Should landlords pay a bond to cover maintenance?

There’s a major problem with maintenance in New Zealand rental housing. Independent assessors of a representative sample of New Zealand housing found that 32% of rental housing was poorly maintained (Buckett et al. 2017:26).

Research recently published by Auckland Council, and based on interviews with Auckland property managers, showed that a major challenge in working with landlords was landlords’ refusal to discuss or pay for repairs and maintenance. Examples of issues that property managers struggled to get landlord agreement to pay for were: fixing broken toilets and light fittings, addressing leaks, and replacing ovens. Property managers reported that some landlords were not interested in maintaining properties or did not have funds available to make repairs. The report notes that:

These comments indicate two things: investment in rental properties in Auckland’s buoyant housing market for capital gain, often at high levels of personal borrowing; and the absence of statutory requirements on owners to have sufficient funds with which to maintain rental stock to a high standard in New Zealand’s broader housing system (Young 2017:34).

Writing about the Australian version of the problem yesterday, Jennifer Duke proposes a solution: a landlord bond.

Simply, regardless of the cost of rent, tenants should get what they pay for – a safe and well-maintained place to live.

While this is already mandated in most state’s Tenancy Acts, it’s well-documented  that many landlords take far too long to attend to maintenance issues.

One way to fix this is through a simple mandatory sum of money provided by landlords as a “sinking fund” for maintenance, or a bond, paid by the investor.

Property managers would have the ability to tap into this fund as needed to fix reasonable maintenance and repair requests, without being delayed by landlords who, for whatever reason, are not getting to the work in a timely manner (Duke 2017).

As Duke suggests, this fund could be accessible by property managers in order for them to arrange repairs. Alternatively – and perhaps preferably, given the fact that most landlords do not use property managers – this fund could be held by MBIE or another body, and tenants and landlords (or their property manager as their agent) could both apply to use the bond paid by that landlord for that home to make necessary repairs. The fund would have to be kept at a certain minimum level, and the remainder paid out to the landlord at the end of the tenancy.

It’s an interesting idea. Could such a fund be one part of the solution to the maintenance problems in New Zealand’s rental sector?

References

Buckett, N. R., M. S. Jones, N. J. Marston, and Saera Chun. 2017. BRANZ 2015 House Condition Survey – Condition of House Comparison by Tenure. Judgeford: BRANZ Ltd. Retrieved (http://www.branz.co.nz/cms_show_download.php?id=53af2b0c2e5ca5169a0176996bba7ee88de082c0).

Duke, Jennifer. 2017. “The Part of the Rental Equation We Are Missing: A Landlord Bond.” Domain, August 7. Retrieved (https://www.domain.com.au/news/the-part-of-the-rental-equation-we-are-missing-a-landlord-bond-20170807-gxcsvt/).

Reid, Alison. 2017. Residential Property Management in Auckland. Auckland: Auckland Council. Retrieved (http://www.knowledgeauckland.org.nz/assets/publications/TR2017-018-Residential-property-management-in-Auckland.pdf).

3 thoughts on “Should landlords pay a bond to cover maintenance?

  1. Yes 100% they should. In 20 years of renting I have only had one landlord, ever, attend to maintenance without delay or excuses. I even had a landlord sack their rental manager. The rental manager had tried emails, texts and phone calls to the landlord for three days when I’d had no hot water and finally she called in a plumber for me. The landlord sacked her for it. Until such time as tenants and landlords have a level playing field landlords will not do the things they are supposed to. This HAS to change!

  2. Yep – Good idea. Need to put rental on a much more professional footing – the property management should be handled by independent 3rd parties ensuring reasonable standards of maintenance and property care (by tenants and owners) actually occur. Changing the whole structure of residential tenancy would make property speculation a much less attractive proposition and re-balance the housing market. If landlords aren’t prepared for providing secure, long term, reasonable quality housing then they shouldn’t be in it. Changes is long long overdue. The true costs of property speculation to the families needing to rent, and to wider society through impacts on health, education etc, are not emphasised enough – I wonder why this privatisation of profit and socialisation of costs goes so unnoticed? Which government will have the guts to make the fundamental changes required? Definitely not National, maybe Labour (probably not though) – roll on the next generation of voters – hope it’s not too late. Thanks for posting these well referenced articles.

  3. I love this idea. I really can see it working and just thinking about a system that would work for my tenants and I. Thanks Elinor, this is a real value add and gives a voice to tenants. Its also a proactive voice, not reactive. Love it

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