Wellington renter Ben Crawford is celebrating the news he may never have to pay a letting fee again, if a Bill lodged in Parliament yesterday becomes law.
"It feels like there's nothing you can do cause if you do kick up a fuss, there's always tonnes more people out there who need a place desperately so you can easily miss out," he said.
Letting fees are charged by property managers for the costs associated with finding tenants for a rental property, including holding open homes, filing paperwork and advertising.
It's common practice for agents to charge one week's rent plus GST, but there is legally no maximum to what they can charge.
The letting fee for Ben Crawford's Brooklyn flat was more than $800, a cost that was a struggle to find money for on top of the bond for the property and rent in advance, he said.
Mr Crawford said he's been forced to live in moudly and cold houses before due to the lack of available properties to rent in the capital.
Renters United member Kate Day said it's a common scenario with the cost of letting fees being a barrier to people leaving inadequate accommodation, among other factors.
She said letting fees were unfair and lacked transparency.
"We also hear about people who move into places that are just not fit for them to move into… they're paying a huge fee but actually the place might be filthy or not fit for the new tenant and therefore they're not getting anything for their money," she said.
Ms Day said she felt ripped off herself having to pay a letting fee when she moved into a Wellington rental with no door handles and mouldy walls.
"We'd like to see the Minister go even further and license and regulate property managers so that other fees that they charge can be regulated as well."
The Government said it's the first step in improving the lives of around half of the country's population that rent.
The most expensive average weekly rent for a four bedroom house is in the Auckland suburb of Parnell at $1,100 and the cheapest is in the Tararua District at $240, according to Quotable Value figures.
Housing and Urban Development Minister Phil Twyford questioned why letting fees were legal, calling it an "unjustifiable tax" that allows letting agencies to provide services to landlords but charge tenants for the work.
"It's basically a way of gouging renters and I think it's time that it stopped."
Twyford said he has no reason to believe a ban on letting fees would lead to a rental price increase, saying that the action was carried out without a negative impact in Scotland, as well as legislation being before parliament in the United Kingdom.
Property Institute chief executive Ashley Church said the move would provide some relief to tenants struggling with increasing rents but appears to have been made for political purposes and won't make a huge difference in the long-term.
"We're ending up with a measure that perhaps hasn't been examined as carefully as it might otherwise have been."
He stressed the opportunity the government had to improve the unregulated property management industry through its review of the Residential Tenancies Act will be more important for creating change.
"What this will do, if it's done properly and not for political purposes, it will actually even out the playing field and make it fairer on tenants," he said.
"There are some people operating within that industry who probably shouldn't be able to do so and cleaning up the industry a little bit and putting some clearer rules in place will avoid those things going forward."
The government is also investigating limiting rental price increases to once a year.
Phil Twyford said he hopes letting fees will be banned by the end of the year.
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