Rent rise fears not addressed by Government: Spokesman worries for 1.5 million in rental properties

A tenant spokesman welcomed today’s Government moves but said he was worried about rents continuing to rise which he said hurts the more vulnerable.

Ashok Jacob, a Renters United spokesman, said around a third of New Zealanders rent and as house prices rise, that proportion is increasing with no end in sight.

“It’s possible rents could rise as a result of this. I’m disappointed that the Government has not addressed the concerns of that large sector of the population because it’s more than 1m people and growing daily.”

New Zealand has about 600,000 properties which are home to around 1.5 million tenants.

Jacob was commenting on today’s announcement led by Prime Minister Jacinda Ardern to pour close to $4 billion into a scheme to accelerate new house builds, expected to help see “tens of thousands” of new properties built.

The Government is also doubling the capital gains tax-esque bright-line test from five to 10 years, meaning house flippers get fully taxed if they sell rentals within a decade.

First Home Grant caps rise from $85,000 to $95,000 for single buyers and from $130,000 to $150,000 for two or more buyers but landlords will be barred from claiming rental property mortgage interest tax deductions, hitting them in the pocket.

Jacob said that wouldn’t necessarily lead to a one-to-one situation where rents would rise due to fewer tax deductions because of how the sector worked generally.

“Landlords increase rents, no matter what happens – just because they’re able to. Rents will continue to rise no matter what the Government announces because it’s unwilling to tackle the major problems in the sector.

“It’s not that if landlords are taxed more they will pass those costs on to tenants. It’s possible and they’ve threatened this. But rent also goes up for tenants regardless of what changes are made.”

Jacob is a tenant in Wellington’s Aro Valley, who has graduated from Victoria University with an honours degree in history. He said he had just finished a dissertation on the Cold War in New Zealand. He is now seeking employment and wants a job working on Government policy but is also volunteering while he finds work.

He has rented for three years and although he would like to buy a house, he sees no end to his tenancy path.

“I’m glad to see the Government is taking aim at the investors who are mostly to blame for the current crisis and that they earmarked so much money for new housing,” he said.

“There are no changes to the rental sector from this. We would have liked to see Government intervention to address the extremely high cost of rent in the short term rather than these long-term changes.

“The people who are hurting the most are renters, not only because they are locked out from becoming first home buyers but their budgets are being squeezed by rising rent. The policy announcements today do nothing to change that for the next few years until new housing supply can take effect.”

Andrew King, NZ Property Investors Federation president, said todayhe was shocked about landlords losing the mortgage tax deductions.

“What, so every other business in New Zealand can still claim tax deductions, but not landlords?” King asked. “You’re joking! This is just bizarre, it’s crazy.”

The sums involved could be tens of millions of dollars, King said, and that would now be lost to landlords, already struggling under Residential Tenancies Act changes from last month which swung the power in tenants’ favour.

Sharon Cullwick, federation executive officer, also expressed dismay at that change.

But King said he was not surprised about the bright line test being extended to a decade.

Late last year, the Herald reported how Auckland rents were almost static, rising by only $9 per week in the year to September 2020, according to new data from one agency.

Kiri Barfoot, a Barfoot & Thompson director, said that agency managed around 16,500 Auckland properties and rents had only increased by 1.79 per cent annually. Early this year, Barfoot said Auckland residential rents had hit a new all-time high and were forecast to climb further soon to an average $600/week.

Auckland’s average rent was $595/week at the end of 2020, based on rents paid during December for around 16,500 properties, including new and existing tenancies, managed by the agency.

Trade Me said at the end of last year that national rents rose for a third straight month in December, hitting new record highs in some regions and supply shortages suggest it could be a difficult year for tenants.

Rent rose 4 per cent in December 2020 when compared with December 2019, to sit at $520/week.

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