Economist disputes landlord rent claims
Landlords say Labour’s plans to change the rental market will drive up rental prices and reduce the amount of property available.
More than 800 members of the New Zealand Property Investors Federation (NZPIF) responded to an online survey.
Almost three-quarters said they would increase their rents if Labour’s policies were introduced.
More than half said they would put rents up between $20 and $40 a week. Almost 13 per cent would put weekly rents up more than $40.
NZPIF executive officer Andrew King said a number of members had told him they would have to sell properties if the changes were introduced.
Economist Shamubeel Eaqub said, for such a survey to be credible, it would have to be scientifically rigorous, which this was not.
The way it was administered made it self-selecting, Eaqub said, and those with concerns were more likely to respond.
Labour’s plan would require landlords to give their tenants 90 days’ notice to move, remove ‘‘nocause’’ terminations and limit rent increases to once a year.
The formula for increases would need to be set in tenancy agreements and letting fees would be abolished.
Labour would pass the Healthy Homes Bill, introducing heating and insulation requirements.
It also wants to ring-fence property losses, so that investors whose rent payments don’t cover their mortgage will no longer be able to claim their top-up payments against their other income.
A capital gains tax (CGT) is also on its to-do list.
Eaqub said the biggest factor for landlords’ income was vacancy rates. He pointed to rental yields – in Auckland, investors can only get about 3 per cent, gross, in rent from the purchase of a property.
"They're idiots … [Tenants'] ability to pay is what really matters." Economist Shamubeel Eaqub
If rents could rise to improve that return, they would have, he said. ‘‘They’re idiots. The market doesn’t work like that; it’s far more complex. [Tenants’] ability to pay is what really matters.’’
He said that did not mean Labour’s policies would not have negative effects for some people. But some tenants might be willing to pay more for a house if they knew they could stay in it.
Bank of New Zealand chief economist Tony Alexander said it was not unreasonable to suggest rents could rise.
‘‘When changes come along which push up the cost of doing a thing, and reduce the number of people doing that thing and increase the cost, it pushes up the price of the output.’’
One precedent might be found in Budget 2010, which changed the rules so landlords could no longer claim depreciation on their rental properties.
When this change was introduced, it was warned that rents could be expected to rise.
King says they did, while Eaqub says they didn’t.
CoreLogic head of research Nick Goodall said his data did not show anything significant.
However, King said Labour’s plan was more wide-ranging than the depreciation move. ‘‘Removing depreciation never had as big an effect as a capital gains tax or ringfencing. Labour is looking at not one of those but both.’’
Infometrics chief forecaster Gareth Kiernan said the brightline test introduced in 2015, which applied a CGT to an investment property sold within two years, had made little difference to rents.