Dear Gareth: Look to Ireland and Scotland, not just Germany

12:22 pm on 11 August 2017

Opinion - Gareth Morgan's push for better renters' rights is praiseworthy but risks missing the best solutions, argues Victoria University's Mark Bennett.

A man in a business shirt holds out a set of house keys.

Photo: 123RF

The Opportunities Party's policy to create greater security of tenure for renters is praiseworthy. New Zealanders are now renting for longer periods or indefinitely, finding they are unable to buy their own homes.

And tenants should be able to stay in their homes until they choose to leave them.

The common objection that renters would prefer to keep the 'flexibility' of the current law makes no sense, given that secure tenancies always allow tenants to give notice and move out.

Mr Morgan's Opportunities Party (TOP) wants to adopt Germany's regime for security of tenure. Tenants would be allowed to remain indefinitely. The landlord could terminate a tenancy only for legitimate reasons, such as if the tenant stopped paying rent or damaged the property. Selling the property would not necessarily be a legitimate reason. Even if there were a legitimate reason, the tenant could have the tenancy reinstated if termination would cause them hardship. Rent increases would be limited to the prevailing market rate, and would be 'slowed'.

I strongly agree that renters' security of tenure should be increased. However, although the TOP proposals seem a good starting point for policy development, they are not the final word.

There are uncertainties - for example, what does it mean to say that the landlord selling the property is not necessarily a legitimate reason for termination? Are there other reasons for termination? What will 'slowing' of rent increases look like?

Further, other political parties will need to support any reform of tenancy law. A longer conversation is needed, examining what the right balance is between the rights and obligations of tenants and landlords. The German model of secure tenure may not be best: there are many 'levers' that can be placed at different settings to alter security of tenure.

For example, should the length of the secure tenure period be a set number of years or indefinite?

What notice periods should be given for termination of the tenancy by tenant and landlord? In 'secure tenure' systems, tenants are never required to stay put for the secure tenure period, but they must provide some notice to their landlord. The 90 days proposed by TOP seems a long time.

What are the legitimate reasons for which a landlord may ask a tenant to leave within the secure period? While TOP has indicated damage and rent non-payment as reasons, what further reasons should a landlord be able to give to evict their tenant? Should there be a provision allowing the landlord to terminate the tenancy to avoid hardship?

With all these levers in play, it is not clear why TOP chose to simply transplant the German model. Particularly when Ireland and Scotland provide other useful models, and have, first, changed their rental law quite recently (2004 and 2015, respectively) - and, second, done so as a response to the problems of 'generation rent'. They have made their changes from a comparably low level of tenure security for renters, in circumstances of housing provision - the relative proportion of private rental, social rental, and owner-occupied housing - very similar to ours.

Ireland's experience also shows that a shift to secure tenure does not necessarily cause a stampede of landlords out of the market: Ireland now has around double the amount of private rental housing, as a proportion of the total housing stock, that it had before the reforms.

TOP is right to say we should improve security of tenure, but we should consider the 'Celtic' model alongside the German.

Ireland and Scotland placed the levers of tenure security in different places, but equally importantly they did so through detailed housing policy development over a number of years, and based on a large body of research into tenants' and landlords' interests and comprehensive consultations.

To find the best policy settings for improving renters' security of tenure, we should draw on both the substance and process of the Irish and Scottish reforms.

Mark Bennett is a Senior Lecturer in the Faculty of Law, Victoria University of Wellington. His teaching and research interests include property, trusts, and residential tenancies law. He has written more about Irish and Scottish tenure security reforms here.