Hawke's Bay Property Investors' Association

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News & Updates

Recent updates

02-12-2014

Political report for November from Thomas Chin

The following is a summary of political and regulatory news or comment affecting the residential rental property industry.

 

 

  • RB postpones 5+ property rule

  • Key’s housing plan will make crisis worse 4/11/14 Labour Party

  • National’s housing plan economically reckless 4/11/14 Green Party

  • Selling state houses Q&A

  • Housing inquiries

  • Briefings for incoming Ministers

  • New initiatives to improve tenancy services 17/11/14 NZ Govt

  • Andrew Little new Labour leader

  • REINZ – property managers

  • Smoke alarms in rental properties

     

    RB postpones 5+ property rule

    The Reserve Bank had planned to bring in new rules on 1 December regarding the classification of rental property owners with five or more properties however media reports suggest this has now been put back to “mid 2015”. The rule changes mean that rental property owners with five or more properties could be classified as either income producing real estate or small to medium enterprises (SMEs). The reclassification could lead to higher equity requirements and mortgage interest rates for affected rental property owners.

     

    Key’s housing plan will make crisis worse 4/11/14 Labour Party

    John Key's plan to sell off state houses and instead give subsidies to landlords is economically stupid and will make the housing crisis worse, says Labour's Housing spokesperson Phil Twyford.

     

    Subsidies for private landlords will drive up rents. Vulnerable families will have to compete with other renters and first home buyers, making an already difficult housing market even harder to get into. And subsidies have only a short term effect, whereas a house is an asset that can support vulnerable families for decades.

     

    John Key’s plan is a win for landlords. Rent subsidies are a continuous transfer of wealth to private landlords, which will drive up rents for all renters.

     

    National’s housing plan economically reckless 4/11/14 Green Party

    National’s plan to sell state houses and provide income-related rent subsidies to private landlords will drive up rents and house prices for everyone and is economically reckless, the Green Party said today.

     

    “Shifting the responsibility for housing from the Government to the private sector looks like a cynical attempt to enrich landlords while palming off responsibility for housing the vulnerable,” Green Party housing spokesperson Kevin Hague said.

     

    “National’s plan swaps our state homes for massive state subsidies to private landlords.

     

    “The Government paid out $1.2 billion via the accommodation supplement in the year to June 2014, a policy that is already credited with driving up rents.

     

    “The provision of state houses by the Government delivers a supply of affordable accommodation. A good supply of rentals at a reasonable rate helps contain rents for everyone, not just those in the state house.

     

    “That function no longer applies when our stock of state houses are sold.

    “Rents will be driven higher, and while families with rent subsidies may be assisted short-term, the Government will be on a treadmill to pay ever higher subsidies as house price-related rents increase.

     

    Selling state houses Q&A

    Q. Why is the Government selling state houses?

    A. The Government says third sector community-based providers look after tenants better, and will work with private developers to develop new housing faster, than Housing NZ.

    Q. Which houses will it sell?

    A. Those that maybe poorly located, wrong size for the area and or demand.

    Q. Who will buy them?

    A. Community housing providers, financiers and possibly property developers and iwi.

    Q. Why is this of interest to property investors?

    A. Community housing providers can get the state subsidies to provide income-related rent as Housing NZ gets

    Q. So what?

    A. Community-based providers could potentially get cheap houses and highly subsidised rental income that they can then use to build portfolios of rental property and compete with private rental providers. Alternatively, private landlords could benefit in any sell-off of state houses and extensions to the availability of income related rents.

     

    Housing inquiries

    The Government has asked the Productivity Commission to review and make recommendations on how to improve planning and development systems in order to deliver an adequate supply of land for housing. The Commission has just released the issues paper on this topic and submissions are invited by 22 December. The Commission expects to release a draft report on the submissions in May 2015 and present a final report to the Government on 30 September 2015.

     

    Elsewhere, the Ministry of Business, Innovation and Employment (MBIE) are seeking submissions on property regulations and local rules that don’t make sense. In particular property owners, builders, tradespeople and businesses who have experienced the issues created by irrelevant or unnecessary regulations, can report these to a Rules Reduction Taskforce which will identify pedantic and unnecessary rules that frustrate and hinder. There is no closing date for submissions.

     

    Briefings for incoming Ministers

    The Government released a number of briefing papers for incoming Ministers during the month.

     

    Of interest were the departmental reports from the Building & Housing Ministry, Housing NZ and IRD identifying policy issues or approaches potentially affecting property investors.

     

    The BIM report from the Ministry for Business Innovation & Employment (MBIE) noted:

  • “Property prices are substantially higher than prices in the early 2000s

  • “Increased prices have contributed to lower home ownership rates

  • “Internationally, NZ house prices are high, comparable to those in Britain and Australia

  • “Rents have also risen, but at a much slower rate than house prices

  • “Housing is now more affordable than it was in 2007. This is due both to the fall in house prices during the global financial crisis and the extended period of low interest rates that followed

  • “Rental affordability has remained relatively stable over the same period

  • “Housing affordability problems are not pervasive across NZ – they are largely concentrated in low-to-moderate income households in Auckland and, in the short term and on a smaller scale, in Christchurch”.

     

    MBIE outlined 3 strategies to directly improve housing affordability:

  • In Auckland: Improve housing supply and rental affordability

  • Nationally: Improve the national planning framework

  • Nationally: Improve the rental market. Specifically:

    -provide greater security of rental tenure nationally &

    -trialling ways of improving the quality of rental housing

 

The BIM report from Housing New Zealand on WARRANT OF FITNESS noted:

  • That scheme is designed to improve the health and safety of tenants by setting minimum standards that ensure that rental houses are insulated, dry, safe and secure

  • Between March and April 2014 HNZ carried out a trial of 500 properties to assess the viability and costs of the proposed WOF Scheme

     

    Disappointingly, the remainder of the official commentary and guidance was heavily redacted. However, the BIM does indicate that a (Ministerial) decision on the state house WOF is due in “late 2014”.

     

    The BIM from Inland Revenue commented on broad ranging taxes, including a land tax and a capital gains tax saying:

  • As a potential new tax, a land tax would be expected to fall on owners of existing land. This could appear ad hoc in falling only on those who have wealth in one particular form. It could also be difficult for particular groups of people (especially retirees, farmers and Māori authorities).

  • The largest area of non-taxation of income in New Zealand that could practically be taxed is capital gains

  • However, taxing capital gains only when assets are sold and ring-fencing capital losses, as generally occurs, can impose other efficiency costs. Capital gains taxes also tend to be complex

     

    IRD also said the design of a CGT is critical as many of its pros and cons depend specifically on how it is designed and implemented. IRD cannot evaluate a CGT in the absence of a detailed discussion of exactly how such a tax would operate.

     

    New initiatives to improve tenancy services 17/11/14 NZ Govt

    Building and Housing Minister Nick Smith announced changes to streamline and speed the delivery of key tenancy services.

     

    “The FastTrack Resolution service will help landlords and tenants to help resolve rent arrears disputes in a faster and more efficient way. A new online system for Tenancy Tribunal applications is also up and running which will reduce processing times significantly.

     

    “FastTrack Resolution means that landlords and tenants who have made a substantial agreement about the repayment of debt will be able to have their agreement formalised by a confirmation conversation, rather than a full mediation. Now a process that could previously take up to 12 days can be completed in as little as 48 hours.

     

    “This will hugely reduce the time it takes to resolve the rent arrears disputes that make up 76 per cent of the 43,000 applications received by the Tenancy Tribunal each year.”

     

    FastTrack Resolution was launched in February this year by MBIE, and since then it has been progressively rolled out to high volume Tenancy Tribunal users, including large property management companies and Territorial Local Authority (TLA) housing providers.

     

    The next priority for the Government will be in upgrading the tenancy bond system to an online service.

     

    Andrew Little new Labour leader 18/11/14

    Andrew Little has been elected the new leader of the Labour Party. Prior to being a MP he was a lawyer and the leader of the Engineering, Printing and Manufacturing Union (EPMU).

     

    Of interest to property investors, during the leadership race, Little said their 15% Capital Gains Tax policy “turned a lot of people off who previously voted Labour” and the party failed to sell it properly to the electorate. Interestingly, Little has NOT rejected a CGT but has said that it needs to be reviewed. It is likely that a version of CGT and the targeting of property speculators  will continue to be Labour Party policy.

     

    Little has named Annette King as his deputy and has confirmed Phil Tywford as the party’s housing spokesperson. Grant Robertson is the new Finance Spokesperson and on the CGT matter, he not being a friend to property investors, has said the policy for the election in 2017 should NOT change.

     

    Loss ring-fencing

    Perhaps more worrying for property investors remains Labour’s policy to remove the ability of landlords to offset rental property losses against their personal income. This measure targets negatively geared rental properties and means that losses may only be offset against future rental profits. No Labour MP has indicated that there would be any changes in this area. Also, Little has said the party would target property speculators.

     

    REINZ – property managers

    Outgoing Real Estate Institute chief executive Helen O’Sullivan wants to see pre-purchase building inspections regulated, a standard set for methamphetamine testing, and property managers come back under the Real Estate Industry Authority.

     

    O’Sullivan said REINZ remains concerned about property management which was deregulated under the 2008 changes to the Real Estate Act. Many real estate agencies have a property management arm which comes under regulation of the REAA as part of their agency licence but others don’t face the same oversight.

     

    Anecdotally there had been a number of cases where property managers have absconded with landlords’ money, but few complain about it to the police because of the relatively small sums involved, she said. “Cumulatively, it mounts up.”

     

    REINZ wants to see all property managers come under the REAA, a requirement for rent money to be kept in trust accounts, and some method of registration so that those who do transgress can’t just easily pop up again in the market somewhere else.

     

    Smoke alarms in rental properties

    During the month the NZ Fire Service called for it to be a legal requirement for private landlords to install smoke alarms inside rental properties.  The Tenants Protection Association has also called for mandatory smoke alarm installations in rental properties. Smoke alarms are an item mentioned in various rental property warrant of fitness proposals.

     

     

    ISSUES UNDER WATCH

What

(sponsoring MP)

Brief description

Status

Building (Earthquake-prone buildings) Amendment Bill

(Nat: Nick Smith)

Sets a requirement for buildings to be earthquake strengthened – also applies to multi-storey or multi-unit residential buildings

Bill has been referred to the Local Government and Environment Select Committee. Submissions closed: 17 Apr 2014. Committee report due: 30 Mar 2015

Healthy Homes Guarantee Bill (Lab: Phil Twyford)

That every rental home in NZ meets minimum standards of heating and insulation

Bill awaiting first reading

Energy Efficiency and Conservation (Warm Healthy Rentals Warrant of Fitness) Amendment Bill

(Greens: Metiria Turei)

Through the introduction of a “WoF” regime require minimum energy performance standards for all residential rental accommodation

Bill awaiting first reading

State house WOF trial

Trialling a WOF system on 500 state houses

Minister of Building & Housing decision on trial is due by the end of 2014

 

END

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