COMMENT: The Sound of One Hand Clapping
Tuesday 2 July 2019
Two of our Lords and Masters have recently been laid low yet landlords are still treated as the problem rather than part of the solution, argues Auckland Property Investors Association vice president Peter Lewis…
Firstly, the Privacy Commissioner has had to “temporarily withdraw for review” his guide to the information that landlords may require from prospective tenants, and what he believed should not be required.
This exemplar appeared to adopt an idealistic stance, where privacy concerns overrode all other considerations. Implemented, it would have made tenant selection a hazardous process.
Fortunately, sanity quickly prevailed and the document has now been removed from the public’s view.
The second, and much more agonising, fall from grace is the now open admission that KiwiBuild is a dog. A dog with fleas, as one commentator put it.
Anyone with housing industry knowledge gained from practical experience rather than from textbooks and ideology knew this right from the start.
Unfortunately, the political chattering classes and blinkered academics were firmly convinced that they knew better than the real world what the real world wanted.
And that means it has taken many months of wasted time and resources before the futility of creating houses few want or can afford in places where they prefer not to live could be publicly admitted.
As the Greeks pointed out so many years ago, after Hubris comes Nemesis.
So we now have what is being called “reset time”, which is presumably time to think about the next move. Some options have already been openly discussed. These include rent-to-own and build-to-rent schemes.
Of course, any program to advance these alternatives will also run into exactly the same constraints as have hit Kiwibuild: the problems of lack of land availability, scarcity of labour, high material costs and festoons of red tape.
Within the Kiwi psyche property developers have been so vilified and maligned that the word “greedy” is automatically prefixed to their occupation.
Thus any attempts to create new housing on a substantial scale is instantly met with strident protests, sit-ins, sabotage, land claims and raucous accusations of ecological devastation.
Look at what is happening right now at the Fletcher Building Otuataua Stonefields development. Really, who needs to suffer those indignities?
Unfortunately, without property developers you don’t actually have any new properties. Hence the belief that only the Government could do it better, cheaper and more quickly.
Meanwhile, the war against private residential landlords continues.
Last week the Taxation (Annual Rates for 2019-20, GST Offshore Supplier Registration, and Remedial Matters) Bill was given the Royal Assent, the final stage for it to become law.
Snuck in quietly, overshadowed by Minister Twyford’s downfall, and completely ignored by the media, this Bill will prevent private landlords from offsetting any loss they may make from their rental business against their other income for tax purposes.
You may make a loss from growing herbs, breeding dogs and, yes, running a motel and quite legally offset that loss against other income, but not if you rent out a house. Yet another specific targeted penalty only for residential landlords.
Interestingly, it does not seem to occur to the zealots that the most likely reaction to a landlord facing a loss that they can no longer offset will be to eliminate that loss by increasing the rents they charge. Has that thought not occurred to anyone?
Yet build-to-rent proposals are being promoted as the solution to the lack of rental housing at the very same time as private investors are being forcefully expelled from the market.
Apparently it is quite OK to be residential landlord if you are a large corporate owning a substantial number of rentals, but not if you are Ma-and-Pa owning just a few.
Again, the political think-tanks and parliamentary claque are blindly following some idealistic will-o’-the-wisp off into a seductive and delusional never-never land.
The bottom line is that residential landlording in New Zealand is and remains a low-return high-workload activity.
I have seen a number of corporates grow enthusiastic over the idea of building a large portfolio of rentals, but then they have faded quietly away once the harsh light of economic reality sets in.
The large-scale Hobsonville development was going to incorporate a substantial number of brand new long term rentals. But, again, I have not seen any further mention of that particular idea over recent years.
Sure, the concept works in some overseas jurisdictions where the laws and customs around renting are quite different from those in place here.
If these types of operations are transported into New Zealand, how will these property ownership companies feel about:
• Tenants being able to freely damage the property and having no responsibility for the resultant, often substantial, repair costs as long as they claim that the damage was “accidental”.
• Being obligated to act as an unwilling and unpaid debt collector for Watercare.
• Being bound to keep housing their tenants until the expiry of any fixed-term lease while the tenant is, in reality, able to leave at any time they wish.
• Having to give a tenant the exclusive possession and occupation of a property worth many hundreds of thousands of dollars but only being able to legally to extract a security bond of four weeks rent (which is probably somewhere around 0.003% of the property value).
The reality is that these ownership companies will only enter and remain in the market if they can make and continue to make a profit.
Given current building costs, they are almost certainly going to require substantial initial grants of either taxpayer money or Government land to be able to construct their buildings.
Having done so they will then need to set their rents at a level to allow for the cost of professional management, trade costs on all maintenance, and still have enough left over for a dividend for the shareholders.
Thus it is likely that even more subsidies will be required to make the project fly and prevent further Government shame.
So once again the dreamers and the schemers in the halls of Government seem to be courting the delusional pie-in-the-sky of build-to-rent.
Yet at the same time ignoring any advice from those of us in the real world who have survived for years in the heat and dust of the market, those of us who already own around 540,000 homes housing some one and a half million of our fellow citizens.
We could be the solution to the problem. This combined knowledge is available.
Landlords are willing to offer it - but we have never been asked. Occasionally, we have been offered limited choices between pre-packaged opinions.
Otherwise we are, at best, ignored and, at worst, abused and blamed. Without a healthy dose of reality, all that Beehive dreaming and plotting comes to nothing. Wasted time, wasted effort, wasted resources.
Comments from our readers
Sign In / Register to add your comment
New Zealand’s housing market resurgence continues to gain momentum with the latest REINZ data showing record prices around the country.
There’s a more upbeat feel to the property market and it’s obvious in this month’s QV data which has values firmly on the rise.
New commercial property disrupter, Jasper, has hit the ground running with their first investment offering achieving full subscription in just 36 hours.
There's been a lot written about the Reserve Bank's new capital rules for banks and some of it seems to miss the mark. Here's Tarawera Publishing managing director, Philip Macalister's, take after hearing from the governor yesterday.