Salesa JennyRESIDENTIAL TENANCIES (PROHIBITING LETTING FEES) AMENDMENT BILLThird 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 third time. Around half of New Zealanders are renters. This Government is committed to making life better for our renters and this proposed legislation is a down payment on a commitment that the Government has made. Banning letting fees will save renters an estimated $47 million a year. I'd like to first of all acknowledge the Social Services and Community Committee for its consideration of this legislation and for them considering the 187 or so submissions that they received. I'd also like to thank those 187 submitters whose feedback and comments helped the committee to shape the views on this legislation. These came from a number of interested parties and they included tenants community groups students property managers and indeed landlords. Letting fees are not fair. This might be one of many reasons why about 60 percent of the submitters supported the general intent of the bill to prohibit the charging of letting fees to our tenants. A letting fee is supposed to cover the costs of conducting open homes vetting potential tenants and advertising a property but 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 fees for those services to be charged to a third party the tenant. Now this is unfair and in what other area of law are there two parties contracting with each other for an exchange of services then allowed to charge a third party? It is an anomaly in the law that is being addressed by this proposed legislation. There is no relationship between the fee and the cost of the services that are provided. It's pretty standard for a letting fee to be set at the equivalent of a week's rent plus GST. Now rent varies for different suburbs and different cities and for different kinds of houses. However letting fees are set regardless of the costs of the services that the letting agency is providing for the benefit of the landlord. There is no market competition on the amount that is payable. This ban will mean that the costs of letting a property will be borne by the party who chooses the property manager. So the costs of letting the property should lie with the person that benefits from the service. This bill means that landlords can shop around for the most cost-efficient manager and it will probably bring some competition to the property management sector. I am not aware of an area of law that allows people to contract for services and then charge a third party for those services.Now some submissions expressed some concerns during the committee stage that this bill may result in rent increases across the country. However we do not expect there to be an impact on rents. Scotland when they banned letting fees—they actually showed no evidence that it led to an increase in rents. Also the Reserve Bank in our country noted that rents are driven primarily by supply and demand not landlord costs. Treasury has also concluded that the experience in other countries shows that there's no clear evidence that banning letting fees will indeed lead to increased rents. The UK Conservative Government has also introduced a similar ban to ban letting fees and their reports agreed that there was no evidence that it led to an increase in rents. Other supply demand and financing factors contribute more to the amount of rent than the costs that are associated with tenanting a property and the Government has a plan to deal with those. If we accept for argument's sake that landlords will try to pass the cost on that is currently being handed to tenants through these letting fees and if landlords try to recoup those costs we expect that rent might go up by a few dollars a week. Now even if that were to be 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 equivalent to an entire week's rent all at once up front at the very moment that they can least afford it—when they're having to fork out for removal fees for bond and for rent in advance. Landlords and letting agents on their behalf will retain the ability under the Residential Tenancies Act to seek reimbursement from tenants for expenses reasonably incurred as a result of signing a tenancy agreement subletting or parting with possession of the tenant's interest in the tenancy. The Social Services and Community Committee recommended a couple of changes. 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 it would allow the substantive provisions in clauses 4 to 8 to come under Part 1 and allow further amendments in clauses 9 and 10 to come 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 usually the highest between the months of November to February of every 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 people's circumstances. Implementing the bill during this period will maximise a reduction in costs for tenants who are signing up for new tenancies over this peak period of time. The Government has committed to a review of the Residential Tenancies Act. This will advance a range of changes to make life better for our renters and it will include consideration of limiting rent increases to just once per year. It will also contain other initiatives to improve their security of tenure and to better allow tenants to make their house a home. This review is expected to result in legislation being introduced into this House of Parliament next year. Ultimately the best way to put tenants in a better situation is to increase the supply of housing and end the shortage that is driving rents up. The 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 are currently renting in Aotearoa New Zealand. Now based on the 2013 census data 60 percent of renters moved within three years while only 30 percent of owner-occupied homes moved within five years. We know that Māori and Pacific 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 rental properties increased from around 50 percent to around 61 percent for Māori and increased to 71 percent for Pacific children. I'd like to again reiterate my thanks to the members of the committee and submitters as well as our officials for their contribution to the Residential Tenancies (Prohibiting Letting Fees) Amendment Bill. I urge the members—especially across on the other side of the House—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. Thank you Madam Assistant Speaker.