Humanity absent in murky depths of landlord chatter

Tenants in rental properties across New Zealand have had their fears stoked by newspaper, radio and television commentaries in recent weeks.

Landlords and their array of property lobbyists would have us believe rents need to rise dramatically on the back of tax changes which are being phased in over four years (mortgage interest won’t be tax-deductible by 2025).

The whole fiasco has been quite an eye-opener in terms of the power play between landlords and tenants.

One side is over-represented by property groups and online chatter and the other is rarely given enough information to see the windows for the curtains.

What happens when you venture into the murky depths of landlord chatter is enough to embarrass even a hardened capitalist. Perspective and humanity becomes lost.

Let’s have a look at comments dug up online. They’ve all been sourced from Stuff.

❚ ‘‘Owners aren’t going to wait, rents go up now in case government pulls any more funny business.’’

❚ ‘‘The vast majority of landlords won’t be affected by the removal of interest deductibility but they’ll put their rents up anyway, because there will be the opportunity to and all businesses try to maximise their profits. C’est la vie!’’

❚ ‘‘Get in before rent caps as we can only up the rent once per year, not even at change of tenancy. There is a very apt saying; a rising tide raises all boats.’’

❚ ‘‘If the people that rent for decades wanted to buy a home, they would have by now. A lot of them are longterm renters.’’

❚ ‘‘Renters should feel second class, they don’t own the gold. If they want to feel first class and security they need to buy the gold.’’

❚ ‘‘I am a landlord and I will be increasing rent purely because the government is making policy on the run and even with the new tax laws, one must always try and be in front of the changes.’’

❚ ‘‘Try more like 17 to 18 per cent before the next election. This is likely given how rapid rents have historically risen under this current government. Let’s do this.’’

❚ ‘‘As an investor/landlord I have already given two families their marching orders as a direct result of the government’s pre-announced announcement. I put up the rent before rent controls come into place and get new tenants.’’

❚ ‘‘When she suggested landlords get a second job to pay the added annual cost, I nearly spilt my coffee laughing in disbelief. To think this won’t cause rents to go up, you would have to be delusional.’’

Dismiss the vitriol

As a rule of thumb, it’s usually wise to dismiss the hiss and the roar you read online. But this is different. Why? Because it matters that tenants are real families.

It matters when a group of people with a lot of power (landlords) are being misrepresented by an inner circle getting louder and louder. It matters that this small group blow fire on their lobbyists and associations, and have access to politicians, economists and financial writers. Many are too easily convinced their views stack up.

The numerical evidence for rent rises is weak.

Let’s be very clear on this one – only a tiny proportion of landlords have high debt. In New Zealand the average landlord has borrowed 20 per cent of a home’s value. The average is so low because swathes of landlords are debt-free.

For the avoidance of doubt, it is very possible to invest in an asset (shares, bonds, property) and pay for it with savings – not a jot of borrowing in sight. It’s these people who stabilise the market.

Where we might be delusional is when it comes to ethics. As you can see from the online comments, the idea of landlords acting like a cartel seems to be positioned with great ease. If a small group raises rents, they expect to have the support of others behind them. Marginal prices set the market and rest follow the pied piper.

It starts to reek of anticompetitive behaviour.

The much-repeated story goes like this. Landlords will sell up due to tax changes and tenants will lose their homes to first-home buyers.

Tenants will be left with a shrinking rental pool and more homelessness. It’s an argument that appears plausible, but makes no sense. When you take a home out of the rental pool, a chain of events begins. A first-home buyer is also moving out of the pool of renters.

One less house and one less renter restores the equilibrium. The size of the pool may shrink, but it is irrelevant when the two

As an investor/landlord I have already given two families their marching orders.

Comment posted on Stuff

parts offset. Migration is the biggest disruptor, not tax policy changes.

The big concern for rent price stability is what happens when interest rates rise. A 1 per cent increase in rates will have roughly the same effect as this tax change ($6000 cost on a $600,000 mortgage).

Imagine the noise from landlords if mortgages move from 3 per cent to 4 per cent. How will the Property Associations position that as an earth-shattering event? Let’s hope there is a more measured approach in future.

Janine Starks is the author of www.moneytips.nz and can be contacted at moneytips. nz@gmail.com. She is a financial commentator with expertise in banking, personal finance and funds management. Opinions are a personal view and general in nature. They are not a recommendation for any individual to buy or sell a financial product. Readers should always seek specific independent financial advice appropriate to their own circumstances.