Ashley Church: Is someone out to destroy the rental sector?

I recently wrote that it would be difficult find a set of policies that could more effectively destroy the private rental sector than those currently being implemented by the Government. It was a cynical observation of the housing and rental policies of the Government, but the more I reflect on those policies, the more I wonder whether there might be some truth to my statement because it’s hard to believe that any government could be so blind to the inevitable consequences of its rental housing agenda.

First, a bit of background:

• The overwhelming bulk of rental accommodation in New Zealand is provided by the private sector. Exact numbers are a bit patchy, but we know that there are probably 525,000 rentals in New Zealand of which around 65,000 are owned by Housing New Zealand, 12,000 are owned by local authorities, and another 8,000 are owned by non-government organisations. The remainder – around 440,000 rental homes – are provided by the private sector, and the overwhelming majority of these are owned by mum and dad property investors who have, collectively, saved the country tens of billions of dollars over the past 40 years.

• Around 40 percent of Kiwis live in rental accommodation and this number has been consistent over several census periods.

• The demand for rental accommodation is increasing. Firstly, because the population of the country is increasing so, for every additional 10,000 people coming into the country, 4,000 will require rental accommodation. Secondly, because our "occupancy per dwelling" numbers have been dropping, which means fewer people live in a Kiwi home than they did 20 years ago so we need more homes just to stand still.

These numbers destroy the myth that there is no impact from Investors leaving the market because the property is simply bought by another investor or sold to an owner/occupier. The reality is that the need for rental accommodation is growing and that we will need thousands more rental homes just to keep pace.

For these reasons, a responsible government would be doing everything that it could to retain, and grow, private investment in the rental sector. This would include avoiding initiatives which imposed significant new costs on landlords, avoiding initiatives which worsen the already precarious position associated with the cost of buying and owning rental property, and introducing programs that make it as easy as possible for Kiwis to invest in this important sector.

So, with these stark realities in mind, what has the Coalition actually done with the private rental sector?

• It has introduced changes to tenancy laws which have moved toward regulation of rent increases and made it even more difficult to evict troublesome tenants.

• It has introduced a suite of significant new compliance requirements to ensure that rental properties meet minimum health standards. These requirements will take effect, for landlords, in 2021, but the Government has given Housing New Zealand an extra two years to comply, exposing a worrisome double standard.

• It went some distance toward imposing a capital gains tax on property investors, shelving the idea only when intransigence by New Zealand First rendered the proposal impossible.

• It has extended the bright line test to five years to capture "speculators", a move which demonstrates ignorance of the difference between speculation and property investment.

• It has enacted legislation to "ring fence" tax losses made on rental investments – a move which will end up shutting many new property investors out of the market.

These policies are so aggressively anti-landlord that you could be excused for wondering if there is a deliberate plan to destroy the private rental sector – perhaps for reasons associated with ideology or political populism. If not – and given the stark reality of our need for thousands more rental properties over the next five years – the only alternative is to assume that the Coalition is simply unable to grasp the most basic realities of the market and is, instead, demonstrating a level of incompetence, in Government, unseen since the Muldoon administration 35 years ago.

Their policies will lead to higher rents, an exodus of investors and fewer rental properties at precisely the time when we need them the most. Few things could be more certain.

- Ashley Church is the former CEO of the Property Institute of New Zealand and is now a property commentator for Oneroof.co.nz. Email him at ashley@nzemail.com.