Housing Warrant of Fitness

February 24th, 2014 at 12:00 pm by David Farrar

The Herald editorial says:

At a first glance, Housing Minister Nick Smith’s announcement of a warrant-of-fitness scheme on state homes seemed like a step forward that was as significant as it was welcome.  …

On closer examination, however, there was much less reason for applause. The final words of Dr Smith’s announcement made it clear that the Government had not decided to apply the warrant of fitness to the private rental market or other social housing providers. Urgency on this issue is clearly not high on its agenda.

I think urgency and haste could backfire.

Dr Smith excused this inactivity on the basis that the Government should get its own housing stock in order first, and that the trial of 500 of its homes would show how a warrant of fitness could work. But there is little reason new rules for all rental housing could not be readily introduced.

I wonder if the writer of the editorial has ever been a landlord?

The trial includes a comprehensive 49-point checklist that means homes must be insulated and dry, safe and secure, and contain essential amenities such as bathroom and kitchen facilities. Each home will have to pass this checklist to get a warrant every three years. Any snags in this arrangement should quickly become apparent and be easily remedied. In only a matter of months, it should be possible to roll out the scheme to the private market. The Government, however, is unwilling to even signal that intention.

I think the person writing this has no idea about how demanding such a WOF would be. They think you can roll it out untested, and just makes any fixes as you go along. They think that one can suddenly have an army of house inspectors.

It could well be that there is merit in eventually rolling out the WOF scheme to private sector rental housing, but the history of Government is that of unforeseen consequences. If getting an WOF is too much of a hassle, or too costly to comply with, then it may lead to fewer houses being available to rent – which would push rental prices up for all tenants.

It is time to place some obligations on those offering homes for rent. Already, they benefit from tax breaks and untaxed capital gains. 

The Government has actually got rid of the tax breaks by eliminating the ability to claim depreciation on (most) investment properties. So I am unsure what this tax break is that the editorial refers to. And yes the capital gain is generally untaxed, but that is not derived from renting the property out.

I purchased a new apartment in 2011, and looked at keeping my old one and turning it into a rental investment property. I decided not to, as the potential return from renting it was so low after you account for rates, body corporate fees and maintenance, that it wouldn’t even cover the interest on the mortgage.

There are potentially benefits from a WOF scheme for rental housing, but the last thing you want is to have Government impose a mandatory new requirement on landlords without knowing how costly it would be, and how it might impact on supply and rental prices. Many things sound great on paper, but turn into disasters when they hit the real world.

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49 Responses to “Housing Warrant of Fitness”

  1. JMS (314 comments) says:

    Is this a job creation scheme to cushion the fall for some recently out-of-work vehicle inspectors?

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  2. stigie (1,005 comments) says:

    No need to worry, the “Rich Pricks” out there can pay for it !~

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  3. Huevon (211 comments) says:

    I’d support a WOF for tenants

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  4. Chris2 (768 comments) says:

    What about a WoF for tenants?

    Did you know that the Tenancy Tribunal only makes it decisions searchable online for three years? After that they get removed.

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  5. PaulL (5,983 comments) says:

    @JMS: my thought exactly. Once you introduce something like this it’s enormously difficult to change because suddenly you have vested interests. The right thing to do is to not introduce it in the first place.

    Surely the right answer to problems with rental properties is to make sure there are enough of them out there that nobody will want to rent dodgy ones? In turn, that means letting people build new houses.

    In other words, this is just another result of the housing problems we have, with governments (local and central) trying to avoid any house owners (a synonym for voters) losing value, whilst also claiming to care about the availability of houses to those trying to get on the housing ladder. The problem is that those two things are contradictory, and so long as the median voter is a house owner nobody is dumb enough to actually fix housing supply.

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  6. gazzmaniac (2,319 comments) says:

    It will be passed on to tenants who will turn around and whine about how their mean landlord just put up their rent by $50 per week to pay for the improvements.
    The market is a much better mechanism for keeping rentals liveable – if you want cheap rent, you rent a shitbox with no insulation and holes in the walls. If you want to pay a bit more then you get something a bit better. All a “WOF” will do is kick people out of the bottom of the market.

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  7. Mighty_Kites (83 comments) says:

    If you can’t afford to keep your rental property in a healthy condition for people to live in, you shouldn’t own rental property

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  8. jp_1983 (200 comments) says:

    What happens if tennants through their actions make the house fail the WOF?
    Will the landlord be fined?

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  9. gazzmaniac (2,319 comments) says:

    If you can’t afford to keep your rental property in a healthy condition for people to live in, you shouldn’t own rental property

    Using your logic, if you can’t afford to rent a property that is in a healthy condition for people to live in, you shouldn’t rent a property.

    Doesn’t work the same does it? There are always going to be people out there who want to or have to rent shitboxes, and it shouldn’t be up to the government to stop them.

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  10. Nigel Kearney (919 comments) says:

    If you can’t afford to keep your rental property in a healthy condition for people to live in, you shouldn’t own rental property

    The corollary is that if you want to rent a property but aren’t willing or able to pay enough to get a property in whatever condition the government decides to treat as warrantable, then you should start looking for a comfortable park bench somewhere.

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  11. RRM (9,667 comments) says:

    And any costs incurred by landlords in bringing their properties up to the requirements of any such WoF scheme, would just be absorbed by the Landlord, and not passed on to the struggling poor tenants, right?

    Right?

    I wonder who will be the first to start vociferously championing this scheme to raise the cost of cheap rentals; Labour or the Greens?

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  12. southtop (263 comments) says:

    Hmmm…”I’m from the government and I’m here to help”
    Nine most dangerous words in English language.
    and
    “Man is not free unless the government is limited” RR
    Oh for at least a centre right government?

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  13. s.russell (1,580 comments) says:

    As a tenant I think I can decide for myself whether a house is good enough for me to rent, thank you very much. I do not need a bureaucrat to step in and tell me it isn’t and I am not allowed to live in it.

    The conditions would be set by do-gooders with no understanding of the real world. They will rule thousands of houses unfit for habitation because of a lack of handrails or some other nonsense, and then thousands of low income families will suffer because they will not be allowed to rent a house that THEY think is just fine.

    Result: Housing WoFs would hurt the very people it is meant to help – just like so many other half-baked Labour-Green policies.

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  14. jonno1 (80 comments) says:

    As a landlord I maintain my properties such that I would be happy to live in them. Pretty simple really, and they would pass any reasonable WoF test. It also maintains their value and makes them saleable at a moment’s notice. I do the same with my own home: carry out maintenance as required rather than leave it until it becomes a major undertaking.

    I also screen tenants carefully, although of course that doesn’t always work out, and at the end of a tenancy there’s always work to do, usually minor but still a pain. I do a full renovation about every seven years (kitchen/bathroom fittings, interior/exterior painting) which means minimal taxable profit that year. Interestingly, at every open home several people comment that “this is the nicest one we’ve seen”.

    But as for mandatory WoFs, that is a nonsense. Just let the market do its work. At most, include a checklist when re-letting that the landlord and tenant must both sign off (ie an extension of the inspection list) and submit it to the DBH with the bond. Job done at minimal cost.

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  15. Viking2 (11,283 comments) says:

    It would be nice if Smith and Collins also got stuck into the Tenancy tribunal. It now takes about 7 weeks to get a hearing. Up from about 2 weeks when Labour were in power.
    All because the responsibility for the Tenancy Tribunal in now in the hands of the Courts.

    One doesn’t hear anything about getting stuff like this fixed so by the time you are able to deal with a tenant issue they have migrated elsewhere

    They fixed something that wasn’t broken as the Nats do.

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  16. Viking2 (11,283 comments) says:

    time to sell some. No money in them anymore. Rather go commercial.

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  17. dime (9,676 comments) says:

    WHAT THE F*%&?

    Lets create a giant new bureaucracy.

    Enjoy your rent increases poor people.

    Dimes rental is about a year old. Wonder if that will require a wof every 3 years?

    If national sign off on this i will be pissed.

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  18. iMP (2,345 comments) says:

    The NZ portrayed in the revived Toyota ‘Barry Crump’ ads is lone gone – bit of corrugated iron, an old army hut, bit of a lean-too. We’ve become Brussells run by urban hang wringers who don’t know wether they’re male or female. Are mountain huts next?

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  19. KiwiGreg (3,224 comments) says:

    God forbid that tenants and landlords, operating in a free market, could determine the price and quality they would demand and supply. Only the all powerful and omniscient government knows how often you should replace your wallpaper.

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  20. KiwiGreg (3,224 comments) says:

    Of course the left will LOVE this – as landlords drop out of the market and tenants are priced out by the imposed increased costs, the “market failure” will “require” a state solution of an expanded housing corporation.

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  21. RRM (9,667 comments) says:

    If a lot of landlords decide it’s no longer worth it and sell – what would that do to the sale & purchase market?

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  22. jonno1 (80 comments) says:

    @Viking2 12.37pm. I have commercial rentals too, and frankly the residential ones do better. Granted, the yield is higher on commercial (9% vs 5%) provided they’re let, but there has been an oversupply during the GFC so some vacancies and rent holidays/discounts. OTOH, once you have a commercial tenant at say 4+4 life becomes a bit easier. Of course the capital gain on residential rentals is higher which off-sets the lower yield, so it’s really a matter of having a balanced portfolio.

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  23. dime (9,676 comments) says:

    kiwigreg – yep, yep & yep!

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  24. s.russell (1,580 comments) says:

    Shocking news! Poor people cannot afford cake!
    Labour’s response: ban bread and make cake compulsory.

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  25. trout (921 comments) says:

    A better solution to the perceived problem may be to insist on a WOF for properties rented with the assistance of an accommodation supplement. This would seem to be better targeted.

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  26. PaulL (5,983 comments) says:

    @trout: definitely. Because then the increased price can be directly funded by the govt, further lining the property owners profits. I’m very much in favour of your taxes being used in this way. But can I get a small carve out so that I don’t have to fund it?

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  27. igm (1,413 comments) says:

    We are now virtually out of rentals, but if this is going ahead, we will be looking for a WoF for tenants. Also a good time to rid us of the socialist tribunal, loaded with failed academics and sociology dropouts.

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  28. Psycho Milt (2,368 comments) says:

    Interesting the number of people on this thread who seem to regard as some kind of extravagant luxury a rental property that’s dry, insulated, and has functioning doors, windows, kitchen and bathroom. Perhaps you all had very deprived childhoods?

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  29. Tom Barker (133 comments) says:

    “I’m from the government and I’m here to help”
    Nine most dangerous words in English language.”

    No. Far more dangerous are the words “Just let the market do its work.”

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  30. PaulL (5,983 comments) says:

    @PM: I can only speak for myself. I would expect most rentals to come with that, but I’m not at all convinced that it needs a new government bureaucracy so as to assure it. Presumably people renting the house will work out whether it has those things, and if it doesn’t then they’ll move elsewhere.

    If they don’t move elsewhere, then I’ll assume that either those things aren’t important to them (maybe a broken door isn’t a problem if it’s the side door they never use?), that there are no other houses available that they can afford (in which case making this house more expensive isn’t going to help them), or that there are no other landlords willing to take them (in which case perhaps some of the breakage was in fact caused by them?).

    I think you’re deliberately creating a straw man, and (unlike many others on this blog) I think you’re capable of more than that. You don’t have to reduce yourself to that level.

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  31. somewhatthoughtful (457 comments) says:

    You mean the party of landlords hasn’t passed something that’s not in the landlord’s best financial interest??!? Well, colour me shocked!

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  32. Brian Smaller (4,028 comments) says:

    I used to hate going to the tenancy tribunal to try and get money stolen off me by tenants. You had to always be so “fair” and “willing to compromise”. So your tenant stops paying rent. Remember they are not technically behind until the end of the current rental period (a good reason to have weekly rent payments, not fortnightly or monthly). Then it takes 2-7 weeks to get a hearing. Then you show up and the tenant rings up five minutes before the hearing with the mediator and says that their kid is sick and it is postponed until next week. Then they don’t show up to that one and the mediator, calls them and you get a repayment order. Which they then break. Of course, then you issue a termination notice. Then have to go to the court to get a bailiff to remove then if they don’t go etc etc. End of story – you can end up taking up to three months to get a non-paying tenant out. There goes any money you might have accumulated for improvements/maintenance that year. And they want to WOF all rentals?

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  33. Brian Smaller (4,028 comments) says:

    Interesting the number of people on this thread who seem to regard as some kind of extravagant luxury a rental property that’s dry, insulated, and has functioning doors, windows, kitchen and bathroom. Perhaps you all had very deprived childhoods?

    I have had places like that that were dry, insulated and everything worked. Then you luck out and get tenants who never open a window, keep curtains drawn all the time, run unflued gas heaters in defiance of their tenancy agreements and fill the place with moisture until the curtains and carpets start to rot. Some tenants are scum. They deserve to live in cardboard boxes.

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  34. Than (440 comments) says:

    Interesting the number of people on this thread who seem to regard as some kind of extravagant luxury a rental property that’s dry, insulated, and has functioning doors, windows, kitchen and bathroom. Perhaps you all had very deprived childhoods?

    Not a deprived childhood, just a few years living as a uni student.

    As others have already said, the main effect of this policy will be to cut out the cheapest rentals on the market. Borderline cases will be brought up to WoF standard with the cost passed on as higher rent. Dumps where it isn’t feasible to bring them up to standard will either be knocked down or left sitting idle. I don’t see how forcing the less well off to pay higher rents will help them, even if it does mean they are guaranteed insulated accommodation.

    Yet another well-meaning policy that completely fails to think through the consequences.

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  35. igm (1,413 comments) says:

    Viking2: The tribunal is an arse, seven weeks for a hearing, then another month to get tenants out, by which time they have stuffed the property. The last lot we had trouble with, did it ourselves with a few friends; waited till they were out, put their shit in a carport, changed the locks and then waited for them to return. All hell broke loose, but they have gone, and court costs will be less than fixing another trashed house. Believe me, insurance does not defray the damage these losers can do. No wonder we only touch commercials now; and these scum are demanding WoFs for houses they rent, many are only fit to be housed in pig stys.

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  36. Psycho Milt (2,368 comments) says:

    Some tenants are scum. They deserve to live in cardboard boxes.

    This is certainly true, but isn’t really relevant to the question of whether rental property should be required to meet minimum standards.

    Presumably people renting the house will work out whether it has those things, and if it doesn’t then they’ll move elsewhere.

    In a free market, people living in damp, uninsulated accommodation with non-functional doors etc can be assumed to be either OK with those living conditions or in some sense deserving of them? That pov goes down a treat in a Kiwiblog comments thread, but governments have to think a little wider than that.

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  37. PaulL (5,983 comments) says:

    @PM: nice caricature of what I said. Again, I say that you are capable of more than that.

    What I said earlier on this thread was that I thought most of the problem is caused by the limits on house building that we have. When there aren’t new houses available it’s easier to charge a lot for a crappy house. But forcing a WOF won’t fix that – we’ll still not have enough houses for the people who want one, and we’ll just push up the rent.

    My question is what problem exactly the WOF will solve. Do we think that people live in houses that are substandard because of the lack of a WOF, or for other reasons? If for other reasons, then do we think the WOF is going to help them? That’s my concern – it’s a policy that is not dealing with the root causes, and therefore that is doomed to failure and unforeseen side effects. I can see it’s easier for you to sneer than it is to engage on those issues, but misrepresenting my position isn’t going to work if you want to look sensible.

    If I were to treat your position as you have mine, then I’d say that your position appears to be that you can regulate quality in housing the same way you can regulate productivity by just increasing the minimum wage. Both are doomed to fail, and to hurt those you’re purporting to be helping whilst you do so.

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  38. artemisia (226 comments) says:

    There is a very experienced property manager in Nelson who manages a bunch of low end rentals. He takes on tenants nobody else will house (bad credit, bad rental history, released from prison etc) and manages them intensively. I’d bet some of these properties will fail a WOF. What then for these tenants? If the landlords don’t or can’t remedy will the rental be red stickered? Will the tenants have to move out? To where?

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  39. mara (752 comments) says:

    Housing WOFs. What a load of bollocks. I grew up in uninsured housing in ChCh and Wgtn with a one bar heater, layers of clothing, a hot water bottle and my mother had the good sense to open windows every day. Never heard of asthma either. Harden up people.

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  40. Psycho Milt (2,368 comments) says:

    I just find it difficult to take seriously a group of people who think it onerous of the government to require rental accommodation to be dry, insulated etc. What kind of person makes a principled stand for the right to offer substandard rental accommodation? There’s plenty of scope for argument about the practicality of implementing a rental WoF – the enormous bureacracy inherent in an inspection scheme and so on – but we have here a bunch of people who are opposed to the very principle. WTF?

    Do we think that people live in houses that are substandard because of the lack of a WOF, or for other reasons?

    Other reasons.

    If for other reasons, then do we think the WOF is going to help them?

    It won’t help those other reasons, no. However, no National government will ever interest itself for doing something about those other reasons, because it wouldn’t be in the interests of its constituency to do so, in which case we’re left with more pragmatic questions about actually-achievable things that might help.

    …your position appears to be that you can regulate quality in housing the same way you can regulate productivity by just increasing the minimum wage.

    My position certainly is that you can regulate quality in housing, the same as you can regulate quality in any other product. You may not be able to regulate it perfectly and completely, but if you’ve ever tried to register an unwarranted car you’ll know that used, privately-owned complex objects can have their quality regulated. However, I’d certainly never claim that you could regulate productivity by raising the minimum wage – the min wage is just an imperfect mechanism for helping claw back some of the financial benefits of improved productivity that have been withheld from the productive.

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  41. Psycho Milt (2,368 comments) says:

    I grew up in uninsured housing in ChCh and Wgtn with a one bar heater, layers of clothing, a hot water bottle and my mother had the good sense to open windows every day.

    Same here. And our distant ancestors made do with mud huts – perhaps you could build one and rent it out?

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  42. gazzmaniac (2,319 comments) says:

    My position certainly is that you can regulate quality in housing, the same as you can regulate quality in any other product.

    And that regulation has a cost.
    People here do think that rental properties should be dry and lockable. Maybe not insulated (most houses built prior to the 1970s are not insulated) and maybe not the flashest house on the block, but dry and lockable. They do not need the government to tell them that. If somebody is in need of a rental property and they want one that is insulated and built for the sun, then they should pay more for it than somebody who just wants a roof and a locked door. It is called market regulation, rather than state regulation.

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  43. Viking2 (11,283 comments) says:

    iMP (2,025 comments) says:
    February 24th, 2014 at 12:45 pm

    The NZ portrayed in the revived Toyota ‘Barry Crump’ ads is lone gone – bit of corrugated iron, an old army hut, bit of a lean-too. We’ve become Brussells run by urban hang wringers who don’t know wether they’re male or female. Are mountain huts next?
    Vote: Thumb up 5 Thumb down 2

    =========
    Yep mostly gone. Doc have removed all the good ones and replaced them with scrub hotels. DPF posted some opics the other week.
    Of course we paid.

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  44. Viking2 (11,283 comments) says:

    You can follow what the Landlords thing here.

    http://www.propertytalk.com/forum/showthread.php?31722-Warrant-of-Fitness-for-rentals-%28including-details%29

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  45. SPC (5,473 comments) says:

    There is some point to a WOF trial (and using the owned housing first), however one could proceed in the private rental market by simply requiring that housing have roof insulation before being rented out to a new tenant (or within 5 years).

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  46. mara (752 comments) says:

    I meant uninsulated not uninsured. The old bungalow I live in now is also not insulated. Having reached retirement age without needing pink batts, underfloor heating or heat pumps I really cannot understand why Govt. needs to intervene in this matter. Perhaps, if intervention is required in this so called “temperate” climate, they should educate some people in the basic skills on living and household management. Especially if they come from tropical islands. But that would be racist and e cannot have that.

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  47. RightNow (6,844 comments) says:

    And our distant ancestors made do with mud huts – perhaps you could build one and rent it out?

    You try getting all the necessary consents to build a mud hut and you’ll see just how easy our ancestors had it.

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  48. SPC (5,473 comments) says:

    mara, the problem is when the people renting un-insulated housing cannot afford to pay the power – it aint as cheap as it used to be

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  49. Ben Dover (526 comments) says:

    They need to intervene so PARASITES can bleed you try SUCK the Life out of you
    wreck your house complain and LIKE hey if the house is not good enough
    get off you FAT A do some work and Build or Buy your own

    I feel an insulation Scam coming

    More stamps for low life parasite ploperty manages to sit on their FAT parasitic A holes and stamp
    for the greedy slimey NZ government slobs

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