“New Zealanders, especially tenants, benefit and rely heavily on the service private owners provide by supplying rental homes” said Sue Harrison, President of the NZ Property Investors Federation (NZPIF). “Private owners bridge the massive gap between state owned rentals and demand for rental homes, currently providing over 85% of supply. The huge emergency housing population costs millions per day and over 24,000 applicants are sitting on the Governments housing waiting list, as reported by the Ministry of Social Development in March this year. It’s renters who would benefit if there was an immediate repeal of the new interest deductibility rule as the impact on the rental market is well underway with owners selling up and potential owners staying away.”
Trade Me reports that the number of properties available to rent nationwide in May was down 19% annually, while demand was up 35%. The Government’s building program is never going to keep up with the demand so more private rentals are essential in increasing supply for tenants. It’s not possible for the state to scale up and worse still the Government has proved to be a high-cost and inefficient landlord at the expense of taxpayers.
While many believe that most rental properties are held by large-scale landlords, a 2015 NZPIF survey shows that a whopping 75.8% of residential landlords own just one rental property. In fact just 0.1% of all private landlords own 10 or more properties. The majority of private rental owners are ordinary New Zealanders - school teachers, doctors, tradies, and office workers - who take on considerable risk to purchase and maintain additional properties. The service rental home owners provide to society is to supply medium term accommodation to those people who cannot or do not want to buy their own.
Rental homes provide key services of huge benefit to tenants such as a home, protection from weather, climate control, utilities such as power and running water. The problem is all of these services are expensive to maintain. A roof to keep out weather, heating systems, and repairs to underground water lines are some of the most expensive repairs (think tens of thousands of dollars, not hundreds).That’s after paying rates, mortgage and insurance which have all increased significantly.
And now a significant handbrake for rental owners expanding the gap between supply and demand of available housing, is their inability to claim mortgage interest as a legitimate business expense. Understandably, owners of private rentals plan to achieve some return for the risk they take and for the services they provide to tenants, often to help fund their own retirement years. Making it more difficult to be able to cover costs and earn any return for their time, money and effort means that more rental home owners are driven out of business, so fewer rentals are available for those desperately looking for a home.
Borrowing money to buy a business asset from which you derive income and for which you are taxed on that income, less any expenses of operating your business, including interest costs, is 100% standard business taxation rules all around the world. It doesn't matter what that business asset is - a machine, a warehouse or in this case a house. Owners must work hard to diligently maintain their asset, follow the rules, and also care about their tenants who need to respect their home as well.
“Changing the interest deductibility rules for rental properties by whatever Government wins the upcoming election is top priority for our tenants’ sake.” said Harrison. “It is essential to ensure that more private rental owners are not forced to sell their rental properties leaving more tenants without homes. There are far fewer owners than tenants and losing any rental homes breaks down the system and they are hard to replace, crippling supply. Any increase in a business’s costs must eventually funded by the end user, in this case the tenant, and therefore ends up as a ‘tenant tax’. Is this what the current Government wants, at a time when they are supposedly fighting to reduce the impact of rising costs on those on lower incomes?”
“Instead of forcing though ill-conceived tax laws which increase rental property owners’ costs and risks, incentives must be put in place to encourage private ownership and to close the gap between supply of and demand for rental homes“ said Harrison. “Owners, tenants and the Government are all in this together with taxpayers funding housing, so let’s find solutions that work.”
ENDS
About the NZPIF.
The New Zealand Property Investors’ Federation is the parent body for affiliated Property Investors Associations representing approximately 7000 property owners and is responsible for educating and supporting landlords to ensure New Zealanders have access to high quality rental properties.
For more information please contact
Sue Harrison, NZPIF President sue.harrison@nzpif.org.nz 0275479739
Peter Lewis, NZPIF Vice President pvlewisnz@gmail.com 0274520511
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