$9700 per property WOF cost for landlords? Yeah, nah.

Yesterday a random press release from an outfit called the NZ Centre for Political Research came across my desk, claiming that a Warrant of Fitness on all rental houses could cost landlords up to $9,700 per property.

Run for the hills landlords! Proper, costed, evidence-based research shows a rental WOF will cost you nearly $10K per house! The only benefits will be about $2.90 per month per household to the tenants. That doesn’t stack up! Revolt!

Oh wait. First of all, the NZ Centre for Political Research turns out to be a climate change denying “think tank” founded by former ACT MP Dr Muriel Newman. Not a politically neutral source then.

Secondly, when you read the press release, it reveals the $9,700 figure was arrived at from a “rough cost-benefit analysis” based on information in Working Paper No.18 from the Children’s Commissioner’s Expert Advisory Group on Child Poverty last year. Now I’ve read that paper (and it’s excellent), and while it recommends the introduction of a rental WOF, it doesn’t set out in stone the standards that a home would have to meet, it simply suggests introducing something along the lines of the Healthy Housing Index developed by the University of Otago. Hardly the basis on which to do a robust cost estimate.

Furthermore, it’s not even clear whether the estimate is based on the Healthy Housing Index or something else. As best as I can tell, the figure has been pulled out of the air. No evidence, research, costings, or calculations are provided to back it up.

The one claim I am prepared to entertain might be accurate is that more properties would fail than pass a rental WOF given the current state of the New Zealand housing stock. If this is true, this is the best argument I can think of for introducing a rental WOF to ensure we’re all living in safe, healthy, habitable homes.

By contrast, legitimate, costed research by the University of Otago two years ago found that insulating homes under the WarmUp New Zealand scheme had saved $1.7 billion dollars and up to 18 lives. This is the kind of robust research we should be relying on for assessing the merits of upgrading our homes.

The Green Party would introduce a WOF for all rental properties, as outlined in our Home for Life package last year.

While it seems pretty clear the $9,700 figure plucked out of the air by the NZCPR is wildly inflated, we do recognise that there would be some cost to landlords associated with ensuring every property meets the standard. That’s why would provide clear timelines for meeting the standard and financial support for landlords to do so.

9 Comments Posted

  1. yet another reason not to vote for the greens.
    vicious sideways attacks on people trying to engender a conversation. Hello?

    is this the behaviour that the Flannagans refer to on their blog M&M whilst Madelaine was at Otago and you Holly was a editor of the student rag.
    Is this your modus oprendi?

    Turns me off as a voter I must say.

  2. What Spam and rural johnny are wanting is the Green’s to do a costing of each and every house that needs work to arrive at a total figure. This is more commonly known as a straw man argument…you haven’t done the impossible they say, so obviously you are wrong! The NZCPR is simply wrong because they have tried to do the impossible from a biased point of view.
    Oh the irony! A strawman that accuses me of setting up a strawman!

    I don’t want / need a costing of every house. I want to know what will be included in the housing WOF (“Can you guarantee that your proposed WOF will limited to be only “heating, hot and cold tap water, toilet, a shower or a bath tub, electricity and a stove””) I also want to know what the estimated typical costs are. If the greens decided to mandate that every house requires a solar panel to meet its WOF, then this will be a significant cost. Whether the greens are planning this is not clear, yet the electorate should know.

    There is a big difference between “not maintained properly” and “safe to reside in”. Eg. is a house needing a paint a health issue for the tenants?

    Do you support every policy that sounds good, irrespective of costs?

  3. I find it rather silly that rural johnny and Spam are trying to defend the NZCPR’s made up numbers by making up their own.

    Firstly, according to BRANZ, 59% of houses in New Zealand are not maintained properly. Obviously more than 15% of them would be rentals Spam. Furthermore, their study found that the amount of houses in good condition fell by 9% between 2005 and 2010. Clearly the problem is getting worse and therefore policy needs to be devised to correct it.

    To follow the NZCPR’s advice would be to do nothing which would result in our housing stock degrading further. That would obviously lead to further social and health deterioration, the cost of which is difficult to fully quantify.

    What Spam and rural johnny are wanting is the Green’s to do a costing of each and every house that needs work to arrive at a total figure. This is more commonly known as a straw man argument…you haven’t done the impossible they say, so obviously you are wrong! The NZCPR is simply wrong because they have tried to do the impossible from a biased point of view.

    It is idiotic to argue that the cost to landlords to insure their houses are safe to reside in is worth more than the people’s health and wellbeing. What of the lost productivity due to ill health caused by inadequate housing? I’m pretty sure many business owners would see the merit in having a healthy workforce. Clearly the right wing are not considering both sides of the ledger with their opposition to a healthy homes initiative.

    The deluded rural johnny claims that a housing WOF will redistribute wealth from the landlord to the tenant. However what he fails to understand is that a percentage of income from rent is meant to be set aside for proper maintenance. In general this is currently not happening and landlords are simply taking advantage of those trapped in poverty. They have increased their wealth at the expense of the nation.

    In my opinion if a rack renter cannot afford to repair a house they own, even with rentals being overpriced by 43% according to the OECD, then they should sell. That would allow those with the capital to invest in property that requires repairs to reap the rewards of having healthy and productive tenants. A housing WOF would allow those looking for a rental to chose the best house…and isn’t that exactly what the free market is all about?

  4. I would argue that the ultimate beneficiary of the improvement of rental housing stock will be the nation.

    Johnny is right that rent would probably rise, but because the renter is not the actual financial beneficiary of the improvements, the renter wont have much of an improved income to pay the rise. The absence of rent control and the lack of rental housing exacerbate the problem.

    I don’t have a solution to offer that would square this circle.

  5. What the wof policy does is to redistribute wealth from the landlord, who wears the cost, to the tenant, who reaps the benefit. So for each of those, a cost-benefit analysis does not mean anything. But from a societal basis, a CBA can be determined!

    Requiring a rental property to have a wof could be justified on the basis that it raises the health and well being of the most vulnerable. That it is done at the cost of those who, it is presumed, can afford it, is one of the issues. The presumption is false: not all landlords could afford the cost of bringing a property up to wof standard.

    You might say, well so be it, loosing sub-standard rentals is no great loss. But there would be a consequence to this – a reduction in the supply of rental stock will cause rents to rise.

    For those landlords who could afford it, there will again be a consequence – increased rental prices to pay for the capital investment.

    Raising the health and well being of the most vulnerable is a worthy objective – this means to achieve that has unintended consequences.

    That is what the NZCPR analysis showed but you do not welcome the data.

    Shooting the messenger in the way you have merely serves to give ammunition to those who want to discredit the Green Party.

  6. You can’t do a cost benefit analysis when all the costs belong to one party and nearly all the benefits to the other. Obviously for landlords it won’t pass such analysis, AND THAT IS THE POINT!

    As they say in the rental market “there is money in shit”.

  7. I agree with Johnny. You start out with an ad-hominem, dismiss the claims as “wildly inflated”, and offer as rebuttal only a completely uncosted policy discussion paper. You complain that it is “hardly politically neutral”. Is your housing policy politically neutral?

    You dismiss the costs of $9,700 as being “Wildly inflated”, yet your housing policy document claims that “thousands of jobs” will be created getting rental stock up-to-standard. How many thousand jobs? Lets say 2,000 jobs, for 10 years. Lets say that they are paid a “living wage” of $18.50 an hour, or $37,000 / annum. 2000 jobs at $37,000 / annum for 10 years is $740 Million. Current rental stock is approximately 600,000 houses. If say 15% of them need work, then this equates to 740 Million / 90,000 = $8,200 / house; broadly in-line with the research above.

    So: Which numbers need correction?
    What percentage of houses need upgrading?
    How many jobs is the green policy really going to create?
    Are the upgrade standards going to be set to maximise the “job creation”?

    Overall, what do you think the actual cost:benefit is?
    have you actually set any standards? Can you guarantee that your proposed WOF will limited to be only “heating, hot and cold tap water, toilet, a shower or a bath tub, electricity and a stove”. Probably not because your seemingly innocuous policy has the catch-all “including” ahead of that sentence.

    What the electorate wants is to know exactly what your policy is, what the impact is, and what the cost: benefit is.

  8. I read the press release to say that it is the average cost of bringing properties up to warrant of fitness standards that is going to be $9,700. In which case it is an admission of the shocking state of our rental housing stock. If it takes someting like a warrant of fitness to jolt landlords into action then bring it on.

    I would expect that the cost of a warrant of fitness would be minimal. I would also anticipate that once a property has passed it’s warrant then it may not need to be checked for some time.

  9. You are dismissive of the WOF cost figure because it was “… arrived at from a ‘rough cost-benefit analysis’ based on information in…” by “… not a politically neutral source…”.

    So what is your basis for concluding that “… the $9,700 figure [was] plucked out of the air by the NZCPR” and is therefore “… wildly inflated”?

    The NZCPR appear to have raised a legitimate policy concern – the benefits of your policy compared to its cost. Yet you attack them for what they are and seemingly, for who represents them, rather than addressing the detail of their concern.

    Given that the Green Party would introduce a WOF for all rental properties, how much have you calculated the cost to landlords to be?

    A rental WOF is nothing like buying electrical goods. Yes, safety standards are set for electrical goods and they must meet those standards to go on sale. Insulation, weather tightness and whatever “basic service provision standards” means, are not safety issues. They are health issues. Your rental WOF proposal is akin to requiring electrical goods to be manufactured with soft grip handles and waterproof enclosures.

    People getting sick from living in uninsulated homes is an issue worth solving. If you target that issue in rental properties, then also target it for those who own their own uninsulated homes. Or is it that you care for only those renting?

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