Who would willingly be a landlord in 2020?
There was a time when investing in property was appealing and encouraged as a means to boost savings for retirement. Property investing also had the ‘feel-good’ factor insofar as your investment was providing a home for someone in need.
However, in recent times, private rental property owners have been hit by draconian anti-landlord behaviour. So much so, being a landlord is now seen by many investors as a test of endurance.
So what’s been going on to cause such antipathy against Landlords?
Well, over the years, housing crises have put Governments on the back foot. Their strategies to provide available houses to meet demand have come up short, so to distract from their own failing the humble landlord has become the fall guy.
Over the last couple of years revised stringent tenancy laws and regulations, have provoked landlords to reconsider if owing rental properties is really for them.
Health & Safety
In the UK, USA, Australia, and other countries, there is an increasing demand for landlords to meet a growing list of health and safety requirements. With these new conditions, rental homes will be in better shape and far exceed the health and safety condition of many owner-occupier houses! However putting that positive aside, the challenge for landlords is how to pay for the requirements and going forward recoup their outlay and make sure their investment profitable.
New restrictions on how often rents can be increased are problematic for investors. Rent increases have been restricted to once every 365 days really turning the thumbscrews on many investors barely breaking even.
Irrespective of how you feel about property investment, private rental properties have to provide a healthy ROI; otherwise, why would the investor take the risk of this type of investment? They won’t they’ll invest their money somewhere else, and this is the real threat to tenants, i.e. a lack of new investors willing to own rental properties and with less supply of rentals, many tenants will have nowhere to live.
Lack of Support During The Pandemic
Then came COVID-19 and while every man and his dog was considered for handouts and grants, landlords were left out and ignored even though they’re providing an ‘essential service’ – i.e. shelter.
Eviction moratoriums and rent freezes have caused undue stress on everyday decent people whose only error was to be a landlord! No relief for rates, insurance, or maintenance. No grants, or subsides, offered to see the landlord through the unpreceded lockdown. The outcome of this anti-landlord behaviour will not be pretty.
Landlord sentiment has reached an all time low and for many investors the only way forward is to sell up.
There may be some initial delight that landlords are selling up. More properties listings and for really struggling investors rise in mortgagee sales however the elation among some groups particularly those with anti-landlord sentiment will be short-lived when they realise the unintended consequences of less rental properties is more tenants with nowhere to live. For example, for every rental property that’s sold, there will be at least one tenant needing to find somewhere else to live! Typically there are three tenants per rental property but only two occupants per rental property sold to owner-occupiers.
Landlords have been the scapegoat for what’s wrong with housing for too long and that’s because they are an easy target.
Private landlords are individuals and while a representative from a property investor association will get some airtime to voice landlord grievances, what’s lacking is a group with real clout among political leaders. Until this happens landlords will continue to be the fall-guy for everything wrong with housing.
Let’s look at New Zealand for example, it looks like the fairest country in the world, but looks are deceiving. We’re in an election year, so what better way to deflect the spotlight away from the Government’s housing woes e.g. the KiwiBuild failure, than distracting voters with an initiative to come down hard on landlords?
The Residential Tenancies Amendment Bill 2020 is being pushed through parliament and the landlords who are struggling with rising costs of insurance, rates, and compliance will sell up.
What’s in the Residential Tenancies Amendment Bill 2020?
There are some fairly innocuous changes including:
- One rent increase every 365 days
- Give tenant 63 days notice when the house is needed for a family member, and they must move in and stay at least three months
- Fixed tenancies automatically become periodic
Then there are these changes to which have Landlords justifiably unhappy.
No eviction without proving anti-social behaviour three times within 90 days.
Landlords carry all the risk associated with owning an investment property, and now this rule is set to make some of their lives ‘living hell’. As eloquently put by Duncan Garner:
Landlords can’t kick tenants out for displaying anti-social behaviour.
No, no, no they will have to prove it not once, not twice, but prove the tenants are kicking in the walls three times in 90 days with written warnings issued.
Landlord to provide a statement of how the property meets the healthy homes standards with 21 days of the tenant’s request.
This will be a nail-in-the-coffin for many landlords who are expected to meet every new standard yet wait what could be a whole year before recouping back some of the cost and in small monthly payments.
The existing tenant can transfer their ‘interests and responsibilities’ to a new tenant
So as the property owner and landlord under this rule, you’re expected to allow the tenant to sign over their tenancy to what could be a delinquent person, and you have to prove they’re unfit.
Investing in private residential property should be a win-win, i.e. a win for the landlord, a win for the tenant. However, right now, there is little to celebrate in property investment and getting tough on private landlords is not the right way forward to solving social housing woes.
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