A logical start to solving the rental problem is a government initiative that offers extended landlord insurance. Currently insurance companies have a list of reasons they will not pay out in the case of a tenancy including:
• Willful damage, partying included,
• Damages caused by illegal activities including marijuana growing, and
• If a tenant fails to pay rent. (There is loss of income insurance but it generally only applies to catastrophic loss from property damage.)
When you combine this with sweeping rules favouring the tenant in the Residential Tenancy Act, the growing expense of property ownership and difficulties getting damages from a tenant, the result is empty or unavailable houses. The little guy who owns one or two potential rentals generally gets out of the landlord game.
One bad tenant can take years to recoup losses. The costs, risks and difficulties undertaken when one turns a property into a rental have grown to a point where renting out is no longer viable especially for the small operator.
Consider a $350,000 investment (a small house in Nelson). It requires income of about $2,000 a month just to cover basic landlord expenses including mortgage (about $1,500 that can be higher if term is shorter), insurance ($150 plus), property taxes ($150 plus), and the water and sewer bill.
Add a hefty repair and maintenance bill to that and the landlord is losing money.
It is evident the free market system is not working in the existing legislated environment. Better assurances that the landlord’s investment is covered would help. Without greater assurances landlords are going to reduce their risk and find better ways to invest their money. Looking at ways to keep landlords in the market will increase rental availability.