Providing Property To A CHP
Sharon Cullwick with the pros and cons of providing a property to a community housing provider.
1 November 2021
With the obvious advantages given to those rental home providers who supply to community housing providers (CHPs), is this a viable option for your rental home? Well, that depends. Sure, you have the ability to continue to claim the interest as a deductible expense. However, there are some advantages and disadvantages that you need to be aware of and consider before deciding.
What Is A CHP?
In 2011 rules and regulations changed allowing private non-government agencies and often not-for-profit organisations and/or charitable trusts to establish as CHPs. These CHPs range in size and cater for the specific needs of their clients (tenants). From 2013 these organisations were able to benefit from the same financial subsidies as Housing New Zealand (now Kainga Ora). Since this time the number and size of these CHPs have increased significantly.
How They Work
Every CHP operates differently. Some provide houses for their tenants and are hands-off in their management. Others provide complete wrap-around services and visit their clients most days, or at least once per week. The wrap-around services which are provided depend on the individual needs of the clients. Some of the wrap-around services include budgeting, mental health, disability support, addiction services and transport to appointments. Some CHPs work with clients and provide transitional houses until they can find a permanent solution for their housing needs.
Number of CHPs
In the June 2021 Quarterly Housing Report, approximately 10,400 houses are provided by the 76 registered community housing providers. There are also 63,955 houses provided by Kainga Ora. Some of these properties are owned by not-for-profit organisations with many being leased from private landlords. Over the last year the number of properties managed by CHPs has increased significantly.
CHPs require properties within any rental price range, although they are often looking for properties within the medium to lower quartile. A rental appraisal is often required to establish the market rent for the property. They very rarely pay above the highest market rent for a property in a particular area. Either a lease agreement or a tenancy agreement is written between the parties with the CHP being the tenant for a tenancy agreement.
• Guaranteed rent for 365 days per year.
• Inspections every three months – some inspect weekly.
• No management fees.
• The landlord can attend a three-monthly inspection and can take their own records.
• You do not deal directly with the tenants but through the property manager.
• Your agreement is a lease rather than a Tenancy Agreement which isn’t covered by the Residential Tenancies Act.
• Tax advantages.
• The house is given back to the landlord in the same condition as it was when leased, give or take normal wear and tear.
• The CHP takes care of all maintenance issues and charges these back to the landlord.
• It is often hard to get insurance for your property.
• Every house provided to a CHP removes one property off the market for a potentially good tenant from the private sector.
• You don’t have a relationship with the tenants.
• There can be high tenant turnover for the property.
• Some tenants can have social issues that may be concerning for neighbours.