New Zealand Property Investors' Federation, (NZPIF) is the umbrella body for 20 local Property Investors' Associations throughout New Zealand.

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Email: www@nzpif.org.nz

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05-07-2015

How many cold and damp houses do we really have?

The total rental housing stock in New Zealand numbers around 440,000, including approx. 60,000 owned by Housing Corporation of New Zealand.  Judging from the recent ‘noise’ in the media about  cold and damp houses an uninformed bystander could be forgiven for thinking every rental property in the country is in dire need of a ‘warm and healthy’ makeover.

Most of the political parties favour a Building Warrant of Fitness (BWOF) as the panacea for warm and healthy homes for all. Recent statements from Prime Minister Key and Deputy PM English suggest the National party is starting to go cool on the idea. National appears to have realised that the ‘one size fits all’ approach is not appropriate.  It appears they also realise a universal BWOF runs the risk of incurring compliance costs disproportionate to the benefits to be gained and with the knock-on effect of increased rents

Any solution must be evidence- based, targeted, and cost-effective for property owners and tenants alike. Housing improvement and compliance costs must be kept to a minimum to ensure that: a) rental stock is not rendered obsolete and therefore removed from the rental pool; and b) rents are not forced up by excessive and/or unnecessary compliance costs.

The two rental properties associated with the two recent well-publicised deaths, where the standard of the accommodation was alleged to be implicated as a contributing factor to ill-health, were both Housing Corporation of NZ (HCNZ) properties. Both were insulated and had means of heating. Factors other than the physical standard of the respective accommodations appear to have influenced the tragic outcomes in both the reported cases.

The ability of an occupant to pay for energy for heating is often directly related to economic circumstances. Fuel poverty is a real issue for many NZ families in winter months. Put simply, a higher priority may be placed on other household needs such as putting food on the table, over spending on energy for heating.

A 2014 survey of landlords by the NZ Property Investors Federation (whose membership comprises 20 local property investor associations covering NZ) indicates over 90 percent of private rental properties owned by members affiliated to the Federation are insulated.

The research led by Prof. Philippa Howden-Chapman, Department of Public Health, Otago University has established the link between housing and health, and the benefits of insulation through reduced health and energy costs and overall improved well-being. It’s been estimated the overall benefit: cost ratio is around 4 to 1 so it’s a worthwhile investment in our national health and well-being and in energy conservation.

The Howden-Chapman research findings underpinned the introduction of the very successful nationwide subsidised home insulation program run by the Energy Efficiency and Conservation Authority (EECA). Some 250,000 pre-1977 homes have been insulated through the scheme, including the majority of the HCNZ portfolio.

The issue now eluding the policy makers is how to cost-effectively target those houses that remain uninsulated.

But do we need to target every last one or is there a more pragmatic cost-effective solution that works from the bottom up and deals to the most cold and damp?   

It is understood just 6% of the complaints received from tenants by MBIE's Tenancy Services (out of approx. 100,000 tenant calls annually) relate to property maintenance issues. This suggests something in the order of 6,000 rental properties are of such a concern to their occupants to prompt a call to the government-appointed residential tenancy administrator. It also suggests a very high overall level of tenant satisfaction (in excess of 90 percent) with the standard of rented accommodation in NZ.  

So, 6,000 properties out of a total rental housing stock of some 440,000 where the tenants are concerned at the physical condition of their accommodation; that’s just 1.3%.  Even if it’s 20,000 or 30,000 surely a universal BWOF cannot be justified when considering the costs and benefits of implementation.

So what might a targeted, cost-effective solution to achieve warm and healthy homes for all over the long-term look like? Well, try this:

  • Central government to set minimum insulation standards for pre-1977 houses (when insulation became mandatory in new dwellings).

  • Continue to incentivise all property owners with the EECA grants for retrofitting insulation and heating.

  • IRD to treat insulation as a tax deductible expense and not a non-deductible capital item as is presently the case.

  • MSD to provide, based on demonstrated need, low-income families with electricity vouchers during the coldest winter months to encourage use of electric heating.

  • Tenants to be provided with information on how to keep their accommodation warm and ventilated. (Insulated properties can still be cold and damp if the occupants are not in the habit of using, or can’t afford, heating. The daily opening of windows to ensure adequate air movement to minimise the accumulation of moisture is also essential.)

  • Provide a complaints’ mechanism for tenants who consider their accommodation fall short of the physical minimum standards for a dwelling. This could be cost-effectively achieved by central government updating the Housing Improvement Regulations. Complaints would be made to the local council. Where a complaint was found to be justified, following inspection by a building officer, a legally-enforceable requisition would be served on the property owner by the Council to upgrade to the minimum standards by a due date.

The provision of warm and healthy rental properties is a no brainer for astute landlords - it simply makes good business sense. Insulated and uninsulated houses (those with and without heat pumps) are now well-differentiated in the market place and tenants factor these into their choice of property. Warm tenants are happy tenants. And they are likely to stay longer if their accommodation is meeting their other housing needs for the time being.

Colin Comber is a New Plymouth landlord, President of the Taranaki Property Investors’ Association Inc and an executive member of the New Zealand Property Investors’ Federation Inc.

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