Otago Property Investors Association Inc

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01-07-2013

Rental Property Warrant of Fitness

An unfortunate aspect of this year’s Government Budget was the announcement that a rental property Warrant of Fitness was to be introduced for State Houses. There was also a strong indication that it would eventually be introduced to private rental properties.

Despite claims from proponents of a rental property WOF, an Otago Medical School report confirms that no country in the world has such a scheme. Other countries have regulations which detail rental property standards and measures that tenants can take if these standards are not achieved. This is exactly how NZ law operates.

The NZPIF is strongly against a rental property WOF as it is an expensive way to seek quality improvements for NZ residential rental property.

The NZPIF does support improvements specific to rental property insulation and heating, however, as these provide the best opportunity for improvements in tenants’ quality of life as well as national savings in the health budget. A study of Property Investor Association members shows that 83% of their properties are already insulated, so such a requirement would not affect PIA members to a large degree.

Additionally, the NZPIF has recently obtained excellent discounts for its members that make it even easier for them to insulate and heat their rental properties.

The NZPIF have also suggested to Government ways that will encourage owners to undertake such improvements without pressure on rental price increases. These suggestions include:

  • Making insulation costs tax deductible
  • Making Energy Efficient Heating a tax deductible expense
  • Allowing insulation DIY installation to be eligible for Government grants
  • Expanding the insulation materials available to receive Government grants
  • Using insulation installer certificates to prove quality of insulation instead of regular inspections.
  • Insulation Inspection Certificates for DIY installers instead of regular inspections..

There are four key problems with a rental property WOF.

  1. It mostly duplicates existing legislation;
  2. Regular inspections are a permanent extra expense;
  3. It will lead to a reduction in rental property availability through some being unable to meet WOF requirements; and
  4. Requirements for WOF increasing over time.

The estimated cost of a WOF inspection range from $350 to $700 dollars. With proponents wanting annual inspections, this would add $7 to $14 a week to the cost of a rental property and would affect low income properties to a greater degree. With rental property being on average $100pw cheaper than home ownership currently, the cost increase of a WOF would easily be passed on to tenants.

This inspection cost does not include the costs of improvements to rental property in order to comply with WOF requirements. Some of the Otago Medical School suggested items to include in a WOF are:

  • Cylinders and header tanks have earthquake restraints,
  • External containers of water and fire extinguishers,
  • Adequate natural lighting,
  • Adequate artificial lighting
  • Sustainable and non-polluting energy sources (e.g. solar water heating)

Many rentals will have to incur significant costs in order to comply with these requirements. In addition, both the Children’s Commissioner and the Otago Medical School have said that this is just a start and requirements for the WOF would increase over time, which could see some properties unable to comply at all.

As it is, there are already some suggestions that could see some rental properties unable to comply with a WOF. The Otago Medical School wants to see adequate protection from noise as a requirement, plus adequate space for personal activities such as study, and optimal orientation of the property for heating from the sun as well as shading from the sun. A poorly oriented rental or one on a main road may simply not be able to comply.

In previous years, WOF proponents have been concerned about the age of rental properties and wanted to have a cut off year where older properties could no longer be rentals. Who knows what we may see included in future amendments to a WOF.

The NZPIF has been invited to be part of a forum on developing the Housing Warrant of Fitness, so we will have the opportunity to put these points forward on behalf of all rental property owners.

Tags: federation reports

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