Landlords with troublesome tenants and those hit hard by tax changes are selling up, experts say.

Others are choosing to put their rentals on the lucrative holiday rental market – further reducing the supply of
homes for prospective tenants.

Property investors and rental agencies told NZME that many good landlords had left the industry, which put more pressure on the market.

The Ministry for Housing and Urban Development, which Tenancy Services sits under, said landlords could still evict tenants for anti-social behaviour and rent arrears but there were regimes in place.

Since February last year. landlords have been required to specify a reason for ending a tenancy and “if someone is being required to leave their home, it is fair for them to know why”, the ministry said in a statement.

“Requiring reasons to be provided when notice is given allows tenants to challenge those notices if needed.”

Figures show In the Bay of Plenty the number of bonds lodged in the year to July 2022 had decreased from 22,686 to 22,569, a 0.5 per cent reduction. Nationally, bonds had increased from 373,250 to 376,315 (0.8 per cent) over the same timeframes.

The news comes as latest data from Trade Me shows nationally rents increased by 7.5 per cent year-on-year to last month. In Tauranga, over the same timeframes, the average median rent jumped from $595 a week to $630.

In Rotorua, it remained the same at $500 a week but rental agencies said rents were higher than that – and many homes had skyrocketed by an extra $100 a week in one year.

Desperate families were also applying for one-bedroom homes as demand outstripped supply.

Tauranga Rentals principal officer Dan Lusby said it had lost landlords because of the regulatory changes introduced last year.

He said it was hard to move troublesome tenants on and those who did not pay their rent on time.

“We had a sort of strange three-strike rule. If they didn’t pay their rent on time or they misbehaved or if they were wrecking the place we’d give them three chances and then 90 days to move out but we can’t do that now.”

Lusby said it could go through the tenancy tribunal but tenants needed to be 21 days in arrears or in arrears three times over a three-month period.

“It’s a nightmare if these tenants build up debt and it can be difficult to move them on.”

Some landlords had given up.

“That is why we lose them. The owners think it’s too hard and they sell up and get out.”

Rents had continued to increase and a three-bedroom house in an average area was now $660.

“Rents are still going up. Over winter we’ve mainly only had one and two-bedroom houses available and they’ve gone pretty quickly. We have only got four properties on our board at the moment and they go within a week.”

Dozens of people were applying for those houses and demand continued to outstrip supply, he said.

“We don’t advertise on Facebook any more because we just get hundreds of applications. People are chasing us all the time.”

Rotorua Rentals owners Pauline Evans said some of its experienced landlords had sold because of tax changes.

“There is no doubt that the recent changes to our industry have made owners nervous, more cautious, and less positive about continuing to invest in rental property.”

Evans said recently it had owners take their property out of the rental pool to change them into short-term holiday accommodation.

“Their perception is that market is about to take off with summer just around the corner.

“Feedback I have heard from some New Zealand visitors is they are concerned about safety issues, especially staying in areas such as Fenton Street in regards to the homeless. They are choosing to stay in Airbnb-type accommodation instead of motels and hotels.”

She said the 90 days’ notice had affected the tenant selection process and had caused delays in processing tenants’ applications.

“We need to be far more creative when checking whether applicants would be suitable for our properties, without breaching privacy laws. Bad tenants not only have a negative effect on neighbours, they also affect our relationship with owners.”

Three-bedroom houses were being advertised for up to $650 per week, which was an increase of $100 per week from this time last year and “these rents are being readily achieved”.

Until there were more rental properties on the market there would be continued pressure on rents, she said.

“If we advertise a lower-priced property we will see a much higher number of applicants. They will apply even if they are a family; they are so desperate to get accommodation they will inquire about a one-bedroom property.”

Tauranga Property Investors Association spokeswoman Juli Ann Tolley agreed the recent law changes made it very difficult to end a bad tenancy.

“That is not good for anyone. The neighbors, the owners and the overall market because at the end of the day, we end up losing another rental house being returned to private use or sold reducing the rental pool.”

She said if the rent was covering outgoings investors were hanging in there, but costs had gone up across the board.

“If it doesn’t, then they have already sold or are now selling up. I believe that this trend will continue for the next few years as interest rates continue to rise and the full impact of the lack of interest deductibility kicks in.

“Unfortunately, in some cases, good landlords who feel it has just gotten too hard have sold up and that has put more pressure on the market.”

Rotorua Property Investors Association president Sally Copeland said a year ago the number of applicants to each property was as high as 50 but “agents are now saying it’s more like 20 applicants”.

There were only 93 properties available on Trade Me, she said.

From an investor’s point of view, Rotorua was a great location and had lots of attributes to attract people, especially with remote and flexible working arrangements.

But even though house prices had cooled, the increase in interest rates made it hard to find positive cash flow.

Some property owners were also concerned about the changes to regulations, in particular the limited action that can be taken against anti-social behaviour.

”Unfortunately, it’s the community that suffers in these cases and the action property owners can take is limited.”

Copeland said often a lot of its members accepted lower-than-market rents when they had a good tenant.

”They value the peace of mind a great tenant provides.”

Bookabach corporate affairs director Eacham Curry said the reasons people choose to let property as short-term rental accommodation were many and varied.

”Most often it’s because when the property is not being used as a holiday home for themselves, owners let them to cover rising costs.”

The most searched regions on Bookabach this year included Waikato, Auckland, Bay of Plenty, Wellington and Canterbury.

Airbnb has been approached for comment.

When can you evict a tenant?
* Landlords can apply to the Tenancy Tribunal to end a periodic tenancy for anti-social behaviour in connection with the tenancy but it had to happen on three separate occasions within a 90-day period.
* The landlord has to serve a valid notice for the behaviour following each of those occasions and the tribunal was limited to deciding whether the notices have been issued reasonably and fairly.
* If a tenant has been late with rent payment on three separate occasions within a 90-day period.
* If a tenant is in rent arrears for at least 21 days.
* Landlords can also apply to terminate a tenancy for other types of tenant behaviour including threats of violence towards the landlord or their family and threats to cause substantial damage to the property.
– Source Ministry for Housing and Urban Development