Count on rent caps, landlords warned
Controversial changes to the tax treatment of landlords mean that rent controls are now ‘‘almost inevitable’’, a property management consultant is warning.
The changes, which remove property investors’ ability to offset home loan interest costs against their rental income, prompted many commentators to predict they would lead to rent increases.
This has not pleased the Government, and Finance Minister Grant Robertson said it would ‘‘take action if necessary’’ should rents be raised to offset the effect of tax rule changes.
While Robertson would not comment on whether that could mean national or targeted rental increase caps, property management consultant David Faulkner, of Real-iQ, said some sort of rent control was now ‘‘almost inevitable’’.
The benefits of owning a rental property were set to take a massive hit due to what was a ‘‘discrimination tax’’ around the deductibility of interest payments, he said.
‘‘The inevitable thing that many landlords will do is increase the rents and increase them significantly, as interest payments will be an additional cost to the landlord of nearly $100 a week.
‘‘And this is why I believe we will see rent controls kick in. Landlords will try and aggressively push rents to levels that will be beyond sustainable for many renters, and the Government will be forced to act.’’
Further consequences of an increase in rents would be less disposable income for the economy and more people moving on to the social housing waitlist, which was already up by 548 per cent since December 2015, he said. ‘‘Rent controls could be implemented on a regional basis. They could look at rental stats based on MBIE data and cap rents to that effect, only allowing rent increases in line with inflation.
‘‘If an owner makes substantial improvements to the property, they might then be able to apply to the Tenancy Tribunal to set the rent if there are disputes.’’
When New Zealand went into alert level 4 lockdown this time last year, a six-month freeze on rent increases in existing tenancies was introduced in a bid to support people through the uncertainty.
Following the end of the freeze, rents continued to increase.
Since the housing announcement last week, tenant advocacy group Renters United has already called for a cap on rent increases.
‘‘Rent controls could be implemented on a regional basis.’’ David Faulkner Property management consultant