Mike Butler: Governing class attacks landlords

Earthquake strengthening requirements, warrants of fitness, a rental property register were among a summary of regulatory moves that could cost private sector landlords dearly appeared in the May issue of the Hawke’s Bay Property Investor Insider newsletter.

The Building (earthquake prone buildings) Amendment Bill, a knee-jerk reaction to the Canterbury earthquake compiled by error-prone bureaucrats (See Bureaucrats bungle earthquake policy) for gonzo Minister Maurice Williamson, passed its first reading on March 5, 2014. Owners of buildings with three or more household units and those with two or more storeys should be aware that under the bill these buildings would have to be strengthened.

An arbitrary standard dreamed up by the New Zealand Society of Earthquake Engineering is the basis of a policy that would cost $10-billion to save seven lives over 75 years. Earthquake strengthening costs are about 50 percent of replacement costs. If this wonky bill becomes law, building owners may appeal a council designation to the Ministry of Business Innovation and Employment. If the property owner disagrees with the Ministry's determination, they can appeal in the district court.

Meanwhile, Health Minister Tony Ryall accepted 109 of a health select committee report’s 130 recommendations focusing on children’s health. Recommendation 25 urged that the government develop a legislative framework for private-sector landlords, apparently unaware of the comprehensive Residential Tenancies Act that has been around since 1986, demanded minimum quality standards, a rental property warrant of fitness with a focus on injury prevention. I guess that could mean fencing all driveways so that idiot parents don’t run over their children.

A poorly informed New Zealand First MP, Arsenati Lole-Taylor, demanded a review of the Residential Tenancies Act to stop landlords “overcrowding their properties and overcharging rent”. She appears unaware that property owners set occupancy limits that some tenants breach and that the level of rent is set by supply and demand in the market.

The Christchurch City Council is “exploring options” for a register of residential rental properties, the brainchild of the Tenants Protection Association. The register is linked to a warrant of fitness proposal to identify “landlords who were not providing an adequate standard of accommodation”.

Labour Party leader David Cunliffe repeated his party's intention to impose a capital gains tax of 15 percent even though properties bought with the intention of selling are already taxed at the seller's tax rate, which is higher than 15 percent.

Labour Party housing spokesman’s Phil Twyford is seeking support for a bill that would require the Energy Efficiency and Conservation Authority to set minimum standards for heating and insulation in rental properties, amend the Residential Tenancies Act 1986 to require all landlords to meet the standards, apply these standards to all tenancy agreements made after the standards are published. No statement has been made to describe what the standards are that would apply to 465,000 rental properties, and there are no such standards on the EECA website

A report from an inquiry into boarding houses by the social services select committee that started in 2011 is pending.

The caring class of central and local government politicians pushing for a crackdown on the owners of New Zealand’s 465,000 rental properties should be careful of what they wish for.

Earthquake strengthening costs and forced upgrades would prompt landlords to sell to owner-occupiers, and could make redevelopment of multi-unit, multi-storey properties into own-your-own homes an attractive option.

Then who will house the renting class?

An exodus from rental property brings a further problem, this time for the government, as the tax take from rental property shrinks, along with work provided to builders, plumbers, electricians, carpet cleaners.

The rental property sector turns over about $6-billion a year, and comprises about 3 percent of GDP.

The report, that also includes a call for a crackdown on State-house wreckers, the government’s social housing plans, issues to do with high-rise maintenance, and a review of the law of trusts, was compiled by Thomas Chin, who represents the New Zealand Property Investors’ Federation.