the Federation’s leadership has played in making it a reality. Craig Paddon and Martin Evans in particular have worked closely with officials on these initiatives, and this has been vital in making sure we come up with sound, workable processes to be implemented.

This work has also been a positive opportunity to build on the relationship between the Ministry and the Federation. That relationship has a strong basis in shared outcomes aimed at raising and developing the professional standards of the industry, and the ever-growing number of owners and investors.

The partnership has already translated into good things, with more landlords participating in a professional way in the market, to the standards set by the Federation. Many of the 1200 landlords who registered for the Ministry’s last seminar series have taken up NZPIF membership, boosting both the Federation and professionalism in the rental housing sector..

In an environment where people are dissatisfied and are looking for change it can be easy to join the grandstanders and criticisers. It is much, much harder to work really constructively in shaping the solution as you have, so I want to thank you for that effort and the patience you have displayed as we’ve got this package into shape.

Conclusion

As I have said, the Government sees housing as a key element of social and economic well-being, central to people’s lives and well being, and we want to give it the attention it deserves.

We want to continue to support you in developing professionalism and improved property management practices across the industry. Today’s package of initiatives will certainly help you in achieving those goals. It is really pleasing to be offering you practical solutions today, to some of the long-standing concerns you have had.

I look forward to working with you as we put in place a more integrated government approach to the housing sector and its issues.

ENDS

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