Past discussions between governments, Housing New Zealand, Tenancy Services and social housing groups about rental crises have never included the federation, says NZPIF vice-president Peter Lewis. “We have ideas that can go a long way to overcoming the rental shortage.”
“What the new Government needs to do is admit there is a problem with supply in the rental market, sit down with landlords and property investors and ask for suggestions to solve it.”
Overcoming shortages, says Lewis can be as simple as “changes in legislation and a change in government attitude towards landlords who have been vilified, abused and denigrated for causing all sorts of problems in society and recognition they do provide a valuable and much needed service to society as a whole”.
The NZPIF’s view is a large contributor to the dwindling number of rental properties has been the actions of the past two governments – changing the tenancy laws and removing the 90-day no cause termination notice as well as ditching the ability for property investors to offset mortgage interest payments against rental income for tax purposes.
“There has been no way around these issues,” Lewis says. “If landlords are demonised like this, it shouldn't really come as a surprise that there's a shortage of rentals.”
Private rentals make up 80% of the market and a growing number of people are renting for life, which is expected to increase as rising housing affordability issues cut a whole section of the population out of home ownership.
The NZPIF letter says incentivising and rewarding landlords is the way to increase supply. “While landlords are penalised with high taxes at one end and more legislation at the other end, the shortage is going to persist,” Lewis says.
“The answer is not more Government-built housing because that is expensive. In the past year, Housing New Zealand was given a $1 billion subsidy from the taxpayer because its rents are tied to tenants’ incomes, which are at the lower end of wage scales. If the Government tries to provide all the country’s rental housing it will go broke on that basis,” he says. “So, the answer is to incentivise and reward landlords, who are willing to provide rental housing to people who need it.”
Even then, Lewis says it will be difficult to lift the number of rentals quickly. He recently looked at a number of properties on an academic basis – both new developments and existing houses.
An average $800,000 Auckland house bought with a mortgage at 7% and rented for about $600 a week, means a loss of $500-600 a week, taking into account insurance, rates and other ownership costs. “Why the hell would anybody do that? It is why we have a shortage. It is simply uneconomic for private individuals to buy rentals. It is a major problem that needs to be solved quickly if there are to be enough rentals to house people, particularly now that 119,000 new migrants flooded into the country in the past year.”
The perennial problem of rentals in Queenstown, is a case in point, Lewis says. The adventure capital of New Zealand has run into huge problems in being able to provide accommodation for workers in bars, restaurants, cafes and shops. Many workers are sleeping in their cars or living in crowded conditions because they either can’t find a rental or they are too expensive.
Lewis says he has spoken to many Queenstown landlords who have pulled out of providing housing because they can no longer make money doing it. Many people forget it being a landlord is a business, it is not a charity. Houses cost money to own and run.
“The lack of rentals is a direct effect of legislation and Queenstown is the worst case scenario.”
While ACT’s election manifesto says the extra taxes Labour imposed on property investors will be removed from April 1, Lewis is doubtful. “If it comes to the push I think Seymour would ditch it in favour of something else more favourable as a coalition partner. And it was New Zealand First who voted with Labour in its coalition government to bring in the Residential Tenancies Act amendments. We can only wait and see.”