The NZ Property Investor’s Federation is pleased that Labour will engage with them in talks about improving tenure for tenants. While some tenants want long term tenure, many more prefer the flexibility that renting brings. For any new policy to work, it needs to be balanced and not trample over the rights of the rental property owners.
Labour states that in the late 60's and 70's, 30-35% of the new houses built were entry-level homes. This is because developers then didn't have council fees, often in excess of $50,000, that make low cost new builds unachievable. The best thing Government can do today for housing affordability is to significantly reduce council development fees.
We need to question if we need as many low cost houses as we did in the late 60's and 70's. Baby Boomers were first home owners back then and needed cheap new houses. Today's first home buyers should be buying the baby boomers first homes.
Labour says that they are introducing a Capital Gains Tax (CGT) to get speculators out of the market. This is deceptive as Labour knows that speculators already pay tax on any capital gains and the Inland Revenue has a well-funded and successful specialist unit to make sure they do.
The public needs to know that a CGT will push up rents, lead to overcrowding for tenants and make it harder for young New Zealanders to get onto the property ladder. They also need to know that it will apply to farms, businesses and shareholders as well.
A CGT has not reduced house prices in any country that has implemented it. A CGT provides very little extra tax funds, usually only accounting for a few percent of tax income.
There is no incentive for rental property owners to move into the so called "productive sector", as other investments will also come under the CGT. Rental property owners are already part of the productive sector as they house workers, contribute to the tax base and support many other industries.
Many tenants will be unaware that Labour has also planned to ring fence any losses that a rental property may make. This will have an even larger effect on an owner’s ability to provide rental accommodation than a CGT. These two policies alone will put enormous pressure on rental prices, condemning tenants who would prefer to be home owners to being tenants for life.
Housing is an essential but complicated issue and people need to think past the clever sound bites and wishful thinking that higher taxes and regulation will improve everything.