Tuesday, August 25, 2020

This is corrupt and should be prosecuted

Newsroom has a major scoop this morning about a corrupt scheme to milk MSD of emergency housing money by subletting houses from landlords without their knowledge. To add insult to injury, some of the houses were uninhabitable, lacking ovens, smoke alarms, or other basic requirements - and it ended up pulling houses out of the normal rental market, making homes in South Auckland even harder to find. And when it ended, the property managers kicked everybody out overnight, creating an even bigger problem.

The full details are in the article, but Harcourts Otahuhu seems to have been a nexus for the scheme. And the bit that really caught my attention is this:

Another curious thing she found was other properties on Harcourts Otahuhu's rent roll had been rented out to Zainulabidin (Zain) Syed. [a motel owner already exploiting MSD]


Parker alleged there was an arrangement between Harcourts Otahuhu, Syed and other investors to find and buy houses, or simply move MSD clients into properties on the firm's books.

Tenancy agreements attached to many of the houses Syed and others rented off Harcourts Otahuhu contained subclauses preventing subletting.

She alleged many of the landlords weren't informed their houses had been sublet to social housing tenants.

Obviously, that's a breach of tenancy law. But its also potentially a crime. If Harcourts Otahuhu received anything for this (e.g. higher commissions from higher rents), then that's a pecuniary interest which they had to disclose to the landlords, with failure to do so punishable by seven years imprisonment. If Harcourts corruptly agreed to accept this or any other payment, that's another seven years. And if Syed offered such inducements or suggested that landlords not be told or not be given the full amount, he's in the gun as well. At the very least, its deceptive conduct under the REINZ property management code of practice, and should lead to Harcourts Otahuhu's licence being pulled.

But will any of this happen? I guess that would require the government to stand up for public probity and for basic standards of honesty in the rental market. And to be honest, I'm not holding my breath for that.

And most obviously: none of this would have happened if the government had sufficient state housing in the first place, or just handled emergency provision themselves rather than trying to subcontract an essential service. Because when you contract out at inflated rates, you create space and incentives for exactly this sort of corruption to grow. Public provision prevents that, and gives us a more honest society. And we're all better off from that (except for corrupt property managers, of course).