Pugh MaureenMAUREEN PUGH (National): Thank you Madam Deputy Speaker. I stand tonight to speak against the Residential Tenancies (Prohibiting Letting Fees) Amendment Bill in its second reading. I call this the bill of unintended consequences.Now the problem that the Government has set out to fix is the upfront fees that tenants are required to pay when they are moving into a new tenancy agreement and they are presumably too high and are—and we concede—a real barrier to some people. So for the record the upfront fees are usually four weeks' rent as bond two weeks' rent in advance and one week all including GST as a letting fee. Given the average rent across New Zealand those fees actually do come to just under $4000 if you are a new tenant seeking a new tenancy.Now remember this is an average across New Zealand and in the great electorate of West Coast - Tasman those letting fees would be so much less because the weekly rents are lower. So in some cases they'll be lower by half but there's no argument across this House that one week's rent for a letting fee is a lot of money for some people to have to find especially those first-time renters. But with those tenants that are actually moving house moving into a new tenancy then they already have their bond in place they already have their two weeks' rent paid in advance and we actually heard from one submitter in Auckland—the very canny tenant—who as he moves around says that as he's paid his two weeks' rent in advance when he gets towards the end of this tenancy he doesn't pay the two weeks' rent that's owing at the end; he banks that money and he's got it ready for his next tenancy and the only fee that he does pay is the letting fee.Now in the select committee process we heard 187 submissions and we heard 41 oral submissions both here in Wellington and in Auckland and I think it is very fair to say that those submissions were quite polarised. So those people who would be paying a letting fee were of course supporting the bill and those who were landlords or property managers were in general opposing this bill.Taking up the Hon Ron Mark's point earlier on about the blunt tool that the letting fee is it is fair. We did ask some of the property managers how they came by this fee and it has just evolved. There was no logic behind it. So in some cases we had in one street the example that was used—that you could have a million-dollar house and a $500000 house but because they attract quite a variance in rents the letting fee would be quite different and it could be the same amount of work involved. And so the simple solution is to have a fee for service.The actual cost that is involved by the letting agent for the work that is undertaken and we know that there's a huge amount of work undertaken as Simon O'Connor mentioned earlier: there is the advertising of the property there is the showing of the property—open homes etc.—the vetting of potential tenants the credit checks the paperwork that goes into the tenancy agreement and lodging of the bond responding to the unsuccessful applicants and also the viewing outside of hours and we did hear from some property managers who said they can arrange for it to suit people's schedules. They can go after hours or on weekends. But one of the challenges they have is that some people may be looking at multiple properties find one don't let the agent know and they're left with a no show. There is a real cost to letting a property.So the select committee did deal with that issue about the transparency of the letting fees. It was a blunt tool it has evolved over time and I do think that a fee for service is probably the fairest way to resolve it. However this bill prevents fees of any kind now being applied by any agent of any sort. So there is no ability now if this bill is passed for any fees to be incurred and that is the cause and effect.Now we've heard talk tonight from some of my colleagues on this side of the House about the impact of increased rent. There is no way that a landlord is going to be able to absorb that cost. It's like comparing it to the cost of increased transportation. A truck has to fill up its tank of gas and it may be costing $50 or $100 more per tank so everything that goes on that truck now goes up in price because we have to recover the cost. It's the law of cause and effect. So the rents will go up and we have heard from submitters that approximately—now we've got 34 percent of New Zealand households are now in rental properties. That's about 589000 of them. Ninety percent of them are owned by mum and dad investors—90 percent. Fifty percent of them are managed by property managers and only 50 percent of them actually charge a letting fee.So this bill does set out to reduce the upfront costs. But let's say those costs are passed on to the tenant. We've heard it tonight that the increase in rent is inevitable but the ones it penalises the worst are those people who are stable in long-term rentals. Now one of the consequences—these unintended consequences—is that if landlords are expected to absorb this cost what's going to happen to a tenant who leaves their tenancy early wants to pull out of their lease agreement their tenancy agreement? Well if a landlord has to keep absorbing that cost of letting the property he's going to say No. You're going to pay me out the term of your lease or you're going to stay there because I'm not going to keep absorbing the cost of letting this property." It's the law of unintended consequences.I would just also like to point out to the House that landlords don't kick out good tenants. They want good tenants in their properties because these for 90 percent of the rentals in this country are owned by mum and dad investors. They want their properties looked after and they want good tenants.Now one of the other issues that we dealt with as a select committee was around the cumulative effects of legislation. For some of the landlords that we're hearing about who are now exiting the rental market it's because of the cumulative effect of these legislative changes. So we are hearing about the Residential Tenancies Act and that's going to bring in some major change for the market. The Healthy Homes Guarantee Act—that's a real cost to landlords and rightly so. There is the risk of the capital gains tax and the recent court decision around the unintentional damage and the consequences of that.One of the other unintended consequences of this bill—and I know this because I have spoken to people in my electorate just recently when I took the Hon Chris Finlayson on a trip through Tasman—is that people are finding it is much more lucrative to turn to Airbnb and quit the rental market altogether. This is getting too tough. The regulation is too tight and they are now finding Airbnb is a very lucrative solution for them and they are out of it. Even TradeMe—TradeMe is even saying there are 3 percent less rentals year on year that are being marketed on their website. The property investors say it's too much too soon and their members have even told them that they are now willing to sell out of their rental properties. Thirty percent have said they would sell out.One of the other issues that we did deal with on the select committee was around the time frame of enacting this legislation and we had some concerns. Originally in the bill it was three months after the date on which it gains Royal assent which was quite standard. The Government members on the select committee have shortened that to 12 December. We do have some concerns that there will be landlords out there who self-manage their properties who will not be aware of this and may inadvertently fall into the risk of having to pay the $1000 penalty for charging fees.In summary the alternative is to make the letting fees a fee for service. Re-letting—it does take time and it does cost. National does not support this bill."