In an opinion piece in the Sunday Star Times on 7 February, Bernard Hickey once again made unfounded, inaccurate and untrue statements about rental property providers in New Zealand.
Hickey has a maniacal dislike of people owning rental property and providing somewhere for people to live. He must by now know that his claims of rental property owners having special tax advantages is wrong, yet he persists in spreading this misinformation.
In his last opinion piece Hickey states that “Rental property investors argue they are taxed at the same rate and in the same way as everyone else. That’s just not true.” For the umpteenth time Bernard, yes it is. But it isn’t just us trying to argue this point, even the IRD have confirmed that it is true.
Hickey tries to defend his point by saying that “Income from wages and company profits are taxed through PAYE and spending is taxed through GST”, however this is incorrect and misleading. Company profits are not taxed through PAYE. Company profits are taxed through income tax, just as rental property profits are. The owners of companies that increase in value don’t pay tax on this capital gain, just as rental property owners don’t if their property value increases. This is also the same for the self employed, farmers and shareholders.
Why is it that rental property owners are condemned for making capital gains while shareholders aren’t? The value of share prices are promoted daily in newspapers, radio and other media. If the increase in value of share prices isn’t a factor for investing in shares, then why is there daily interest in how much they have gone up by? As an aside, have you noticed how shares are said to have soared when they increase by a few percentage points, but they merely soften when they go down by the same amount?
Although he is not alone in doing so, Hickey is selective in what he compares rental property to in an attempt to be seen as correct. He says that “Landlords also have access to tax breaks that competing first-home buyers can’t get. They are able to claim the interest costs on their mortgages as a cost of doing business, along with maintenance, rates and management fees”.
What he doesn’t mention is that all businesses claim expenses from their business income, not just rental property. His argument doesn’t make sense as a home owner doesn’t receive any income from their property to claim expenses against. The rental property owner doesn’t get to claim expenses on their own home, only the rental property that they rent out. In addition, if the property is not the owners home but they choose not to rent it out, they also cannot claim expenses. They are a speculator rather than a rental property owner.
In making his claims, Hickey is implying that rental property owners have an advantage over home owners, specifically first home owners, when no such advantage exists. Such propaganda has been allowed to persist in an attempt to turn the general public against the provision of rental property.
It appears that Hickey has been captured by the Financial Services industry, a collection of extremely profitable companies who have never liked the fact that they can’t “clip the ticket” from people buying a rental property. These are the same companies who brought you events such as the Global Financial Crisis, yet still managed to pay themselves vast salaries while convincing Governments to bail out their organisations.
The Financial Services Industry has for many years tried to introduce rules and laws that make it harder for people to provide rental homes for tenants. Hickey is probably New Zealand’s poster boy for taking their views public.
For many years they argued for a capital gains tax before realising that it would apply to them as well. In their naivety they thought it would only apply to rental property. However through the efforts of Hickey and others, they have made rental property providers the villains and may achieve their cunning plan through convincing the Government to further extend the Bright Line Test on rental properties. While portrayed as a tool to rein in property speculators, it is essentially a capital gains tax to dissuade people from providing rental property.
For a number of years, we have known that the real problem with housing is one of supply. It is to expensive to build new homes, takes too long to get them consented, costs too much in fees such as development contributions and we don’t seem to want medium density housing in the suburbs.
Hickey even points to the situation of Christchurch where the then National Government “effectively suspended the Resource Management Act and paid for local infrastructure to kick-start a massive house building drive” that increased supply and stabilised house prices. This was private developers and house construction companies that achieved this when the legal impediments were removed.
We know what to do and it isn’t to dampen demand from rental property providers. We are in a rental crisis where we need more rental properties, so the last thing we need is to dampen down the best group of people to provide the extra rental properties we need. Thank goodness for low interest rates helping more people to provide rentals, but it isn’t enough.
If the Government is to be bold and transformational then they need to stop listening to Hickey and others of his ilk and address the real issues in our housing system. Their recent announcement of amending the RMA is an excellent start in the right direction.