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Feel-Good Investing

The opportunity for landlords to pair with transitional (or emergency) housing providers to supply rental properties is a prospect with unexpected upsides, writes Joanna Jefferies

By: Joanna Jefferies

1 May 2018

While every landlord should feel proud to provide a muchneeded public service, supplying transitional housing to those Kiwis in desperate need of short-term accommodation has an extra “feel good” factor, as well as some quite unexpected benefits.

The possibility for community housing providers (CHPs) to pair with private landlords became much more accessible last year when National announced the expansion of the Housing First initiative. Its aim was to reduce homelessness in Auckland and to provide hundreds of transitional homes across the country.

CHPs have been working swiftly in conjunction with the Ministry of Social Development (MSD) to procure dwellings for their clients, as well as provide wrap-around services to support their growing number of tenants.

Since then, hundreds of landlords have taken up the challenge to provide short-term accommodation, with over 2000 transitional housing places currently being supplied through 43 CHPs across the country. Community housing provider Salvation Army alone has 70% of their 190 rentals provided through private landlords.

‘The Salvation Army have furnished it so that inside it is a really respectable place where someone can hopefully get back on their feet’ ANGELA PLIMMER

Salvation Army housing procurement manager Sharon Heslop says the organisation matches clients who are on the housing register with suitable temporary accommodation.

They assess the needs of their client and provide wrap-around care while their client remains in the dwelling, which can be for a period of up to 12 weeks.

“They might need assistance with parenting advice, emotional support or financial advice,” says Heslop. The idea is their client will be “actively engaging” in a search for a permanent home during that time of respite.

What Do Landlords Need To Know?

Heslop says the Salvation Army wants secure, preferably standalone dwellings in a “private situation”. This is to reduce any unwanted issues with neighbours. The dwelling must be vacant in order for a landlord to sign up.

“Predominantly we are looking [for rentals] in the lower to median rent quartiles,” says Heslop. The rent is set at market rates, as agreed in a standard tenancy agreement between the landlord and the provider. The property is then effectively sub-let to their client.

The Salvation Army fully furnishes the rental, so that the tenant doesn’t have to bring anything with them, also minimising issues around vacating once the 12 weeks are up.

It prefers to pair with landlords who can supply their properties for a period of between at least 12 months and a maximum initial contractual period of three years.

As is usual in a Tenancy Agreement, the landlord can review the rent, but the Salvation Army asks for this review to happen every 12 months rather than every 180 days. A notice period of three months to terminate the agreement is required for either party.

What Are The Benefits?

Hamilton investors Angela and Adam Plimmer have recently had their first Salvation Army tenant vacate their threebedroom property in Frankton, Hamilton after a period of 12 weeks. The couple say there were no issues with the tenant and they moved on to a permanent Housing NZ home.

“I am really proud of the place,” says Angela, who renovated the property to include a bath and third bedroom. “It needs a coat of paint on the outside but the Salvation Army have furnished it so that inside it is a really respectable place where someone can hopefully get back on their feet.”

Currently their property is un-tenanted while the Salvation Army waits to place the next tenant. The upside? The couple are paid weekly at the same rate whether the home is occupied or not. They say this allows them to make any small improvements or repairs they need to without having to organise it around the occupant.

The Salvation Army also takes care of the grounds and lawns.

Angela initially had concerns around the potential for damage or meth contamination but the Salvation Army take on complete liability for meth contamination and damage caused by the tenant to the property. This is noted explicitly in a schedule addendum attached to the standard Tenancy Agreement they signed.

Angela says this is a clear upside to this investment, as traditional insurance providers do not provide complete coverage for damage caused by meth.

The only drawback was that when she approached her insurance company, it promptly reclassified the dwelling as a boarding house – due to the possibility for tenants to stay less than three months – which significantly increased their premium. However, because of this she negotiated with the Salvation Army to increase their rental payment by $10/week.

She also hopes to use the next tenant’s Community Services Card to make use of insulation subsidies before they expire in June.

And... The Risks?

Adam says all their investment properties are managed by property managers, except for this one and that is because the Salvation Army effectively is the property manager ... as well as the tenant. Sound confusing?

Heslop says the Salvation Army provides a social worker and tenancy manager for each tenant, “reducing some of that risk to the landlord.” And the tenant is visited and the property checked weekly – far more frequently than a property manager would check. The downside, says Adam is that they are not professional property managers. “They have limited ability in that way – but on the other hand they inspect weekly. It’s not perfect.”

Adam says they have been easy and flexible to work with and Angela’s feeling is “they desperately need the houses”.

The Salvation Army pay for baseline meth testing, as well as testing between tenancies – another added benefit to the agreement.

So, has the Salvation Army had to deal with meth contamination? “Yes, we have had to do remediation in three locations,” says Heslop. But “there’s no risk to the landlords as we cover [the risk].”

Housing The Homeless

Another opportunity for “feel good” investing is through housing the homeless. Airedale Property Trust (APT) is one such CHP, based in Auckland, who have the specific task of working with homeless people who wish to transition into permanent homes.

Unlike the Salvation Army’s clients, APT’s clients are unlikely to be on the housing register. APT group property manager Ratenesh Sharma says their needs are high – they’ve been living on the street for a long time – and as such, the wrap-around services provided are comprehensive.

“We’re contracted to house 60 [clients] and to date we have housed 34 out of 60,” says Sharma. “What we want is to get more investors to come on board and lease us their properties.”

Sharma says they typically lease properties from Mum and Dad-type investors and they guarantee rent for a minimum period of 52 weeks. Landlords can sign up for a maximum period of three years.

Like the Salvation Army they take care of repairs, maintenance and fix any damage as well as take on liability for meth contamination. They do this slightly differently to the Salvation Army as Sharma says they are unable to get insurance. Each property has a sinking fund with MSD, which sets aside $10,000 per year, per dwelling to pay for damages, and the landlord also takes out their own insurance.

“So far there have been only four units that I have had major issues with. The good thing is none of them were over $8,000 [in repairs].” Says Sharma. “Because we go there on a weekly basis, we are able to identify risks early on and therefore mitigate major risk.”

‘If that person came up to you – you’re not going to rent the property to them. But through this agency you can help out’ ANDREW BRUCE

APT pairs with Lifewise, who provides the wrap-around support services for their clients. For every 10 clients they have there is one social worker and one key worker who are in regular contact with the tenant. “That’s the only way we can make a difference,” says Sharma. “It’s quite rewarding – there are some good stories: one of our first clients that we housed went back to University and finished a degree he started 10 or 12 years ago.”

Auckland Property Investors’ Association president Andrew Bruce is one of those investors keen to make a difference for those homeless people wanting to transition to permanent housing. He currently has two Auckland City apartments leased to Airedale Property Trust and he says his experiences have been “really, really good” despite one tenant going “badly off the rails”.

The challenges of homing someone, who may have been homeless for 40 years are really different to your average challenges with your typical tenant, says Bruce. One memorable call-out was when the tenant thought “the fridge was leaking – they hadn’t turned it on so it had defrosted,” chuckles Bruce. He has close contact with the property manager and the client’s social worker so he is abreast of any problems as they arise.

“From my point of view, yes, we’ve run into a few hiccups along the way, but I was very, very impressed with [how it was dealt with]. I’d quite happily have them [as tenants] – you’re helping people out.”

Bruce says it’s a fantastic way to get involved with housing those who most need it and the back stop of the wraparound services takes away much of the risk. He says in any other circumstance “if that person came up to you – you’re not going to rent the property to them. But through this agency you can help out.”

Get Involved

There are currently 44 community housing providers registered and they need rentals across the country. To look for a provider go to: http://chra.mbie.govt.nz

Accommodation is always matched to each tenant and so it’s important that you can provide the right type of dwelling for the tenants.

Sharon Heslop says currently the Salvation Army is looking for properties in New Plymouth, Hamilton, Wellington, Christchurch, Whakatane, Nelson and Flaxmere. She is looking for a mix of one-bedroom and two-bedroom units.

Please contact Sharon Heslop on 04 382 0735 or email: [email protected] Airedale Property Trust is also looking for properties, contact Ratenesh Sharma by email: [email protected]

Who Transitional Housing Is For

Transitional housing provides short-term housing for families who don’t have anywhere to live and have an urgent need for a place to stay. They are likely to already live in the community, with children going to local schools. Families could be in this situation because:

  • the house they were renting has been sold and they’ve had to leave
  • they’ve been living with family, or in overcrowded or sub-standard

accommodation (like a garage) and can no longer stay there. In all situations they will have struggled to find a place to rent, and will have been assessed by Work and Income as having the greatest priority. People living in transitional housing pay rent of up to 25% of their income, which is in line with income-related rents for social housing. The balance is subsidised to providers by the government.


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