Despite being in the middle of the biggest national crisis our country has faced in over half a century it would appear that ideology still trumps reality within the Coalition Government. While the country comes to terms with the economic impact of the lockdown and hundreds of thousands of Kiwis wonder whether they’ll still have jobs and be able to pay their bills, the Goverment is still pressing ahead with oral submissions to the controversial Residential Tenancies Amendment Bill over a series of days this month.
It’s worth also noting that these oral submissions, which are being made to the Government's Social Services and Community Committee, are in contrast to a multi-party agreement to suspend all business before Select Committees during the lockdown. Despite this, Housing Minister Megan Woods apparently believes that these reforms are of such national urgency that they should be exempt from the accord.
Frankly, this is disgraceful. Woods' focus should be on doing everything that she can to make sure that Kiwis have a roof over their heads.
Meanwhile, a crisis of severe proportions is brewing within the rental sector. While businesses within other sections of the economy are being partially supported through the Government's Wage Subsidy and other initiatives, landlords – who collectively house around 40 percent of our people and who were already under attack by this Government – are now being asked to carry the additional strain on the housing sector at their own cost.
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Landlords as a group are not eligible for any form of support, and in most cases, are not eligible for deferral of mortgage payments if they are suffering hardship. This is despite new rules that state they cannot, during lockdown, press for the payment of unpaid rent unless there has been non-payment for more than 60 days, cannot replace tenants who choose to vacate a property and cannot evict tenants except under "extreme circumstances".
While most Kiwis accept the degree of sacrifice implicit in the current restrictions, I’m certain that most of us believe that no one sector should carry more of that burden than others. These measures will ultimately harm the very people that the Government claims to be seeking to protect once the lockdown is behind us. For many "mum and dad" investors, scheduled improvements to rental properties will now have to be deferred. Newer investors, who already typically make a loss on their rental property, will be forced to sell up and get out of the market altogether, and some established investors will see these measures as the final straw and will leave their properties empty rather than try and negotiate the minefield of regulatory intervention that is about to hit.
Yes, I know that some reading this will say "good riddance" to the prospect of landlords leaving the market, but this ignores the fact that the number of Kiwis needing rental accommodation has been remarkably consistent at around 40 percent of the population for much of the past 100 years.
Admittedly, some rental properties lost to the market will eventually be replaced by properties vacated by work-visa migrants who will need to go home and Airbnb owners converting their empty properties back to long-term rentals, but given that there are around 440,000 private rental units in New Zealand, it’s unlikely that these will be anywhere near enough to make up the loss of properties due to landlords exiting the market.
So are there solutions to avoid these outcomes? Of course.
These could include levelling the playing field by introducing a Rent Subsidy Scheme (to match the Wage Subsidy Scheme), which would provide a rent top up for landlords who could prove that they had lost rental income as a result of the Covid-19 crisis; a reversal of the decision to "ringfence" property tax losses so as to provide new investors with some financial relief; or an extension of the Mortgage Guarantee program to allow property investors to defer payments for up to six months in the same way that owner-occupiers are already able to.
I’m not usually a fan of any form of government subsidy to any sector, but these are unusual times and a rent subsidy and the other solutions proposed would enable the most stressed owners of rental property to survive in a time of extreme hardship.
Some aspects of Covid-19 crisis are inevitable despite our best attempts to mitigate them, but losing rental stock doesn’t have to be one of those consequences.
- Ashley Church is a property commentator for OneRoof.co.nz. Email him at [email protected]
