Salesa JennyRESIDENTIAL TENANCIES (PROHIBITING LETTING FEES) AMENDMENT BILLSecond ReadingHon JENNY SALESA (Associate Minister of Housing and Urban Development) on behalf of the Minister of Housing and Urban Development: I move That the Residential Tenancies (Prohibiting Letting Fees) Amendment Bill be now read a second time.Around half of New Zealanders are renters. This Government is committed to making life better for renters and this bill is a down payment on that commitment. Banning letting fees will save renters up to an estimated $47 million a year.I would like to thank the Social Services and Community Committee for its consideration of the bill. They've worked hard on the bill and have listened carefully to many submissions in their thorough consideration. I would also like to thank the 187 submitters whose feedback and insight helped the committee in shaping the bill. These came from a variety of interested parties including property managers landlords tenants student associations and community groups. Letting fees are unfair. They have no economic rationale. That may be why 60 percent of submitters supported the general intent of the bill to prohibit the charging of letting fees to tenants.The fee is supposed to cover the costs of advertising a property conducting open homes and vetting potential tenants. These are services that are provided to the landlord. The contractual relationship is between the landlord and the letting agency but somehow the existing law allows the fee for those services to be charged to a third party: the tenant. Now in what other area of law are two parties contracting with each other for an exchange of services allowed to then charge a third party? It is an anomaly in the law.There is no relationship between the fee and the cost of the services provided. It's pretty standard for letting fees to be set at the equivalent of a week's rent plus GST. Now rent varies from city to city and from suburb to suburb and for different kinds of houses the rent varies but the letting fees are set regardless of the cost of the services that the letting agency is providing for the benefit of the landlord. There is no market competition on the amount payable. This ban will mean that the costs of letting a property will be borne by the party who chooses the property manager.The costs of letting a property should lie with the person who benefits from the service. The bill means landlords can shop around for the cheapest manager and finally brings competition to the property management sector. No area of law allows people to contract for services and charge a third party for those services.I understand from the submissions that there is a concern that the bill will result in rent increases across Aotearoa. We do not expect there to be an impact on rents. Scotland banned letting fees and there was no evidence that it led to a huge increase in rent. In fact the UK housing advocacy group Shelter found that only 2 percent of landlords in Scotland increased their rents after letting fees were banned there.The Reserve Bank notes Rents are driven primarily by supply and demand not landlord costs." Treasury has also concluded that "Experience in other countries shows no clear evidence that banning letting fees will lead to increasing rents."—this is from the regulatory impact statement. The UK Conservative Government has also introduced a bill to ban letting fees and their reports agreed that there was no evidence that it led to an increase in rent. Other supply demand and financing factors contribute more to the amount of rent than the costs associated with tenanting a property. We've got to plan to deal with those.If we accept for argument's sake that landlords will try to pass on the cost that is currently being sheeted home to tenants through these letting fees and if landlords do try to recoup those costs then rents will go up by a few dollars a week. Now even if that were the case—and we don't expect that it will be—that would surely be better than tenants being whacked with a letting fee that's the equivalent of an entire week's rent all at once up front at the very moment when they can least afford it when they're having to fork out for removal fees for bond and for rent in advance. Landlords or letting agencies on landlords' behalf will retain the ability under the Residential Tenancies Act to seek reimbursement from tenants for expenses reasonably incurred as a result of a tenant assigning subletting or parting with possession of the tenant's interests in the tenancy.The Social Services and Community Committee recommended two changes be made to the bill. The first change is to separate the bill into two parts. This will allow the bill to be considered part by part under Standing Order 303(2). The change reorders the bill so that the substantive provisions—clauses 4 to 8—are under Part 1 and further amendments in clauses 9 and 10 are under Part 2.The second change is to the commencement provision in clause 2 of the bill. The bill will now come into force on 12 December 2018. This is because tenancy turnover is highest between November and February of each year. Tenants are more likely to move house in summer. It is the start of the new university year and the fact is that the new year often accompanies a change in circumstances. Implementing the bill during this period will maximise the reduction in costs for tenants that are signing up for new tenancies over this peak time.The Government has committed to a review of the Residential Tenancies Act. Submissions on this close on Sunday. This review will advance a range of changes to make life better for renters and will include a consideration of limiting rent increases to once per year. It will also contain other initiatives to improve security of tenure and better allow tenants to make their house a home. This review is expected to result in legislation being introduced to Parliament next year.Ultimately the best way to put tenants in a better position—in a better situation—is to increase the supply of housing and to end the shortage that is driving rents up. Our Government's KiwiBuild policy and urban growth reforms are designed to increase supply. Homeownership rates have declined from around 74 percent in 1991 to around 63 percent in 2017. Approximately 576000 households currently rent in Aotearoa New Zealand 500000 of which rent from the private market. Based on 2013 census data 60 percent of renters moved within three years while only 30 percent of owner-occupied homes moved within five years.Māori and Pacific populations are overrepresented in renting statistics. Since 1986 the proportion of Māori living in private rentals has increased by 88.3 percent whereas across the total population renting increased by 42.7 percent. Over the same period the proportion of Pacific and Māori children living in a rental property increased from around 50 percent to around 61 percent for Māori and 71 percent for Pacific children.In closing I reiterate my thanks to the members of the committee submitters officials and the Ministry of Housing and Urban Development for their contribution to the Residential Tenancies (Prohibiting Letting Fees) Amendment Bill. I urge members to vote for this bill so that we can start reducing the costs that many families face support a more consistent experience for New Zealanders and make some meaningful changes to the lives of renters in Aotearoa New Zealand. I commend this bill to the House as reported back by the Social Services and Community Committee. Thank you Madam Assistant Speaker."