Tribunal decisions interfering with landlords rents

A recent newspaper article revealing the Tenancy Tribunal had ordered a landlord to lower the rent on their property is worrying evidence of unnecessary interference and must be stopped, says Salesh Chand, a partner at property accountancy firm GRA.

The tenant successfully argued to the tribunal the weekly rent of $730 for her three-bedroom property in West Auckland’s Rānui was above market rent by a substantial amount.

Her evidence included Ranui market rent gathered from Tenancy Services bond data, which found $580 was the median rent and $645 the upper rent. The adjudicator ordered the woman’s landlord to reduce the rent to $610 a week.

Chand says this interference by the tribunal is creeping socialism.

“In his book The Theory of Moral Sentiments, famous 18th-century philosopher and economist, Adam Smith, proposed the idea of the ‘invisible hand’, whereby markets regulate themselves due to competition, supply and demand, and self-interest.

“For example, if a landlord asks for rent that is way above market, tenants will not lease the property in the first place. It is self-limiting, and the landlord will need to lower an unreasonably high rent in order to attract a tenant,” Chand says.

He says dictating what rents landlords must charge is tampering with the free market. “And because free markets are naturally self-regulating, they do not need ‘help’ from government organisations in order to function properly. Government interference is not just unnecessary, it is actually counterproductive because it stifles supply signals (e.g. premium rents indicating high demand, which leads to new supply).”

Chand is aware of one landlord who challenged the right of the tribunal to reduce the rent he charged. He says the adjudicator mentioned in his findings the rent level was correct and appropriate at the beginning of the tenancy, but became unfair to the tenant when the market cooled and more properties became available.

“How have we got to a position where the tribunal thinks it is appropriate to intervene like this? We need to appeal every such adjudication on principle, and get New Zealand back to free market principles.

“This is just more evidence of a dangerously socialist government thinking it knows best, condoning actions that are in fact damaging in the grand scheme of things. We need to reject the nanny state socialism, centralised authoritarianism, and get New Zealand going again,” says Chand.

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