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COMMENT: Punishing landlords won’t solve crisis

The capital gains tax debate is over, but landlords are still being scapegoated as the focus turns to Healthy Homes, argues Auckland Property Investors Association vice president Peter Lewis…

Monday, May 6th 2019, 7:02AM 4 Comments

All the heat, light and thunder of the capital gains tax (CGT) controversy has faded away into the sunset, leaving only the whimpering of the envious in its wake.

Fortunately, I didn’t devote too much time to agitating against the proposals as it seemed evident that the whole exercise was a political ploy with the usually predetermined outcome.

However, I did find two surprises within the exercise. Firstly, just how many previously sensible people argued the case for a CGT on the basis of “fairness”.

How could it be fair when you and I could each buy a house for $100,000 and both keep ownership of those houses for 25 years. When we both decided to sell after that length of time, and each now got a market price of one million, I’d get to keep all of the money whereas you’d have to pay $297,000 in capital gains tax - because you had rented out that house whereas I’d lived in mine?

As soon as you exempt anything from a CGT you immediately lose any so-called fairness and all sorts of remarkable, convoluted and unforeseen distortions set in.

The second surprise was that we property investors and landlords now have a new and powerful friend. That’s right, Dr Michael Cullen.

He of the “rich pricks” comment has now stated: “It is hard to understand why those renting out properties, a necessary part of the housing market, should be singled out from all others who benefit from the largely unearned increment derived from the almost inexorable rise in land prices.”

I was stunned…. Because for many years we landlords have been reviled, abused and blamed.

Everything from the overcrowding of hospitals to the shortage of rentals has been our fault. If youngsters can’t afford their first home or the elderly can’t afford to pay their power bill it’s because we are snapping up all the houses and our rents are too high.

We must be singled out and punished. Although we are supplying a legitimate and badly needed service to a demanding and undersupplied market there should be targeted and vengeful taxes, state-funded witch-hunts, and possibly tarring and feathering in the council carparks for all those who dare to rent out homes to other people.

This is the unfortunate but expected outcome from several years of landlord bashing. Terming us “speculators” and imposing draconian rules, harsh compliance demands and specific punitive taxes on people who are providing a legitimate and legal service to the market will, inevitably and over time, reduce the supply.

As landlords, we have maintained that this would happen. We were then told that we would be “forced” to do this that and the other and frequently vilified by politicians, the media, tenant groups and academics as greedy.

Most of these accusations and the subsequent demands seem to be based on thin evidence, or in some cases, on no evidence at all.

Housing Minister Twyford has made repeated claims that 6000 children are admitted into hospitals each year for housing-sensitive illnesses. He has used this as the reasoning behind his push for the so-called Healthy Homes minimum standards.

Unfortunately for him, two Government Ministries recently provided contradictory data that provided no grounds for the Minister’s claims. Support for the Minister's allegations appears to be, at best, exaggerations based on minimal evidence or, at worst, based on no evidence at all, just a convenient push of the emotional button.

Thus there will be considerable costs imposed on rental property owners (but not owner-occupiers, who are, apparently, immune). Many will be forced to spend several thousand dollars on each dwelling for largely unnecessary work, which will do little to improve children’s health.

Instead, when the cost of these modifications is inevitably passed to tenants, it is likely to cause even more overcrowding and a further reduction in living standards.

Meanwhile, property people – who are overwhelmingly financially-stressed Ma-and–Pa investors - face stark economic choices. They must dig into personal savings to fund these alterations, borrow the money to do so, or sell up. And a tenanted house when sold to owner-occupiers displaces more tenants and further exacerbates the rental shortage.

This has all occurred with minimal reference to those who are working in the rental property field every day. Neither the NZ Property Investors Federation nor any of the property associations that I am involved with have been asked to give any significant and meaningful input into what is actually required to solve this crisis.

Any input that we have been able to supply has been drowned out by ideology and dogma. It is time that those with the power to create change listen less to those who moan the loudest and more to those that work the hardest.

The bottom line is that, in our society no-one can be forced to become or remain a residential landlord. If the business just becomes too difficult, people bail out.

There is a strong undercurrent among the state-funded chattering classes that this will be a good thing, that there should be no private landlords, and that all rental housing should be provided by HNZ or social housing providers.

But their queues are long and getting longer. It costs the government (and hence the taxpayer) more to house a tenant in a state house than any accommodation supplement paid to that tenant for housing in the private sector market. The Government is an inefficient, costly and ponderous landlord.

Well, let’s see how they cope now.

Tags: APIA capital gains tax CGT healthy homes housing market housing shortage landlords minimum standards NZPIF property investment property management rental market rents tenancy reform tenants

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Comments from our readers

On 6 May 2019 at 12:28 pm John Butt said:
Actually, it would appear that landlords while not yet bailing out, are ceasing to supply sufficient homes to continue to allow for normal market growth.
See some real stats here:
On 7 May 2019 at 1:56 pm Janice111 said:
I always enjoy and mostly agree with Peter Lewis's articles. But as I've said before - you get some terrible tenants and some terrible landlords - and each can create a bad name for the others.
We've owned 3 rental units 7 years and want to buy one more and we're a tenants dream. We're onto infrastructure, maintenace, improvements and section beautification. In fact we probably do and spend too much, but we enjoy it and so do the residents.
On 8 May 2019 at 1:51 pm AT HOME said:
I love the straight forward approach of Peter's comments. He does not let the ridiculous usual PC approach interfere with telling it like it is. I am particular fond of his "It is time that those with the power to create change listen less to those who moan the loudest and more to those that work the hardest." statement and agree wholeheartedly.
On 4 June 2019 at 9:35 am bellamoodie said:
Exellent,plain talk information

Having been a landlord for years & a Great one at that
,providing a home for those who' cannot afford'it is great to hear from
Like Minded.
Thank you Peter

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Lender Flt 1yr 2yr 3yr
AIA - Back My Build 6.19 - - -
AIA - Go Home Loans 8.74 7.14 6.75 6.39
ANZ 8.64 7.74 7.39 7.25
ANZ Blueprint to Build 7.39 - - -
ANZ Good Energy - - - 1.00
ANZ Special - 7.14 6.79 6.65
ASB Bank 8.64 7.14 6.75 6.39
ASB Better Homes Top Up - - - 1.00
Avanti Finance 9.15 - - -
Basecorp Finance 9.60 - - -
Bluestone 9.24 - - -
Lender Flt 1yr 2yr 3yr
BNZ - Classic - 7.14 6.79 6.65
BNZ - Green Home Loan top-ups - - - 1.00
BNZ - Mortgage One 8.69 - - -
BNZ - Rapid Repay 8.69 - - -
BNZ - Std, FlyBuys 8.69 7.74 7.39 7.25
BNZ - TotalMoney 8.69 - - -
CFML Loans 9.45 - - -
China Construction Bank - 7.09 6.75 6.49
China Construction Bank Special - - - -
Co-operative Bank - First Home Special - 6.79 - -
Co-operative Bank - Owner Occ 8.40 6.99 6.79 6.65
Lender Flt 1yr 2yr 3yr
Co-operative Bank - Standard 8.40 7.49 7.29 7.15
Credit Union Auckland 7.70 - - -
First Credit Union Special - 7.45 7.35 -
First Credit Union Standard 8.50 7.99 7.85 -
Heartland Bank - Online 7.99 6.89 6.55 6.35
Heartland Bank - Reverse Mortgage - - - -
Heretaunga Building Society 8.90 7.60 7.40 -
HSBC Premier 8.59 - - -
HSBC Premier LVR > 80% - - - -
HSBC Special - - - -
ICBC 7.85 7.05 6.69 6.59
Lender Flt 1yr 2yr 3yr
Kainga Ora 8.64 7.79 7.39 7.25
Kainga Ora - First Home Buyer Special - - - -
Kiwibank 8.50 7.99 7.79 7.55
Kiwibank - Offset 8.50 - - -
Kiwibank Special - 6.99 6.79 6.65
Liberty 8.59 8.69 8.79 8.94
Nelson Building Society 9.00 7.75 7.35 -
Pepper Money Advantage 10.49 - - -
Pepper Money Easy 8.69 - - -
Pepper Money Essential 8.29 - - -
Resimac - LVR < 80% 8.84 8.09 7.59 7.29
Lender Flt 1yr 2yr 3yr
Resimac - LVR < 90% 9.84 9.09 8.59 8.29
Resimac - Specialist Clear (Alt Doc) - - 8.99 -
Resimac - Specialist Clear (Full Doc) - - 9.49 -
SBS Bank 8.74 7.74 7.29 6.59
SBS Bank Special - 7.14 6.69 5.99
SBS Construction lending for FHB - - - -
SBS FirstHome Combo 6.19 6.14 - -
SBS FirstHome Combo - - - -
SBS Unwind reverse equity 9.95 - - -
Select Home Loans 9.24 - - -
TSB Bank 9.44 7.79 7.55 7.45
Lender Flt 1yr 2yr 3yr
TSB Special 8.64 6.99 6.75 6.65
Unity 8.64 6.99 6.79 -
Unity First Home Buyer special - 6.55 6.45 -
Wairarapa Building Society 8.60 6.95 6.85 -
Westpac 8.64 7.89 7.35 7.25
Westpac Choices Everyday 8.74 - - -
Westpac Offset 8.64 - - -
Westpac Special - 7.29 6.75 6.65
Median 8.64 7.21 7.29 6.65

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