For rent sign outside a home
Photo: Getty Images

PoliticsAugust 9, 2018

The big problem with the ‘KFC test’ for tenants

For rent sign outside a home
Photo: Getty Images

The MP who rumbled property managers talking about the so-called ‘KFC test’ for tenants writes about why they need to be stopped.

It is clear that most landlords and property managers are doing it right – they are providing an essential service for New Zealanders and are doing a good job, in a respectful and responsible way. 

But clearly some are not. The fact that we have some who try to justify that they have the right to sift through people’s private and sensitive information shows that something has gone terribly wrong.

What’s becoming more and more common is asking for bank statements from tenants, and these statements are being used to make decisions of affordability.

At first glance for some people this may sound perfectly reasonable. Landlords and property managers can see income going in, and rent payments going out.

However, at a recent select committee hearing an Auckland-based property manager openly admitted this:

“…I see a lot of bank statements because I do ask for bank statements to show affordability…I see a lot of people who are low socio-economic and their bank statements literally will read “KFC, McDonalds, the dairy, KFC, McDonalds, court fine, trucks that they buy, goods that they can’t afford.”

It is evident that this was not an assessment of a tenant’s capacity to pay the rent. This was someone snooping through bank statements to make a moral judgement on where the person spent their money, when they spent their money and on what. In this case it was fast food, but where does it stop? Are judgements going to be made based on political donations? Church tithings? Child support payments?

There is a fine line between making necessary, informed assessments and making unethical, prejudicial judgements. 

With house prices soaring over the last decade, more and more Kiwis are becoming tenants rather than first-home buyers. This has meant that our rental market is becoming impossibly competitive.

It is not unheard of to have fifty people or more bidding for a place to rent, creating a situation where landlords can then have the ability to be more and more selective.

Desperate tenants then feel pressured to hand over almost anything to landlords in order to secure a tenancy – and they do because they think its standard practice. Banks and other financial intermediaries will ask for bank statements – but the difference is that they’re financial advisors in a highly regulated environment.

But what right does any manager or landlord have to judge anybody on how they spend their money? All they need to know is that they can afford the rent and pay it on time. That can be assessed in a myriad of other ways including credit checks, references, proof of income, employment history, IRD income summaries – the list goes on. 

What is concerning is that anyone can own properties and call themselves a property manager. They don’t need training or qualifications and there is no ‘code’ to adhere to. Property managers are not registered and the industry is totally unregulated. This is why some are making uneducated, ill-informed, unethical judgements on peoples spending habits. 

This is well within the law for managers and landlords to ask to see peoples’ bank statements – and of course people can refuse. But where would that then likely put them in the long line of applicants?

It is a perfect storm for this monster of a situation to have evolved: housing unaffordability, a highly competitive and crowded rental market, desperate and vulnerable tenants, unregulated and untrained property managers, and an unethical practice that’s well within the law. 

When the manager was asked if this practice was commonplace she said “it’s becoming more so – I know lots of companies that do it”.

This issue isn’t just isolated to individual landlords or property management companies. It has been revealed that Wellington City Council also requests bank statements from its potential tenants applying for council owned rentals. If that is truly the case then we need to find out just how widespread, normalised, and accepted this practice is.

Not all landlords unnecessarily pry into people’s private information. But some do.

What is certain is that we need to draw a line in the sand. 

Walking rough-shod over someone’s privacy rights is an unacceptable method to shortlist tenants.

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