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COMMENT: The rental housing conundrum

Still simmering away below all the Covid-19 virus activity is the Government’s “reform” of the Residential Tenancy Act and that’s something we should all be concerned about, writes Auckland Property Investors Association vice-president Peter Lewis…

Monday, April 20th 2020, 11:17AM 7 Comments

Written submissions on the proposed tenancy law reforms closed back in March, and oral submissions are being heard right now.

There are calls for the Government to place all such non-urgent business on hold while the current state of emergency exists, as the restrictions now in force hamper the full and democratic procedures that normally function when Parliament is in session.

However, despite all the other travails the country is facing, they seem to be absolutely determined to proceed with this one.

Looking at the proposed amendments I can see that they are based on a certain view of the rental housing market and of the overall supply of housing within New Zealand.

For at least twenty years New Zealand governments of all political persuasions have tried to “solve the housing crisis” by enacting various pieces of legislation.

But looking at the latest statistics, there can be no doubt that these measures have failed - and failed comprehensively.

There are more than 600,000 rental households in New Zealand with about a million people living in them, up from 453,000 in 2013 and 388,000 in 2006.

The proportion of households that rent has risen from 27% in 1999 to 32% now. And it’s worth noting that rental households generally have more people in them than owner-occupied housing.

The government cannot build public housing fast enough and now there are over 14,000 tenants on the public housing waiting list, more than twice as many as there were back in 2017.

That is not 14,000 individuals, but 14,000 prospective tenants, including their families. We could be talking about over 33,000 people here.

Of rental properties, 85% are provided by private landlords and 90% of those privately-owned rentals are provided by Ma-and-Pa landlords who, individually, own just one or two rentals. In some cases, these landlords rely on those rents to put food in front of their own families.

The public housing sector is, and always has been, a very small part of our rental housing market, and each publicly owned rental inevitably requires open-ended taxpayer support. The reality is that the government is a high-cost and inefficient landlord.

Most of the political initiatives around rental housing in recent years have been based on dogma and false assumptions. 

All the legislation that has been enacted in recent years has been based on the institutional belief that private landlords are wealthy large-scale operators who habitually hold all the power over their tenants and not only make large-scale profits out of their affairs but are then, somehow, able to avoid paying any tax on those profits.

This view of the rental housing market is totally wrong and entirely misrepresents the way it operates.

Most Kiwi residential landlords are the hard-working, thrifty and goal-orientated individuals that any sane society should cherish and nourish, not vilify and punish.

Yet that’s what both the recent and the Government’s proposed tenancy law reforms set out to do, penalise these people who, I can remind those pushing this legislation, are all voters.

Given my experience, background and industry involvement I think you can assume that I know what I am talking about.

Yet not once, in my almost thirty years as a landlord, has any Government representative come to me and said “We have a rental housing problem. How do you suggest we could work together to improve the situation?”

No-one can be forced to be a residential landlord. If passed, this legislation will give residential landlords another very good reason to exit the market.

What the Government is then going to do with the resultant huge number of unhoused tenants is anyone’s guess. That will be the Government’s problem.

But the Government should care about this because the homelessness in New Zealand is set to get a lot worse. And the Government’s actions - which are intended to create open-ended tenancies and unilaterally impose large fines on landlords - will be pretty much entirely to blame for that.

The Government has a choice here. They can work towards solving the rental housing problem or they can punish landlords.

They must choose one, they cannot do both.

*Both REINZ and the NZ Property Investors Federation have called for the proposed tenancy law reforms to be put on hold while the country is on lockdown due to Covid-19. The NZPIF is also running a petition opposing the reforms. It can be signed here.

 

Tags: APIA compliance investment Kris Faafoi landlords property investment property management rental market rents RTA Tenancy Services tenants

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Comments from our readers

On 20 April 2020 at 12:46 pm sromanos said:
Superb article. Thank you for speaking the hard truth about our industry - Simon Romanos
On 20 April 2020 at 1:50 pm Lin35 said:
I agree as well. Considering that 32% of the population is renting obviously for political reasons is a nice pool of votes available. I am a landlord and I think the reform will actually create more problems just for the "bad tenants".
On 20 April 2020 at 3:04 pm bArt said:
As an ex rental owner I must point out (at the risk that most here only wish to read comments that benefit them) that the line "The reality is that the government is a high-cost and inefficient landlord." is not actually true. The government itself is faced with high building and regulatory costs. The government also has those costs associated with providing housing for the least responsible and lowest paid portion of the population. I believe that in principle, housing should be subject to the natural forces of the market, (supply and demand) BUT the average person has worked out that owning something others need and will pay over the odds for is rather lucrative. I want to be on the side of landlords and I believe most are car-working, honest and caring but in this case it seems that the few who give the rest a bad name, provide the government with the excuse to suppress speculative property ownership through the proposed changes to tenancy laws.
On 20 April 2020 at 4:30 pm Redflick said:
I am staggered that this government has suggested to landlords to be kind and help out tenants ( and many have) at the same time as pushing unpopular RTA reforms through and also denying landlords the opportunity to defray ( now increased) losses on rentals from other income they earn. Where is the government being kind to landlords here???

This government is so ideologically hating of landlords that rents have increased dramatically since they got in and homelessness has massively increased. I am asking the government to take is blinkers off and do the job for all kiwis
On 21 April 2020 at 12:31 pm AT HOME said:
Great honest article and two good comments so far.

"The government cannot build public housing fast enough and now there are over 14,000 tenants on the public housing waiting list, more than twice as many as there were back in 2017."

I think that this figure has risen to 14000 mainly because of one factor that is so PC that nobody even mentions it. The factor is that we have a large pool of poor quality tenants that no private landlord wants to rent to and quite rightly so.This pool is growing rapidly and that is what is contributing to the rising numbers on the public housing waiting list.
This pool consists of people with the following issues: rent defaulters, drug addicts, criminals with records, bad references or no references, young single mothers with one or more of the previous mentioned issues. These issues are all the result of poor life choices.But taxpayers will have to fit the $25.6 million bill that will go to the Sustaining Tenancies programme and $8.67 million has been allotted to allow the Ministry of Social Development (MSD) to introduce housing broker roles. So once again law abiding tax payers will fit the enormous bills for other peoples poor life choices. And government thinks that you the private landlord will want to build connections with housing brokers to promote MSD clients as potential tenants, and match people with housing opportunities in the private rental market.Not only do they think you will but they expect you too even after they have declared "open war" on ALL private landlords. Its time for a coup d'état. I will gladly lead it from At Home Property Management headquarters in Tauranga :) Stay safe and check out our fantastic flat rate of 7% ( negotiable for multiple properties ), plus no vetting,advertising, inspection or tenant placement costs.
On 21 April 2020 at 2:43 pm vlwallace said:
Agree agree with all/most of above. When is this country (let alone the govt) going to wake up to the fact that yes, maybe property investor/landlords do make a profit from delivering their product & offering their services (in housing) but so does every other business owner country & worldwide. I have worked in a few different industries & have a marketing background & fail to understand why landlords are earmarked as the bad guys! Sure, a few dodgy operators in all industries but most of us are hard working/7 days a week managing & maintaining property to somehow forge a self reliant future for our own selves & family. When profits are made/taxes are paid. Sure, there is some capital gain but if the property industry was an easy one, everyone would be doing it. There has to be incentive as the profit margins are small along the way. It's a lot of work & many retract from it for that exact reason. It's not easy to balance the books owning one property let alone additional ones. The govt needs to look at our social crisis as well as the housing crisis as was aptly pointed out above - as the number of poorer quality tenants seems to be rising & with tenancy laws changing dramatically, carefully managed tenant selection will become more important than ever. Of course there is much talk of a glut of rentals with AirB&B properties coming back onto market but these are generally a fairly high standard offering & owners will still need to be very selective if they want to keep their properties in good condition to return to the short term sector....if we get to see a return to domestic travel (as a minimum) soon. There are so many if's & buts out there - it's going to be testing times for all. Will be keen to see where we are at in 6months time for sure....
On 27 April 2020 at 7:44 pm sparrow said:
I always have a good laugh at the "landlords don’t pay tax" moan. As domestic rentals are gst inclusive, excluding bank costs I pay 15% tax on all goods and services I use on my properties.

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