Govt's move to ban letting fees for tenants applauded by Barfoot & Thompson

The AM Show 23/03/2018

One of the biggest property management companies in New Zealand wants the industry regulated to stop managers from charging letting fees.

The Government plans to ban letting fees by the end of the year.

"It's basically like a supermarket charging you to walk in the store for the privilege of buying their goods," Housing Minister Phil Twyford told The AM Show on Friday morning.

"What other area of the law allows two parties to contract for the exchange of services, and then charge someone else? It's completely unjustifiable."

Property managers are hired by landlords to find tenants, who are then charged to secure the tenancy - usually about a week's rent, plus GST.

Barfoot & Thompson director Kiri Barfoot supports the move, though it'll require many property managers to rethink their business models.

"They're providing services to the owners, and the owners should be the ones that pay for those services - not the tenants."

Around 80 percent of landlords use property managers, by her estimate. She doesn't think that percentage will go down, even if landlords are charged.

"It's a lot of work to find a tenant. It's not just turn up and show somebody a house. There's a lot of paperwork, drive to a property and the potential tenant doesn't turn up... background checks, Google searches, taking photos, advertising, etc etc. It's a lot of work."

But with rental stock in high demand, there are fears some landlords and property managers will take advantage of desperate applicants and make it clear if they don't pay up, they won't be considered as tenants. 

Any industry that's not regulated is open to corruption.

"The property management industry isn't regulated - anybody can be a property manager. We think that needs a little bit of investigation," says Ms Barfoot.

"This is dealing with people who are perhaps at the vulnerable end of society - a little bit not educated, a bit naïve. Any industry that's not regulated is open to corruption."

Renters United Wellington spokesperson Robert Whitaker told The AM Show he's confident property managers will abide by the new rules.

"Once that loophole is taken out, it'll be pretty black and white in the law that you can't charge fees like this."

National Party housing spokeswoman Judith Collins said Labour supporters will be happy, but there will be a "flow-on effect" on rents.

"If landlords have to pay the cost, they will have to get the money back from somewhere, or else they simply take the hit. I think Phil's done exactly what his supporters wanted him to do... but there's always a cost."

Mr Twyford says after Scotland banned letting fees in 2012, it had no effect on rents.

Even if it did, Ms Barfoot says it would be a good thing to encourage more people to buy, rather than rent.

"Ultimately you want to take a step back and think well, people do have to rent, most people start off renting. Don't we want eventually as a country get people back into buying houses again?

"Go back to schools, teach a bit more financial nous to schoolchildren, teach them that having your own house should be a goal to attain, to aspire to. Teach them about sacrifice, delayed gratification, lowering expectations."

Barfoot & Thompson manages 15,000 properties in Auckland, and employs 260 staff. Ms Barfoot doesn't expect any job losses for them, but smaller operators may struggle and have to find a new way of making money.

"That might be a small minority of businesses that rely on the letting fees... If we can't get the money from the tenant, we'll just look at perhaps getting it from the landlord."

Home ownership rates in New Zealand are at a 60-year low.

Watch the full interviews above. 

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