Landlords swamped by change

The unbelievable last 30 months of changes for landlords

2016: LVR Restrictions

• Landlord deposit requirements increased to 40%,
• Meaning very few people could fund new rental property
• This was start of reducing private rental supply for tenants.

2016: Bright Line Test – Two years

• The Bright Line Test was aimed at Property Traders and Speculators passing themselves off as rental property providers and not paying their required tax.
• It was intended to make the existing intention rules clearer, which it did, but also reduced rental property providers flexibility or requirement to sell without having to pay a capital gains tax.
• This rule only applies to residential rental property, thereby making other investments more attractive and reducing the supply of new rental property.

2016: Increased powers for MBIE to investigate landlords

• Increased powers of entry
• Increased powers of investigation
• Increased powers of prosecution
• Increased penalties
• No increase in powers against tenants
• Insulation statements required

2017: Residential Tenancies Amendment Bill (Became law in 2019)

• Tenants liability for damage
• Unlawful properties
• Methamphetamine

2018: Extending the Bright Line Test 

• Increased to five years.
• Studies have shown that property traders mostly buy and sell properties within a six-month period.
• Extending the Bright Line Test therefore only affects residential rental property providers
• Further disincentivising the provision of rental property for tenants.

2018: Letting fees abolished

2018: Tax working group

• Labour established the Tax Working Group primarily to bring in a CGT.
• There were calls to only establish the CGT for residential rental property, however research commissioned by the NZPIF showed that rental property paid just as much, if not more, than other investment assets that increase in value.
• Prior to this, the expectation of a CGT disincentivised the provision of rental property.

2019: Ring fencing tax losses

• As with other businesses, it is extremely difficult to fund the provision of rental in the first few years of ownership.
• While other businesses can use losses to offset the tax payable on other income, rental property providers can no longer do this as these losses are ring fenced.
• This means rental property providers cannot use losses in the years that they are made, but ironically they can use them when the property is profitable.
• This law change has fundamentally changed the cashflow situation for providing rental property and made it impossible for many people to be able to fund new rental properties.
• This has disincentivised provision of rental property

2019: Healthy Homes Guarantee Bill

• Sets standards re heating, insulation, ventilation, moisture ingress etc
• Determines the method of compliance
• Landlord must sign a statement stating they will comply with Healthy Home Standards

2019: Privacy commissions guidelines

• P.C set out guidelines – realised they were unworkable and then consulted the NZPIF and other landlord groups then re-issued.

    July 2019 

• Insulation standards enforced – Ceiling and under floor
• Average cost to upgrade was $3500?

    March 2020

• Covid-19 emergency changes to regulations - rent increase freeze, no evictions except in limited circumstances, tenants can give notice to leave but landlords cannot conduct viewings.

 

    July 2021 

• Insulation standard #2 will be enforced
• Heating standard will be enforced
• The new heating standard is onerous and the NZPIF estimates this will cost on average about $4000 per tenancy

FINALLY:  Did you know:  The NZPIF has never been asked by the Government how landlords could help increase the supply of rental housing – what tools do they need?

So here we are  - unbalanced legislation – landlords leaving en mass and the government is paying up to $1,200 a week for a motel unit to house tenants