Smith NickHon Dr NICK SMITH (National—Nelson): Thank you Madam Chair. Part 1 of this bill is so typical of the smoke and mirrors that we get from the Minister in the chair Phil Twyford. What the Minister would have the committee believe and what he's told tenants up and down New Zealand is that if he bans letting fees there's going to be a big saving for tenants. So my question for the Minister is in terms of consistency. When I sat in the Minister's chair I introduced a bill requiring in a tenancy change that all homes have smoke alarms.Hon Shane Jones: Talking about himself—always talks about himself.Hon Dr NICK SMITH: That's right Mr Jones intervenes. We passed a bill that required all tenanted properties to have smoke alarms to save lives. I don't apologise for that. I've checked the Minister's record; he said that bill would add to the costs and he's right. That is if you impose a regulatory cost on the landlord that will be passed on to the tenant. National introduced our tenancy amendment bill requiring all homes to be insulated by 1 July 2009—something the Minister in the chair never mentions these days. He would have us believe that all the heavy lifting around improving the insulation of homes was done by the current Government and he overlooks the huge amount of work that our Government did. But in the same instance the Minister in the chair argued quite rightly that if you impose a cost on landlords to insulate homes that's a cost that falls on the landlord sector. That is a cost that will be borne by tenants.So the very simple straightforward question is around removing the capacity for the real costs when a property is re-tenanted. There is a real cost of writing out the tenancy agreement of advertising the property of checking out the credentials of the new tenant and of letting the various tenants have access to the property. They are real costs and the pretence by the Minister in the chair and the Government that somehow that cost will magically disappear if we pass this bill is a fraud. It is a real cost. It is a cost that will fall on the sector and the only question is: who meets the administration advertising and interviewing costs of entering into new tenancy agreements? All we're going to do is shift that cost from a transparent charge that's made at the time you enter into a new tenancy agreement and include it in the rental.We've seen very sharp rises in rentals under the first year of this Government despite all the rhetoric that we heard from them in Opposition and our argument on this provision is that all you're going to do is shift that letting cost which currently falls quite transparently in the tenancy agreement into the general rent increases that will be faced by tenants. This is just the basic disagreement that there is between the Government and the Opposition on this bill. The Government keeps pretending that you can impose costs whether it be on supermarkets whether it be on small businesses whether it be on landlords and somehow that magically does not affect consumers or in this case tenants. Our argument is very simple and that is that every cost you impose on a sector—whether it be on landlords whether it be on supermarkets whether it be on any other area—ends up being paid by the consumer. It is misleading it is smoke and mirrors and it is a fraud for the Minister to be going around the country and saying that this bill is going to be saving millions of dollars for tenants when it will not. It will simply transfer the costs from the time of the tenancy agreement to the general rental.Here's the next question and it's the proper question for Parliament: is the real cost of finding new tenants and entering into new tenancy agreements most fairly allocated each time a new tenancy agreement is reached or is it more fairly to be distributed into the general rental costs? The consumer pays either way. The question for Parliament is not whether this cost falls on tenants; it's how it most fairly falls on tenants. And here's the pitch: if you have a tenant that has a large number of turnovers—some people have lots of short-term tenancies; and I've had nine different flats while in Parliament and each time paid a letting fee—should the person who turns over their tenancies a lot more often have to pay for that or should that cost be spread over the general rental?Let's be up front as to how these costs will switch. The interesting thing is higher-income earners tend to have more regular transfers of their tenancy arrangements than do lower-income earners. That is if you pass this law what is going to occur is that the costs associated with letting fees for the costs of transferring tenants are going to be spread into the general rental so the winners of this are going to be people that are in short-term tenancy arrangements. So for instance sometimes you'll get a construction company that will enter into a large number of short-term tenancies to be able to accommodate a group of workers for a short period. Those in the short-term tenancies will tend to benefit from this provision. Those that have their tenancies for a long period are going to be disadvantaged because it will be included in their rental and effectively it will be a cross-subsidy to those in short-term tenancy arrangements. I just challenge members opposite: what is the logic of that? Why would we not let costs lie where they fall? Shouldn't those people that change tenancy a large number of times actually transparently face the cost of the advertising and of the work that's involved in letting agents doing that rather than effectively Parliament regulating and saying No you cannot charge in that transparent way. You must include that within the cost of your weekly rental."? That is the essential question that members of the Government need to argue if they are going to argue that Part 1 of this bill is in the public interest. Now if we look at what these costs are what you are going to see is them passed on in the actual charge of the rental or do the Minister and the members opposite live in this fairy tale world where if you don't enable the recovery of the letting agent's fee somehow that magically isn't going to be paid by anybody? Dan Bidois: It's a fantasy. Hon Dr NICK SMITH: Well I'm sorry—yes it is fantasyland stuff. It really goes to the heart of so much of this Government's policy that is misleading. For instance they put up the increased costs on petrol and they say "Oh that won't be coming out of consumers' pockets. That will come out of the cost." The very Minister in the chair Phil Twyford is responsible for increasing the tax on excise but he somehow argues "Oh but that will come out of the margin of the petrol company." No it doesn't. It goes on to the cost of the consumer. They are now paying more for their petrol and it's exactly the same with this provision. If you are going to pass a law that bans letting fees be in no doubt that tenants will continue to pay—as do all consumers—for costs that are being imposed. I want to challenge the Minister on the advice that he's received from officials. The advice from officials was very plain: "If you're going to ban letting fees you're going to put the rents up." So will the Minister in the chair accept responsibility for the inevitable rise in rents that are going to flow on from this bill? We know that rents in the last year have increased quite significantly. Does he accept the advice from his Ministry of Business Innovation and Employment officials that Part 1 of this bill will see an increase in rents and why doesn't he just be open and honest with New Zealand tenants—that is actually you're not getting rid of letting fees. It's not a free lunch. All that's going to happen is that rather than paying that cost up front it's going to be spread in longer rentals. Actually people who are in stable long-term tenancies are going to end up paying more and people who are in shorter-term tenancies will end up paying less. Is that really the right incentive? I come from a perspective that says actually there are broader society benefits from having longer-term tenanting arrangements. I think that's a better arrangement for landlords. I think that's a better arrangement for tenants. When you allow letting fees and costs to lie where they fall you're effectively providing a financial incentive for longer-term tenancies and that's in the public interest."