To assist voters in their decision making on September 23, Labour needs to front up on the cost of their housing policies for rental property providers and their tenants.
In last week’s economic overview, BNZ Bank Economist, Tony Alexander, pointed to two Labour policies that he believes would lead to higher rental prices.
"Labour's policy mix has capacity to help constrain the pace of house price rises for lower-priced properties by boosting supply. But it will come at the price of higher rents" says Alexander.
Although Labour continues to say it isn't their policy, they have all but confirmed they will introduce a capital gains tax on all assets apart from the family home.
Alexander states that a capital gains tax means rental property owners will hold on to their properties for longer. "That means the policy will tend to place upward pressure on rents" says Alexander. Another tax change is ring fencing rental property losses, adding $4,084 per year to the cost of providing the average property as a rental home.
“And because negative gearing is usually only a short-lived situation for long-term investors be they large scale owners or small scale Mum and Dads, it is possible the policy will lead to less rental accommodation being built and made available,” says Alexander
Labour’s extension to National’s Minimum Standards law for rental property will require many properties to have insulation top ups costing thousands for a 5% increase in efficacy. The same policy will make heat pumps a requirement for every rental property regardless of whether this is the best source of heating or if it is what tenants want.
Labour has tried to offset the insulation and heating costs with a $2,000 grant. However they have not provided detail of how this grant will work. Current insulation grants have tended to double the price, meaning they effectively provided no benefit at all.
When proposing its desire to apply debt to income restrictions, the Reserve Bank stated that this would lead to a reduction of 9,000 rental properties. Labour must have completed similar modelling to assess the effect on rental property supply and rental price increases and these need to be shared with voters.
Families who are renting and the parents of children who are flatting deserve to hear from Labour how they are likely to be impacted by Labour’s policies.
Tony Alexander’s Weekly Overview can be found here