Frank Newman: Making life better for renters

Housing Minister Phil Twyford says he wants to make life better for renters. But in doing so, will he make life unbearable for landlords?

The Government has released a discussion paper as a prelude to what will be a comprehensive reform of the residential tenancy market. The changes to be "discussed" come on top of a number of changes either in place or on the way, which include:

• Insulation upgrades.
• Removing the right of property managers to charge a letting fee.
• Limiting damages claims against tenants.
• New standards which are likely to include the installation of a fixed heating source, a ventilation method, and protection against draughts.

Frank Newman: Property prosperity and interest rates

The NZ Herald recently ran an interesting article about a young lady from Auckland, who despite the stories of housing un-affordability has, at the age of just 24, managed to own a property in Auckland and a bach in Pauanui (a swanky beach resort on the Coromandel).

How did she do that? "...it wasn't having rich parents that got her there - she's worked since she was 13, sacrificed nights out and saved like crazy."

The back story is interesting, but essentially it comes down to a strong work ethic, and a commitment to saving.

Mike Butler: Insulation benefit grossly overstated

Government claims that $1 spent insulating rental properties brings a $2.10 benefit are grossly over-stated, Ian Harrison of Tailrisk Economics said yesterday. The error in the analysis used to promote insulation was uncovered as submissions on the Residential Tenancies Amendment Bill, which involves insulation, get under way.

That amendment would require landlords by July 1 this year to disclose in tenancy agreements the extent of insulation in their properties and install smoke alarms.

Mike Butler: WOF means hardship for tenants

Tenants should be very alarmed at rent increases and more stringent standards that would come with a proposed warrant-of-fitness scheme. Early indications from two trials are under way show that more properties fail than pass the test that requires ceiling insulation 120mm thick, under-floor insulation, and a supplied heater.

Upgrades averaging $9700 per rental property, as estimated by the Building Research Association of New Zealand after a survey of 491 properties throughout New Zealand, would increase rents by around $20 a week thus disadvantaging the people a WOF scheme purports to help. (1)

Mike Butler: $9700 WOF cost for landlords?

A survey of literature cited to support a property rental warrant-of-fitness scheme reveals that the amount each landlord could be expected to pay for upgrades is $9700 for each property. As for the benefits, which go to the local health board in reduced hospitalization and not to the property owner, may be a meager $34.80 a year for each household with a child under the age of 15.

The Office of the Children’s Commissioner lobbied the government two years ago with Working Paper No.18: Housing Policy Recommendations to Address Child Poverty, which includes 12 recommendations -- one of which is for a warrant-of-fitness scheme and another involves insulation and heating. (1)

Mike Butler: Why the property WOF is a crock

A closer look at the 31-point property rental warrant of fitness checklist that is being trialled gives the appearance that it has been put together by people unacquainted with the Residential Tenancies Amendment Act, who are ignorant of how tenants live in New Zealand buildings, and who fail to understand the implications of building code compliance.

Two pilot warrant of fitness trials for rental properties are presently under way. One is a government initiative involving 500 Housing New Zealand properties and the other involves a “consortium” of interests involving the Auckland, Tauranga, Wellington, Christchurch and Dunedin councils, ACC, NZ Green Building Council, and the University of Otago.

Mike Butler: Readers oppose rental WOFs

A NZ Herald editorial last month titled "Warrants of fitness a must for all rental homes" which opined that “It is time to place some obligations on those offering homes for rent. Already, they benefit from tax breaks and untaxed capital gains” sparked 97 comments most of which were hostile to such WOFs. Many related the time and money spent cleaning up after tenants trashed the place, a number thought any rental property WOF should be on the tenant not the building, and one asked why, since people had lived in houses for 10,000 years, should there suddenly be a need for a rental WOF.

The objections are illuminating and entertaining. Read on:

Frank Newman: TV tenants

The Herald reports a tenant advocate has complained about the TV reality programme Renters. They claim it unfairly portrays tenants as villainous machete-wielding, house destroying, rent absconding characters, and has ignored the many very good tenants.

Mike Butler: WOF warning for landlords

Landlords should be alarmed that the “Solutions to Child Poverty in NZ” report proposal of requiring a warrant of fitness for rentals jumped to top of the list in the poverty experts’ media statement, released on Tuesday, and Housing Minister Phil Heatley made noises on Closeup that suggest he would go along with such a scheme that would be paid for by landlords.

The poverty experts, who believe rental property owners only seeking short-term investment gains and tenants seek long-term tenancy stability, when the exact reverse is actually the case, want a capital gains tax for rental property.

Frank Newman: RMA and land prices

Last week the Economist magazine ran an article reporting New Zealand has one the world's most over-valued housing markets. This may explain why. It involves a well-intentioned individual and a scruffy piece of land on the Tutukaka Coast 30 minutes north east of Whangarei.

The 6.6 hectares (16 acres) had been a forestry block that backed onto a coastal settlement. The pines were removed in 2005, and Pampas grass has been thriving ever since. He bought the land in 2006, with the intention of rezoning it from Coastal Countryside to Living. The proposal was for a low density residential development comprising 24 sections. A substantial area was to be set aside as a reserve for native revegetation, and included covenants preventing residents for owning dogs and cats, lest their pets prey upon local Kiwi which have been returning to the Coast is significant numbers.

Mike Butler: Taxing the family home

The term “big kahuna” could refer to the Hawaiian surfing god, or could mean “important person” but for economist Gareth Morgan it is part of the title of his new book “The Big Kahuna – Tax and Welfare”. The basic idea is a variation on one that surfaced in New Zealand in 1987 when then Finance Minister Roger Douglas introduced a policy of a 23 percent flat rate of income tax and a new form of income assistance called guaranteed minimum family income.

Morgan’s proposal differs in that his unconditional basic income is available to every individual working or not working -- $8500 a year for those aged 18-20 years and $11,000 for those 21 years and over. This would be funded by a flat tax of 30 percent, as well as a comprehensive capital tax which includes owner-occupied housing.

Mike Butler: Property investors squeezed

Property investors are between a rock and a hard place in the coming election with the Labour Party, Greens, and Hone Harawira calling for a range of measures against rental property and the National Party silent about further moves after a number of dramatic changes imposed without warning. Those who expected change under a National-led government did not expect more tax and more compliance issues that came with the Residential Tenancies Amendment Act 2010, since the National Party went into the 2008 election promising to retain existing tax rules and deduction provisions for rental property owners, and since the party perceived no need to cool down the housing market.

Responding to recommendations from the anti-property Tax Working Group, the 2010 Budget:

1. Ended landlords' and businesses' ability to claim depreciation on buildings with an estimated useful life of 50 years or more.
2. Tightened the definition of income for Working for Families eligibility to exclude investment and rental losses.
3. Changed the rules on loss attributing qualifying companies so that tax losses of those companies could be attributed to shareholders. (1)

Mike Butler: The Budget and property investors

How bad did Budget 2010 get for property investors? The expected hit on depreciation deductions on buildings eventuated, from April 1 next year, with an unexpected proviso it applies to rental housing and office buildings with an estimated useful life of 50 years or more.

Mike Butler: Tax Working Group errors spotted

Errors have been found in the Tax Working Group’s report on the taxation of rental property by the Zealand Property Investors’ Federation and a leading academic. Writing in the April edition of The NZ Property Investor, federation president Martin Evans said that the working group advised the government that $200-billion was invested in New Zealand rental property, yet it lost $500-million per year resulting in tax refunds of $150-million.

Mike Butler: A message from property investors

Too much money is going into bricks and mortar and this is creating an unbalanced tax system, Tukituki MP Craig Foss told a meeting of property investors in Havelock North on Friday, March 19. Speaking as the chairman of the government’s finance and expenditure committee, Mr Foss emphasized that nothing had been finalized in proposed changes that would most likely end the ability of residential property investors to claim depreciation as a loss, and end the use of loss attributing qualifying companies to offset rental losses against income from elsewhere, mainly a high-paying job.

Mike Butler: Nats create enemy on the right

Glad to see that the NZ Property Investors’ Federation is going into battle over the proposed changes affecting property tax. The NZ Property Investors Association said landlords would lose on average $1750 a year if they lost the tax rebate and this amounted to $34 a week, which would be passed on to tenants, according to ONE News. Labour MP Trevor Mallard echoed the warning when he said the increase could be as much as $45 across 400,000 households.

Mike Butler: Losing money on rentals

Property investors who offset rental losses against personal income would be surprised to find out that the Tax Working Group has not prescribed measures on loss attributing qualifying companies.

Possibly Prime Minister John Key’s comment about “closing loopholes” has sparked debate, especially among commentators who have been campaigning against these companies.