Rental reforms unintended consequences in Arrowtown

A sign you will never see from your current minority government

Arrowtown is one of the nicest places in the country to live. It is basically New Zealand, from about forty years ago. You can walk down the street and be certain to meet someone you know, there is almost no crime, and you can leave the keys in the car when you pop into the dairy.

A lot of the appeal of Arrowtown is that it is a great place to bring up a family. It was always a little cheaper than Queenstown and families would move there to get out of the hustle and bustle of that tourist oriented town.

However, Arrowtown as we know it is changing.

I was having dinner last week with someone who is closely connected to the local primary school and was shocked to hear of the problems facing the school.

Arrowtown Primary School has had a growing school roll for a couple of decades now, but that’s all over, and it seems that a lack of rentals for families is a major driver for that.

Arrowtown Autumn Parade

Not only are new families not coming to Arrowtown, some of the existing families are leaving, and the word on the street says that it is because they simply cannot find affordable places to rent, let alone a house cheap enough to buy.

According to qv.co.nz, the median home value in Arrowtown is $1,299,200.

The cheapest house for sale currently in Arrowtown is available to buy off the plans in a new subdivision, it is $975,000. The cheapest section is $525,000.

Finding a rental is the hardest part for a young family. A quick Trade Me check today shows just six rental properties available, ranging from a two bedroom downstairs flat for $480 per week, to a nice five bedroom house for $1200 per week.

The median rent for a three bedroom house is currently around the $750 per week mark.

If you listened to Phil Tyford, the best way to help sort out this problem is for our socialist government to make finding rentals harder!

By announcing their possible new anti-landlord tenancy rules this week, he has single-handedly screwed over the hopes of families trying to make Arrowtown their home.

The other day when I heard these silly new rules about not being able to evict tenants who hadn’t done anything majorly wrong, I made a comment on Backchat that the easy to get around it will be to only give short, fixed term tenancies, thereby rendering the point relatively mute. The side effect of course would be less security for tenants, not more.

But how silly of me. Of course the ruling class had already thought of that one, for I now find out that they are also wanting to ban fixed term tenancies!

There are of course a lot of reasons why a landlord might only want a short fixed term tenancy. Maybe they are going overseas for a well earned break. Maybe they want to use their bach for Xmas but are happy to rent it out for the other eleven months. Maybe they simply like the security of not having their tenant bailing out on them with only 21 days notice when they find a cheaper place.

The upshot of course is that there will be less houses available for rent. Sure there might be a few more houses put on the market initially, and that will likely slow the steady upwards creep of the prices, maybe it will even crash the market for a year or so and we will see perhaps a 10% drop in home values.

Considering the extra costs of building etc, this is pretty unlikely but in any case, that would only bring the Arrowtown median price down to a paltry $1.17 million.

What will really happen is landlords will find another way to beat the system.

With this in mind I shall advise of my own situation there. I have a rental property in Arrowtown. It is a fairly nice four bedroom, 2 bathroom standalone house.

It has been tenanted to a nice young family with a baby and a dog for the last two and a half years. Because I was being nice to them, I left the rent at the original level for quite a long time and it is currently rented to them at about $200 per week less than what it could be.

My tenants have just given me their required 21 days notice as they have managed to buy a section in a neighbouring town and plan to build. They have been very fortunate to find another rental in that town right next to their section so it absolutely makes sense for them to quit Arrowtown, even though they will now have a 30 minute commute to work and schools in Queenstown.

I have decided not to rent the house out to another family. Even though I could easily get around $750 to $800 per week for the house, I am not prepared to give away control of my asset to the extent that Labour would demand.

I would normally look for another nice family, (with a dog, as those people always look after the house very well knowing that it’s hard to find somewhere else that will allow pets). But no longer. If I can’t take my house back if I need it, say to help out family or friends, then I won’t be a long term landlord anymore.

But what to do? Plenty of people richer than I would be happy to leave it empty and I suspect that’s exactly what will become of many former rental properties. I don’t want to do that as we live off that income, it’s how we afford to eat.

I could put it into short term lets via book-a-bach or air bnb. There is certainly a market for that in the area and I could possibly make more money each year by doing that, but it is a fair amount of work too. It is not my preferred strategy but one that I will possibly look at in the future.

An easy way around the new rules might be to simply only advertise the property as an air bnb property, but with a minimum rental of say six months. You still pay the tax just like with any rental property and probably have to pay higher rates etc but I suspect you wouldn’t be bound by the new tenancy rules. I expect the CoL will work out a way to ban that too though.

So what I will be doing is putting my daughter into our property. She can move out of my house (at 23 it’s time!). She will get flatmates in to pay the rent and as it will be occupied by family, there will be no tenancy agreement and I won’t be bound by the government’s socialist agenda. I will get the same amount of rent as before and I can get the property back anytime if I need it for some reason.

In any case, there will be one less rental available for a family in the area, (one less of many I expect), and there is one less family who will be sending their kid to Arrowtown Primary.

So well done Mr Tyford, if your plan was to napalm the rental market, drive up rents, ruin communities, and wreck peoples hopes, you’re well on your way to success.

Slow clap for you.

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