We review one of the most eventful years in Property Management history
2018 will be remembered for many reasons but not all is bad
Where to start? I had the same problem this time last year when I wrote the same article. 2017 seems like a distant memory now as over the last 12 months, our industry has had everything thrown at it including a bucket of KFC!
In my time working within the Property Management industry and in particular the rental sector, I cannot think of a time when we have had so much upheaval. Saying it has been a challenge is an understatement. We have a lot to look at so let’s not waste any more time. As ever, we would love your feedback along with your high’s and low’s of the year.
Professor Sir Peter Gluckman: On May 29th a bombshell was dropped on all as we predicted that this would happen in our first article of 2018 when we stated in January that the ‘Meth Myth’ would finally be busted. And busted it was! The report by the now retired Professor Sir Peter Gluckman was comprehensive and condemning, stating that “There is currently no evidence that levels typically resulting from third-hand exposure to smoking residues on household surfaces can elicit an adverse health effect”. Sir Peter and his team was equally dismissive of the field composite test stating that they should not be used as it creates a bias towards detecting higher levels.
I have long been a critic of many within the industry for using scaremongering tactics. The defence of the industry would be that they are simply trying to make the public aware of the implications and risk. However, when your source of income is aligned with keeping the levels as low as possible, your opinion will naturally lead to a bias to keep the status quo and adopt the guidelines set by the standards committee in 2017. The sad thing is that thousands of people have been affected and the health of some of the parties involved would have deteriorated probably due to financial burden and the emotional damage of having to deal with the fallout. Millions of dollars have been wasted, benefiting only the testers and the people who do the remediation work.
The Meth testing industry has not yet given up and is holding on to the Residential Tenancies Amendment Bill No 2 as a reason why testing should still take place. They even attempted to organise a petition to get Parliament to commission an independent review of the Gluckman Report. This petition closed with only 526 signatures, probably made up mainly of people who make money from testing and remediation.
Tenancy Tribunal ended up scratching their head as to what to do in the immediate fallout after the report. However, Tenancy Tribunal, who have to take some responsibility for creating this mess, have now adopted the Gluckman Report. To do otherwise would mean that HNZ, New Zealand’s biggest landlord would be committing multiple breaches of the RTA. In time, insurance companies must also follow suit and change their stance with regards to only paying out on claims when a Meth test is carried out pre-tenancy. To maintain this stance is immoral and is in contradiction with the Gluckman report as Gluckman states the only testing that should be done is discrete individual swipes, not the composite swipes. This being the case, landlords would face costs likely to be in excess of about $1200 per tenancy. Could you see all landlords doing that at the commencement of a tenancy?
Unfortunately, across the ditch in Australia, we can see that they are heading down the same slippery slope with many in the Meth testing and remediation industry using similar tactics that was used here. Yet the reality is, even after all this news and debate, no one can provide medical records that show an individual has become seriously sick or died from living in a property with low levels of meth. A waste of time, money and emotion. Sir Peter, you have done us all a massive favour. Now lets all please move on.
Dealing with the letting fee: This was always going to be passed on to the landlord as the industry finally took a cement pill, a deep breath and wrote to their clients informing them that they would have to wear the cost. The fall out was minimal as many landlords understand that this is a service that comes at a cost. Someone had to pay.
RTA Reform discussions: Being part of this was very very insightful and it showed that landlord and tenant groups could actually sit down and have a constructive discussion without abusing each other. A pleasant change to sit around a table and talk rather than abuse each other on Facebook. Balance is required with any reform.
Pets: Good news all around if you are a pet loving tenant. It looks likely that tenants will have the right to have pets in their rental properties. I have no issue with this so long as amendments are made around tenant liability.
Attack on Negative Gearing: Out of everything the Coalition government is doing with rental properties, and it’s doing plenty, this has the potential to have the most negative consequences. Currently, if a rental property runs at a loss, the landlord can offset that loss against their own personal income and claim tax back. In the example below, the landlord earns $90,000 per annum in their paid employment and they also get income from a rental property that they own. The cost of operating the rental property including interest payments on the mortgage is just over $40,000 whilst the income from rent is only $28,600. This means the property is running at a loss of about $12,000. When you take the loss and add it to the annual salary, the landlords income drops to $78,157. This means that the landlord has paid too much tax by approximately $4,000. Today, you can claim this tax loss and get a refund on the tax you have paid.
The government looks like it is going to change this meaning that landlords will no longer be able to claim the tax loss.
Labour have long held the opinion that the people who benefit from the practice of negative gearing are large scale speculators but the reality could not be further from the truth. This stance is going to really hurt many of the 80 to 90% of landlords who own no more than two properties.
Just when we need landlords to invest in their properties to ensure that they are compliant with the Healthy Homes standards, we hammer them by removing the ability to offset losses against their own personal income. This again will lead to the selling of rental properties and driving up rents even further.
A short sighted policy that will do more harm than good.
Special mention must go to Paul Davies of the Tenancy Compliance Investigation Team for his endearing ‘We are coming for you’ speech at the REINZ Conference. It is a long time since I felt like I was in trouble at school. Meanwhile Steve Watson, the General Manager of Tenancy Service gives the same message at the LPMA Conference but in a completely contrasting style showing empathy to the challenges Property Managers face. I know which approach I would rather work with.
The alleged 100,000 uninsulated rental properties that are apparently still out there. The insulation industry has a capacity to do 50,000 a year according to one of the leading insulation providers. It seems inevitable that we are going to have a large amount of non-compliant properties by the time July 2019 comes around. Landlords have had plenty of time to get ready and I for one have no sympathy for those who do not comply.
The Papakura Swamp House: This case highlighted how bad some of our rental properties are. The facts in story are that Dawn Robbie, her partner Cameron and their two young children had been living for about 2 years in a rental house that floods underneath every time it rains. The problems were so bad that their 11 month baby ended up in intensive care with bronchiolitis.
The landlord, Aven Raj, even issued the tenants a 90 day notice to vacate which was a clear breach of the Residential Tenancies Act under Retaliatory Notice. Fortunately common sense kicked in and it was withdrawn. The Ray White branch at Papatoetoe look to have done a great job in resolving issues as they only took on the management after an insanitary notice was issued. This was brave of them as they could have potentially exposed themselves to unnecessary and unfair litigation. However, their pro-active approach helped both parties resolve the ongoing issue.
This story highlights the genuine health concerns that many tenants have to deal with. Thousands of tenants still live with in poor quality housing throughout the country and whether we like it or not, the New Zealand rental stock still has its fair share of slumlords.
These are the genuine health concerns of tenants in New Zealand. This is where the focus needs to lie and some of the Government policy rightly reflects this.
Media attack on the industry: You cannot blame journalists for doing their job and investigating stories but it has had a negative impact on the morale of many people working in the industry. I have spoken with people directly after some of them made the news for the wrong reasons and for one such person it was completely out of their control. She spent the weekend locked in her bedroom in tears too embarrassed to leave, devastated by the story that appeared, even though she had no control over the circumstances of the story.
The issue is the damage it causes for individuals exposed under the media spotlight. Many are just doing their job to the best of their ability and all of a sudden they are making the headlines. I have seen Property Managers and business owners brought to tears after stories about them have been published. How can we attract and retain good quality people if they are subjected to such ordeals?
The worst of these stories had to go to Rebecca Stevenson who’s article ‘Why Property Managers are terrible for everyone’ was appalling and had many inaccuracies. I don’t envisage Ms Stevenson will be winning any Pulitzer Prizes for this article.
No cause evictions: I can see the logic in this but I suspect that this is again going to cause far more issues than what it solves. A slow Tribunal process and a lack of supportive evidence could lead to all types of issues. Safety must be paramount in any decision around changes made and I fear that this may be glossed over.
They said it! Quotes from the year in Property Management
Enjoy the break!!
If ever an industry deserved a break its ours. The year has been a challenging one with plenty of up’s and downs. It has been exhausting trying to keep abreast of all the changes that are coming and I have to confess, I don’t think I have looked forward to a break as much.
As ever, we will do our best to keep you well informed in 2019 as the ever evolving world of Property Management and renting continues to spring surprises.
In the meantime, switch off and take a break. Don’t answer the phone and don’t respond to emails (unless your working of course!!). Get off social media, it’s way too negative and make sure you spend time with your families and loved ones. We want to wish each and every one of you a Merry Christmas and a Happy New Year.
Signing off for 2018