New Zealand Property Investors' Federation

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Will rental WOFs make the grade?

On paper it sounds like a great idea. A checklist for rental properties which, if mandatory, would ensure that the 31 per cent of the population who rent are in liveable homes.

Increasingly, though, there are murmurs from landlords and real estate agents about whether the rental "warrant of fitness" idea being proposed at council level will improve the tenant's lot.

Five councils, in Auckland, Tauranga, Wellington, Christchurch and Dunedin, are field testing an assessment tool which could be used for a potential rental "warrant of fitness". Other councils are watching closely.

However, finalising the assessment tool is just the start of the debate. At this stage, a warrant would be voluntary but sources say it may become the "stick" following a series of "carrots" to get bad housing up to scratch.

Another unknown is whether central government would take it further. At the moment, the housing minister is focused on getting 69,000 state houses in order.

But the concern that worries all parties is whether a WOF will push up the cost of rent.

For several years rents have been more or less in the doldrums, rising about 3 per cent annually. Infometrics economist Gareth Kiernan is expecting that to change this year as wages and the economy picks up.

"The Reserve Bank's LVR restrictions will force more people to continue renting, particularly in Auckland, while Christchurch's rental stock will remain under pressure as more people move to the city for rebuilding work."

Demand for accommodation around the rest of the country is also likely to increase as the economy improves, he says.

Property investors believe a warrant of fitness on top would push rents higher still.

Jackie Thomas-Teague, president of the Wellington Property Investors Association, says the current plan is for two-yearly inspections at a cost of around $200. She doubts that's realistic.

"I can't see the WOF assessment staying at $200 per inspection given other building inspectors and valuers currently charge between $600 and $1000 per inspection. Especially if you factor in the requirement of getting through the huge volume of properties targeted for a WOF.

"Even just looking at rental properties, that is 3100 properties to be assessed each and every working day for two years. It would take a huge optimist to think this would be achieved."

There have also been calls for additions to the warrant of fitness. The Real Estate Institute believes a P-lab test should be considered.

Wellington investigator Debra Young sees evidence of methamphetamine use or manufacture in nearly half the houses she investigates and agrees strongly. "As a landlord and a person involved in the anti-meth industry I am an advocate of testing before the tenant moves in and before the tenant moves out. This guarantees to the tenant the property is meth-safe and provides a level of protection for the landlord also."

Much of the criticism of rental WOFs is that it will simply add another layer of bureaucracy.

Auckland Council strategic adviser Damon Birchfield, who believes almost all rental properties will fail based on current criteria, says the proof will be in the pudding. "For me, the key concept underpinning a housing warrant of fitness is, does it drive market transformation of the quality of private sector rental housing market or not.

"However, if you look internationally, there does seem to be a shift to a more measurable definition of what a minimum level of performance should be, and we think our proposed checklist takes a really good stab at it.""That's the key question that we're all trying to understand. Is it the right tool? If you talk to property investors, a number will question whether it's the right tool but I would suggest we don't really know the answer.

Birchfield believes many landlords have bought homes assuming little or no maintenance, or repair. "People are paying $1 million for places which need a lot of work," he says.

A fully implemented WOF regime could therefore impact on the prices prospective landlords are willing to pay.

Birchfield agrees there has to be balance between "getting landlords moving" and being too onerous. But, he says, "tenants that are healthier and enjoy their living environment are better tenants. They look after the house better, they're more likely to pay the rent, they're more likely to stick around".

However, Rick Mooney, a Lower Hutt real estate agent, fears building WOFs "are just another policy that has had little consideration of the hows and certainly not the whys".

He says the genesis for the rental WOF came out of the student flat situation in Dunedin, where houses are regularly trashed.

Landlords with messy tenants often have little incentive to upgrade their houses until they've gone, he says. However, he believes that for the most part, market forces work pretty well.

"As a landlord, I know that people expect a standard. You can't charge a certain rent if you don't have it to that standard, no one will pay. Tenants have choice . . . They don't have to pay what the landlord wants. They can go elsewhere or pay less, or they can take it on the basis that he put in some heating or insulate under floor or do something to make it better."

One way to cut down on bureaucracy might be to make rentals under a property manager exempt, as long as their three-monthly inspections meet the same WOF standard, Mooney suggests.

The thing about the rental WOF is that there are alternatives, says Andrew King, national Property Investors Federation president [correction: Executive Officer].

He would like to see the focus go on heating and insulation. Many low-income families heat only one room in winter to save costs, he says. Higher rents resulting from a WOF won't benefit these families, only "the newly established inspection industry".

King prefers Labour MP Phil Twyford's private bill, which would enforce a certain standard of heating and insulation. He also supports winter heating grants for low-income families and tax deductions for landlords installing insulation or heat pumps.

King doesn't deny some houses need a good upgrade, but believes tenants also need more education about ventilation. Drying clothes indoors or using unflued gas heaters are commonplace. People "are reluctant to open windows and dry out the air inside their homes believing that they are letting warm inside air escape and cold outside air in".

He'd also like to see insulation grants reintroduced for a wider range of people. "The government saves $5 in health spending for every $1 spent on heating and insulation . . ."


The draft warrant of fitness checks houses for warmth, dryness, mould, injury risk, sanitation, basic state of repair and living needs. The five councils trialling the checklist will report back on the practicality of its contents in March.

It is not clear whether councils could pass bylaws making WOF tests mandatory for rentals, but the pilot across different local authorities follows government hesitation on bringing in across-the-board rental WOFs, suggesting councils could adopt a unified strategy at some stage.

Tags: gareth kiernan - wof - jackie thomas-teague - debra young - damon birchfield - rick mooney - andrew king - phil twyford