Housing Warrant of Fitness

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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