Briefing Papers 5: “Rental standards”

AUT’s Briefing Papers initiative has kindly allowed us to syndicate their recent series on housing. The fifth paper is by Philippa Howden-Chapman, professor of public health at University of Otago:

Every year people die prematurely in winter in New Zealand, a phenomenon unheard of in the coldest parts of Europe and North America, where houses are built and heated to protect people from winter cold. People are more likely to die in winter in New Zealand if they live in rental housing, because it is likely to be older and in poorer condition than houses which are owner occupied, and which provide more protection from the cold.

In July this year a coroner’s report stated “Whether the cold living conditions of the house became a contributing factor to the circumstances of Emma-Lita’s death cannot be excluded”. The rental house the two-year old was living in was cold and mouldy and the family had been unable to afford any heating. The Minister for Building and Housing, Nick Smith, responded by announcing “a pragmatic package” of changes to tenancy law to “make homes warmer, drier and safer … without imposing excessive bureaucracy or cost.” Most significant are the new requirements for ceiling and underfloor insulation and smoke alarms to be phased in by 2019.

The package also includes a number of amendments to the Residential Tenancies Act (RTA) aiming to quickly establish when a rental property is abandoned, increase disclosure requirements for landlords and strengthen MBIE’s enforcement powers. Tenants are still expected to be the ones to initiate complaints about poor housing, but they have longer to do so and landlords who retaliate will be subject to an increased maximum penalty of $2,000. However, tenants may still fear to complain, particularly where there is a shortage of rental housing.

The proposed law changes also gives teeth to MBIE to investigate breaches of the Act, although a recent extensive review of rental laws, Paper Walls, suggested that MBIE could have better used its existing powers under Section 124, to take over the direct monitoring of remediation.  MBIE has used this power only twice in the last 20 years. The amendment’s new Section 109 explicitly grants MBIE the right to investigate and take action against landlords in severe cases. It will be important to monitor MBIE’s use of these powers to investigate severely substandard housing.

Are the changes enough? The Government made the decision to introduce selected minimum standards in preference to implementing a comprehensive evidence-based rental housing warrant of fitness (WOF), which would ensure all houses passed a range of health and safety tests. In 2013 five councils and the NZ Green Business Council announced that they and the University of Otago, Wellington were pre-testing a 31-item rental WOF, developed by He Kainga Oranga/Housing and Health Research Programme for over a decade. Regardless, MBIE commissioned a parallel study of state housing alone. The results of the Councils’ and Otago’s WOF pre-test were made public in early 2014 and showed that the WOF was considered fair and acceptable by 85 percent of the landlords. While most rental properties failed, relatively small amounts of money were required to bring most of the surveyed properties up to the pass standard. The recently released results of the MBIE study were comparable: while only four percent of the 400 properties were fully compliant it was judged that an additional 48 per cent could be remediated to meet the comprehensive standards within two days, at relatively low cost.

By contrast, the Government’s proposed minimum rental standards are not evidence-informed and the Regulatory Impact Analysis, as Treasury observed, does not meet the quality assurance criteria – it lacked analysis and there had been inadequate consultation. The Minister gave no plausible reason why the regulations reverted to 1978 insulation requirements, now almost 40 years old, which are just over half EECA’s current standard (70mm vs 120 mm of thickness).
A recent cost-benefit analysis of ‘Warm Up NZ’ included heating, and this analysis demonstrated the high benefit:cost ratio (about 4:1) of the whole package. This has been overlooked by the Minister, who stated that heating is already required in the RTA 1986. This Act does not in fact refer to heating, but incorporates the Housing Improvement Regulations 1947, which require a fireplace or an approved form of heating in the lounge. It has been widely interpreted that an approved form of heating could include an electric socket, although a 2011 District Court case found this to be inadequate and ordered compensation to a tenant where the landlord had failed to provide some form of inexpensive heater to meet the regulations.[1] Heating costs for tenants are likely to remain high without requirements for an efficient and cost-effective heating source as well as thermally efficient insulation levels that meet the current Building Code.
Requiring all landlords to insulate their properties is a step forward, but suggesting low standards is a retrograde step. It appears to be a continuation of the Government’s practice to act with extreme caution, when more cost-beneficial measures could have far-reaching positive consequences for energy efficiency, health and CO2 emissions. The comprehensive Rental WOF proposed by He Kainga Oranga and tested by the councils includes the key, critical items that have been shown to warrant social investment, with randomised control trials clearly demonstrating reductions in the burden of disease and injury. It is a serious public health concern that the government is introducing comparatively ineffective standards for rental housing, where a growing proportion of low-income children and their families live.

[1] Complete Property Management Limited V White DC Christchurch CIV-201 0-009-3562, 3 February 2011 [unpublished].

15 comments to Briefing Papers 5: “Rental standards”

  • ‘Most significant are the new requirements for ceiling and underfloor insulation and smoke alarms to be phased in by 2019.’ This statement disgusts me. I have no other wording that I could find to reflect how I feel reading this (and many other parts of this paper). Why are we striving for such a low standard? The only ‘significance’ of this is that this minute contribution to change should shock us. Having tried to buy a house in Auckland and viewed over 80 properties in a 6 week period, and then gone on to look at rentals in what many would consider to be an unaffordable price bracket, I found exactly what is listed here. Mould, damp, complete lack of heating and lack of insulation…..for $700+ per week… which I was told there were forty other families looking so ‘get in quick’. In Auckland people are forced to rent – it is not actually a choice in most cases, and then people are forced to rent what in many other countries would be condemned housing. I would strongly argue that we don’t just have an affordable housing issue in terms of house prices in relation to purchasing, but also (due to a MASSIVE number of investors purchasing houses and then renting them out in whatever condition they currently have them in) an increasing issue with rental standards.For example, I viewed a house which had mould growing in the bedrooms through the walls and ceilings which the real estate agent told me I could paint over so I couldn’t see it……this house was available for rent soon after as I don’t believe it sold. But’s okay, because by 2019 that house should have some insulation. Excuse me while I savour this significant change.

    • Peter Nunns

      I tend to take a glass-half-full perspective: “isn’t it nice they’re doing something, even if it’s not enough”. But yeah, you’re right that things are in crisis right now and that a stiffer response could make sense.

      There seems to be a significant “market power” issue at the moment – i.e. an excess of demand over supply means that there are few incentives to fix rental accommodation. In the long term, getting supply back in balance should help even that out by creating more competition for bad landlords. But as Keynes said, in the long run we’re all dead. Even faster if we’re breathing in black mold…

      • Peter Nunns

        Further on that topic, one issue I’ve been trying to get a handle on is whether landlords are earning a high or low rate of return from rents. Some work that I did earlier in the year suggests that rental yields on new investment properties are probably low and dropping throughout most of Auckland. (Another way of saying this is that landlords are increasingly seeking returns from capital gains rather than rents.)

        If that’s the case, then higher rental standards would tend to push some landlords out of the market rather than simply requiring them to reinvest a bit of their excess profits. But I’m not sure that it is – there are a few too many stories of rents going up significantly on shoddy properties.

        • Yes, reports like this would support he idea that purchase is mainly for capital gain and I would agree that this has been the case for many many years not just a recent development, but reports like this (for example) are meaningless, as they don’t actually compare the quality of houses available for owner occupiers and renters This data is comparing apples with oranges. The quality of these two ‘types’ of housing is completely different.

          And I would say that even though capital gain IS the main purpose, we have a housing shortage, so rental prices can be high for poor quality housing and the enforcement issue remains….. so investors are sitting pretty in all aspects. I would encourage you to visit some rentals in a range of prices in a range of areas (you may use stronger language than ‘shoddy’ :)…….that’s if the agents bother to reply to your inquiry. They have so many inquiries I have found they usually just don’t bother!

      • Ted F

        Peter, isn’t that the investor’s problem. If he pays too much for the property then the rate of return is his problem?
        As I see it they must be doing alright because they are helping to drive the market. (sure enough, many of them are relying on capital gain but that implies they are in it for that purpose not for renting. So looking at rate of return on rent alone is fallacious.)

      • A delay in reply due to a sick child….a situation faced daily by many in rentals. I would argue that waiting for supply to improve to push landlords to up their standards will be too late for many ( Yes we are in crisis and the word crisis indicates we have a situation and we have it now. Houses like those described in the Stuff article are very common and if current legislation means even these should not be in this state, why should we be excited about yet more rules that will not be enforced? The only route of enforcement is via the tenant. If they lose their home…right or wrong, they lose their home, something in Auckland, we can’t afford to do. So I am afraid I don’t consider it a glass half full situation when the current glass has year old raw milk in it, sitting on a sunny bench, and the fridge is essentially yet to be invented.

        • Peter Nunns

          Great article… I’ll put it in next week’s Sunday reading post.

          I’ve been renting in Mount Eden since I came up to Auckland. We’re fortunate enough to have a dry apartment with a landlady who wants long-term tenants for stable income. But even with that I’m aware that (a) a lot of people are in far, far worse situations and (b) we don’t have guaranteed tenure if situations changed for our landlady. If that did happen (I hope it doesn’t!) we’d probably have to buy an apartment, even though I’m not really keen to tie up that much capital in a single undiversified asset.

          On that note, one observation that I’d make is that countries which have the best housing affordability outcomes – e.g. Germany or the Netherlands – have a robust rental market with good quality housing stock and stable tenure arrangements. I’m sure that can’t be an accident…

          • I think when talking about housing affordability in Auckland specifically, we need to define the term better. To me it is more ‘home ownership affordability’ and ‘safe/healthy rental affordability’ (nothing catchier has yet come to mind). These are two completely different things as the possibility for one disappears for many (something we increasingly have to accept as New Zealanders) and the standard drops for the other (something we should not have to accept as people in a country capable of controlling such a thing). We cannot wait for one to become attainable for the other to improve as a hopeful secondary impact. If home ownership affordability seems such an impossible problem to fix (although I don’t believe it is but that is not the topic here), we surely could be solving the problem of poor quality rentals with better efficacy.

            My experience of Germany is that people do not expect to own a house, so renting is a long-term requirement for a large proportion of the population. If that were the case in much of NZ, I believe the Govt would be forced to view it differently. It is not viewed as a long-term plan for most people here currently and is seen as a temporary set-back in Auckland. The reality is that there are entire families living in conditions causing sickness and stress that are just hoped to ‘right themselves’ when the developers get going.

            A (very very brief I admit) comparison of quality housing stock in Germany shows a positive correlation with tenancy agreements and enforcement law in that country. I am sure that also can’t be an accident…..

    • Tutut

      Agreed that more needs to be done, prehaps people in Auckland should consider moving, Wellington has plenty of cheaper houses and our house prices seem to be reducing! If more Aucklanders moved it would reduce the need up there and increase prices here :p

  • Kara

    Well, to call the proposed WOF evidence-based is stretching it. Effective ventilation eg is allegedly achieved through having some openable windows. While 120mm insulation in the roof is required, there are no checks whether this is installed in a way that it will actually work. A fixed heater of undetermined power will also help bugger-all with keeping anyone warm. Evidence of healthy living conditions would require someone to measure temperatures and humidity indoors at the minimum, and ideally CO2 concentrations as a proxy for other gaseous air contaminants to demonstrate effective ventilation. Ticking boxes does not safeguard outcomes – whether they are achieved has to be monitored in a scheme that claims to be evidence-based rather than based on wishful thinking. I am reminded of our visible smoke test to check whether our cars are polluting the environment, which is equally inadequate. So: while the government managed to turn a halfway useless scheme into something almost meaningless, we need to to better than the tick-box exercise that is the proposed WOF. Meeting current Building Code is furthermore likewise no guarantee of healthy and affordable living conditions, as the compliance methods for H1 are anything but plausible or based on science.

    • Peter Nunns

      You raise some good points. The Building Code seems to be excessively vague about verification standards – there’s a lot of subjective language in there that you could drive a truck through.

      I’ve also noticed that what’s “acceptable” for warmth and weathertightness varies quite a bit between people born in NZ vs born in Europe or the US. This country’s still getting over its fixation on uninsulated wood-framed tin-roofed sheds…

      On a slightly different note, I was taking a look at some other building code requirements a while back – mainly around minimum room size and daylight access. Again, there’s a good deal of subjectivity about what is “acceptable”. However, it also seems like these aspects of design are more visible to buyers than humidity, draftiness, and CO2 levels. What’s your view on the priority we should place on addressing the more visible aspects of design?

  • Lloyd C

    Many of the rental properties in Auckland need to be bulldozed, a quick drive through Mt Roskill and you will see dilapidated old state houses on 1000m2 sections with the house plonked right in the middle so we can build a block of modern units and keep people warm and out of our hospitals. I’ve worked in alot of state houses and many of them don’t even have carpet or decent drapes let alone a fireplace or heatpump, one state house I was at the other day the tenant had to use old mattress underneath the house to stop the cold air coming up through the holes in the floor as housing nz had refused multiple times to fix it.

  • Brendan

    I don’t understand why a WOF should only apply to rental properties. If implementing a comprehensive evidence-based housing warrant of fitness (WOF) which would ensure all houses passed a range of health and safety tests is important, why should kids whose parents own their own property be penalized?

    Shouldn’t it either apply to all houses or no houses?

  • Ted F

    I guess that as an old joker growing up and living in homes that were built to the standards 3604 and before, that I’m a bit of a sceptic.
    I wonder why we have such a mould problem now that didn’t seem to be evident before the 1970’s. I wondered if some of the changes could be related to the way our living has changed?
    Could it be related to the fact that, today both parents need to work and the house does not get the airing that it did when someone was home all day and the house not shut up. The joinery of the modern house does not allow for much natural ventilation so there is little change of the damp air from the nights heavy breathing? We were able to pick up fuel for the open fires readily and used that as a heating source (which in turn kept sucking in more air from outside. A lot of homes today are using non-flued gas heaters which add to the moisture load of the air inside.
    Having built our own hose with wooden joinery and it’s fairly close fitting we notice that we do get condensation on the sills overnight (but we didn’t in the old prewar houses or at least no to the same extent; we usually had fan-lights open all the time as well.) We find that the fire draws much better if we leave a window cracked open to allow more air to enter the house.
    Next let’s look at the paint systems which were for the most part lead based until the 50’s and then alkyd resins which hardened off and did not have the porous nature of the present acrylics which seem to be a prime growing medium for fungous.
    So I think we need to look not just at insulation of our homes but also heat source and the ventilation as well.

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