Phil Twyford, Housing and Urban Development Minister, says Kiwi families could save up to NZ$47 million every year now that Parliament has abolished “unfair” letting fees.

He says the change will make a “real difference to struggling families”.

“Letting fees are unfair. They have no economic rationale and there is no relationship between the amount of the charge and cost of the services provided.”

Twyford says there are “significant costs” in moving to a new rental property, which many New Zealand families do often.

“Tenants can face up to four weeks’ bond, two weeks’ rent in advance – and one week’s rent as a letting fee – in addition to moving costs,” he says.

“With home-ownership rates at a 60-year low, this change recognises that we need to take action now to make rent more affordable so people can save to buy their own home.”

Bindi Norwell, chief executive of the Real Estate Institute of New Zealand, says banning letting fees may lead to an increase in rent.

“Additionally, our concern is that it may make tenants with shorter term tenancy requirements, such as students or seasonal workers, less attractive to landlords making it harder for them to obtain rental accommodation,” she says.

“Given the current raft of legislation being directed at landlords, this may contribute to landlords’ decision-making to exit the rental market, further reducing the available pool of rental properties and driving up prices. This has been highlighted by a number of property managers across the country now.

“We continue to call for a balanced approach to avoid harming the rental market in the long term,” says Norwell.

“We’ve said this before, but we think a better way to look after renters is to regulate the property management industry rather than focusing on smaller issues such as banning letting fees.”

Tenancy Services, run by the Ministry of Business, Innovation and Employment, says letting fees are normally the equivalent of one week’s rent (excluding GST), and paid at the beginning of a tenancy as an upfront cost.

Charging letting fees to tenants will be an unlawful act from 12 December, and it says anyone who does so could be liable for up to NZ$1,000 in exemplary damages.

Any costs for letting agent services at the beginning of a tenancy may be covered by the landlord, Tenancy Services says.

“Landlords and their agents can still recover expenses reasonably incurred from a tenant if they wish to reassign, sublet, or part with possession of their rental home.”

First published 6 November 2018

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