'Fewer rental properties and higher rents'

Property

Housing and Urban Development Ministry officials concede that the Govt's new 'Healthy Homes' initiative will drive up rents, see rental stock taken off the market and may increase demand for public and emergency housing

26th Feb 19, 7:53am by David Hargreaves

By David Hargreaves

Housing and Urban Development Ministry officials have conceded that the Government's new 'Healthy Homes' initiative will likely drive up rents, see rental stock taken off the market and may increase demand for public and emergency housing.

Additionally, Housing New Zealand says the new measures launched by Housing and Urban Development Minister Phil Twyford on Sunday may cost it somewhere in the region of $200 million. Some other government agencies that own housing - notably Defence - may also face cost ramifications.

The new measures, targeting around 600,000 rental properties, are set to be made law by the middle of this year and will take effect on a sliding scale up to July 2024 by which point all rentals must be compliant.

The full details are included in the graphic underneath this paragraph, but the big parts of the new measures include the compulsory provision of fixed heating in the living rooms of rentals that must be able to heat the room to 18C and the need for ceiling and underfloor insulation of 120mm minimum thickness. The moves follow an earlier consultation process conducted by the Government.

Twyford's paper that was put to Cabinet with the proposals said that Housing NZ estimates additional costs of $113 million to $144 million for "known interventions" required by the new measures, over and above existing planned programmes. In addition there's a potential additional sum of $77-$99 million for interventions that may or may not be required to meet the proposed temperature standard.

"HNZC considers it can fund the required upgrades from its baseline, although the effects of this work on other existing planned programmes of work has yet to be assessed from a financial and market capacity perspective. Actual costs incurred are likely to be higher because HNZC may need to bring forward long term decisions to retrofit or redevelop properties, rather than incur additional short term cost for an older or unsuitable asset," the paper says.

Looking generally at the overall costs of the new measures, the NZ Institute of Economic Research has calculated that in the case of properties that are not currently compliant with any of the new requirements, the cost for private landlords, including GST, of getting them up to requirement would be in the region of $8,625 to $11,500

Sale and withdrawal from supply

In a regulatory impact statement prepared for the Minister, Housing and Urban Development Ministry officials concede that some private landlords will choose to sell their "unimproved" rental properties, while some properties that need improving will be "completely withdrawn" from the housing supply.

"Where these properties are at the very low end of the quality spectrum and are unable to be improved, then the quality of the housing stock will have been improved and the supply of houses reduced," the statement says.

"If these properties are in concentrated locations, then the effects on (rental) housing supply in those areas may be visible."

The officials go on to say that in such an instance local or central government "may become involved to address emergency, temporary or longer term housing supply issues".

The officials say the costs of upgrading properties will be borne by landlords, "who may accrue limited direct benefits".

'Landlords may recover costs from tenants'

"Landlords may recover these costs from tenants through rents where supply and demand conditions allow them to do so."

In some supply constrained markets, low income tenants may be paying close to as much as they can for housing and therefore limit potential rent increases, the officials say, and in these cases landlords will have to accept a reduced return on investment, or sell.

"Where a significant portion of landlords sell their properties this could create a short term supply shock as the market adjusts, potentially increasing short term demand on emergency or public housing."

The officials note that there have been recent increases in national median rent, "this could be in part due to landlords anticipating the introduction of changes when considering how to set rents".

In talking about "distributional effects" of the new measures, the officials say some rental properties will be sold to owner-occupiers including both first home buyers and other owner-occupiers moving into a new property.

Fewer rental properties

The net effect will be a decrease in the number of rental properties.

"Alternatively, some rental properties may be removed from use in long term accommodation altogether, and switched into short term accommodation (e.g. AirBnB)."

The officials say where housing is transferred from rental to owner-occupied status, this may lead to a demand for more houses to accommodate the same number of people "because the average, owner occupied housing has fewer people per property than rental housing".

"A reduction in rental housing particularly low quality homes are likely to disproportionally effect low income households, potentially increasing demand for public and emergency housing.

'Increased household crowding'

"This pressure is also likely to increase household crowding at the margins until supply constraints can be reduced."

But curiously, the officials then go on to say that these effects on the rental market might be "mitigated" by the context of the pressures in the broader housing market

"The effects of strong demand from immigration and higher incomes for renters will be an increase in rents, especially in areas with unresponsive supply.

"This should encourage more landlords to stay in, or enter the housing market as rents increase.

"This effect is significant, because it could totally offset some of the negative effects of the healthy homes standards and other regulatory changes that affect landlords."

'Impossible to isolate causes of rent increases'

The officials say that in practice, it is "impossible to isolate, after the fact", the different causes of rent increases.

"If rents do increase, as we expect, landlords may attribute these increases to the Government’s policies.

"However, in reality other factors will be strong demand from population growth coupled with constrained supply that will enable landlords to increase rents."

The officials say they propose to monitor the situation but don’t have any mitigating actions proposed.

We welcome your comments below. If you are not already registered, please register to comment

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.

99 Comments

by murray86 | 26th Feb 19, 8:25am 1551122757

Lets face it many landlords business models are built on fraught and faulty assumptions and are highly dependant on rent subsidies. The vast majority of renters are generally trapped into this type of accomodation, with little to no power in the relationship. In the last 20 years our entire housing/accomodation model has been turned on it's ear, to the point that we now accept homelessness as an unfortunate by-product of the economy. While in time, I think the Governments actions will have an impact, they are going to create other problems. Putting rents up will just put more people on the streets.

First the landlords who cannot afford to bring their properties to standard will not rent them out, but sit on them empty. yes this will cost them, but they will see it as less than the cost of upgrading the property. Effectively they will be landbanking. And there is ample anecdotle evidence that this is happening already, by both local and international owners. The Government needs to act to address this to make it uneconomic, perhaps a higher tax on vacant properties?

Landlords continue to push the argument that they are providing a social service. Lets be clear - unless they are building NEW properties, they are not. They are taking existing houses away from first home buyers and helping to keep pressure on house prices to keep them up. Unless they are charging an affordable rent that does not require a subsidy they are also NOT providing a social service! They are just parasites who need to be regulated firmly.

by Te Kooti | 26th Feb 19, 9:11am 1551125488

You make some valid points but then conclude by calling landlords parasites, effectively rendering your post garbage. Landlords do provide a service - have you ever had to relocate for work? The only thing you care about is finding decent accommodation to rent and you want as much choice as possible. You wouldn't see them as parasites if you had. Landlords compete in the open market, take risk (taking equity out of their home and borrowing money), take calls in the weekend when something breaks or tenants lock themselves out. Some landlords are home owners who have transferred to another city and rent their primary residence while they in turn rent a house in their new city. Are they parasites as well? You need to set your bitterness to one side and start looking at this objectively.

by murray86 | 26th Feb 19, 9:53am 1551127999

Yes I have. I have rented and owned. In fact i used to own 7- 9 rental properties, but got out of the business when the market went stupid. Every rent i charged was affordable for my tenants and did not require to be subsidised. My business was built on a primary return of rental income, because at that time there was negligible capital gain.

Parasites they are, with the rents they are charging today. You argue that it is the market. Rubbish! Go and ask your tenants what they can afford, without a subsidy. You operate on a captive market of people who largely have no choice. They have no power, because when they tell you they cannot afford your rent, do you drop it to something they can afford/ No - you tell them that is what the rent is, if they don't like it, go elsewhere. That is not a fair and balanced market it is parasites at work, leeching off the vulnerable and the tax payer. It is blackmail.

When you price the rent of your properties at a round 20 - 30% of your tenants take home pay (no subsidy), or less then come back and tell me what i am saying is rubbish, and that your business model operates on a high standard of morals and ethics. Until then you are just a parasite, leeching off the vulnerable, expecting to be subsidised by the taxpayer.

by Nzdan | 26th Feb 19, 10:11am 1551129068

Average Salary in NZ = $50k = $41k p.a. after tax.
Average Rent in NZ = $390 per week (1 - 2 Bedroom) = $20k p.a.

48% of average take home pay for average 1 - 2 bedroom place. But using the average take home pay is a potential distortion, i assume a greater proportion of renters are at the lower end of the pay scale.

by Carlos67 | 26th Feb 19, 11:14am 1551132855

Yeah but there is often multiple people living in the house and paying the rent. You only need to look on trade-me to see what a room costs. If your in your 20's there is plenty of money left over to spend at the pub. If your still renting in your 40's perhaps you should take a look at your life choices.

by saving4AUhouse | 26th Feb 19, 12:09pm 1551136151

Do you think 20 something professional who have earned a difficult degree and are starting their career in engineering, programming or law should need to share a bloody flat?

That's not very normal in the first world.

by kpnuts | 26th Feb 19, 12:19pm 1551136788

yes it is --- all around the world -- or are you saying a newgrad should own a four bed house in remmers as a right !

its very normal for people in their 20's to rent and save for their own home -- which if they have earned a difficult ( not judgemental ) degree - the one you hold obviously - they are probably bright enough to realise it

by saving4AUhouse | 26th Feb 19, 12:27pm 1551137232

I'm saying new grads in the highest paying fields should be able to comfortably rent their own apartment. This isn't manhattan or san francisco.

by bob | 26th Feb 19, 4:02pm 1551150168

I graduated in 1991 Auckland and everyone flatted for years before thinking of buying houses. We were lawyers, accountants, architects, doctors etc and no-one I knew would consider renting their own apartment.

by Foyle | 26th Feb 19, 12:45pm 1551138322

Oh yes it is. I'm an engineer, and that is exactly what I had to do in the years following graduation. And it is worse in other countries with higher student debts.

by Korki | 26th Feb 19, 4:12pm 1551150720

No because in most of the world (not the west) unmarried children (adult) live at home with their parents and often grandparents, etc.

by waymad | 26th Feb 19, 10:40am 1551130813

Go and ask your grocery buyers what they can afford, without a subsidy. You operate on a captive market of people who largely have no choice and need food every day. They have no power, because when they tell you they cannot afford your food item, do you drop it to something they can afford/ No - you tell them that is what the food item is, if they don't like it, pick a cheaper item. That is supermarkets at work, catering to the cash-challenged and without recourse to the tax payer. It is BAU.

by Believer1980 | 26th Feb 19, 10:56am 1551131795

Murray, you couldn't have been a very successful landlord, unless your tenants were all executives earning after tax salaries in 6 figures or your houses were purchases for less than $200k, in that case you would have been a genious to tie your rents to how much money your tenants were making instead of the so called market rate.

What you say does not make any sense. What if you have 3 bedroom house and one potential tenant has annual income of $30k. Will you rent the house for $173 per week where interest plus rate and insurance cost you about $325 (assuming $400k value for the house and a mortgage at 6% and nil deposit)? That is called charity not business. Or you will look for a tenant that at least makes $62,000 a year so they can pay you the minimum costs plus 10%?

by murray86 | 26th Feb 19, 11:44am 1551134658

Wrong. "That is called charity not business. Or you will look for a tenant that at least makes $62,000 a year so they can pay you the minimum costs plus 10%?" First I am in the regions. Secondly I carefully selected the properties I purchased. I would go so far as to say none were flash, most were quite old. I had to do a fair amount of work to make a couple livable, but then I paid less for them anyway. But the model I used was balancing purchase price, maintenace and other costs against what rents I needed. If the rent was too high, I either negotiated the price down or went away.

These days my observations are that too many people are pay significantly too much for their investment. I believe that most people are thinking of them as an investment, but renting property out is not an investment it is a business, and that requires a somewhat different line of thought.

Why are you buying a rental property at that price? Unless you're banking on capital gains, you cannot get the return. If you and all the other prospective landlords walked away because the properties they wanted to buy to rent out were too expensive, where do you think the property prices would be today? Who gives you the right to look to the tax payer to subsidise your return on investment in your business? This is where i feel successive Governments have failed. Any market is supposed to be about a power balance between buyer and seller. In the rental market there is no balance, and hasn't been for some time. The buyer is a captive market with no choice, and the seller is driving them into poverty or onto the street. This a model of parasitism.

by Yvil | 26th Feb 19, 12:55pm 1551138902

Murray's comments make it quite clear that he has never owner a rental property.

by murray86 | 26th Feb 19, 1:28pm 1551140921

Wrong - jeez you guys are soo blinkered by faulty paradigms you couldn't see the truth if smacks you between the eyes. Thats why the world economy is so screwed up, people like you who can't see giving others a fair shake is actually better for all.

Yvil, one of my tenants was a beneficiary (actually several were) but I told this guy when i would sell my property and how much for. I also told him that with what i knew of his benefit, and what he had done to address some rent arrears, he could afford to buy it and it would be cheaper than renting. I laid it all out for him, including all the costs then of a mortgage (around 5% if my memory serves), rates insurance etc. He was impressed at the time. i gave him two years notice. When the time came he did not buy the property, but he tells me that that conversation is what motivated him to get a job, and buy another better one!

Oh and all the gripes about tenants - i was often surprised. The ones you'd think would be bad, turned out to be the best. the ones i thought would be no problem, ripped me off big time. the tenancy Tribunal were useless and toothless.

by Te Kooti | 26th Feb 19, 11:01am 1551132098

I've never heard a more fallacious argument, "the rents they charge today" are determined by the value of a property and the cost of financing it. If I bought a house tomorrow and rented it out, am I recouping a significant excess spread after financing and operating? (If I financed all equity I'm probably only going to make 4-6% ROE). Sure, landlords who bought 20 years ago are going to receive much higher returns, but surely all rents at T zero have to be at the market - that's economics 101. Oh, I bought my gold 20 years ago so you can have it at the same price.....

by murray86 | 26th Feb 19, 12:36pm 1551137770

It is not fallacious. No matter what business you are in the model must be sustainable. As a landlord you have actively made a choice to have a business buying and renting out properties. This requires you to have renters wanting to rent (note I have not said 'needing'). A sustainable market means your business model has its costs under control, and that your customers have a choice. Today the market is a longway from that.

Your comments imply to me that you have purchased property at a price that means you cannot get a reasonable return on your investment unless your charge exorbitant rents and your tenants rely on a subsidy. That alone makes your business model unsustainable. Any other business that tried to operate on that basis would go broke rapidly.

The collective actions of investors and landlords has driven the property market into the significantly unsustainable bracket, and this needs to be corrected. Most people who are renting today are trapped by these exorbitant rents and prices. They 'need' to rent. The price of property needs to go back to a level where people have a genuine choice. there will always be people who will choose to rent, but those who want to buy should also be able to make that choice.

by Te Kooti | 26th Feb 19, 1:21pm 1551140477

How can I be charging exorbitant rents yet still not make, or lose, money? If my rent is exorbitant surely a tenant will rent from someone who isn't? For any new rental the carry will be break-even at best. It's a long game waiting for inflation in rent and capital value, or picking an up and coming area. And you're wrong, I haven't bought an investment property recently.

by murray86 | 26th Feb 19, 1:31pm 1551141077

You are not paying attention. You are saying the market sets the rents. you are setting your rents by what other landlords are asking, not by what is affordable. Haven't you heard? The entire spectrum of rents in Auckland and most other places now is unaffordable! Read exorbitant!

by skudiv | 26th Feb 19, 9:13am 1551125581

Most renters are highly dependent on rent subsidies, landlords not so much. I think the parasites are the one getting by on government handouts, who don't work but expect to live in as much comfort as someone who sacrifices 40hrs a week to provide for his family. Landlords are doing nothing wrong, and it's not as if government is providing much rental accommodation for these losers. Someone has to do it, especially if the government wont touch it.

by RickStrauss | 26th Feb 19, 10:23am 1551129839

Rent subsidies don't stay with tenants, they go to landlords. But I agree that we should stop subsidising rent prices for property investors. Makes no sense at all, this squandering of welfare money.

Not sure your calling renters who receive WFF or Accommodation Supplement losers helps NZ's situation much though.

by Nzdan | 26th Feb 19, 6:07pm 1551157643

It's just the way Skudiv feels the need to get his message across. He's always on here painting scenarios of people perceived as less fortunate than himself and labeling them as losers. I think it speaks more of his own insecurities, maybe he's subconsciously mirroring the way he was treated when he was at school?

by RickStrauss | 26th Feb 19, 12:17pm 1551136626

The irony is it takes being in denial about the fact one as a landlord is receiving welfare subsidies.

by Korki | 26th Feb 19, 4:23pm 1551151395

The problem I have with your statement is it a broad generalisation. I have a few rentals and bought based on ROI when the market was dead - I would go to Auctions and be the only one, and I could name my price, this was only 6 years ago when a housing crisis was far in the distance.

One of our philosophies when we bought was to treat it as a social service because the renter's were less well off than us. Every house we bought got insulated, a fire or heat pump, and paint, and fans put in every bathroom before anyone moved in. We limit our rent increases to every two years, and wouldn't increase it if rates and insurance didn't go up every year. We put ourselves on our renters shoes and say " would I live with that?".

So I resent being labelled a parasite, and I imagine the continued assault on landlords will drive many of the decent one from the market also.

by Ex Expat | 26th Feb 19, 8:28am 1551122933

Isn't this like the 'well being' measure? You put rules in place to increase the quality of rental homes and you change the market dynamics. If you expect the changes then it's a known trade-off and the COL will have to accept the responsibility for the impacts. Governments are there to make these types of decisions. End of.

by k_s | 26th Feb 19, 8:29am 1551122941

"Alternatively, some rental properties may be removed from use in long term accommodation altogether, and switched into short term accommodation (e.g. AirBnB)."

That is such a joke. But at least it wasn't pushed as hard as it was on the Herald, yesterday.
There is no way a landlord could expect to be yield neutral by switching to Airbnb. It's just a crazy notion that houses that fail the most basic of quality standards could increase on the expected Airbnb occupancy rate/return by like 1000%.

"because the average, owner occupied housing has fewer people per property than rental housing".
Again. Another crazy statement that so many rental sprukers blindly push.
Unfortunately, normally due to confirmation bias or ignorance these people ignore the unequal distribution of dwelling occupancy across demographic bands. Take out the higher age demographics skewing the broad averages and the dwelling occupancy rate difference is likely to, effectively, disappear. The people who are transitioning from rental to home ownership are predominantly those in their late 20s and 30s. So if you are going to compare broad averages, compare the rates across these bands.

by Miguel | 26th Feb 19, 9:02am 1551124930

Both are excellent points. I would say there is a slight difference in Owner/Occupiers and Renters, as people tend to buy the size of house they would need in 5 years time, while renters will rent what they need right now.

I think your point still stands that the difference is mostly made up by socio-economic/demographic factors.

by Pragmatist | 26th Feb 19, 9:56am 1551128164

Indeed, had a laugh at work yesterday with a co-worker who is a landlord with multiple properties. Even he says that any home that fails to meet the basic insulation and heating requirements is going do very poorly on AirBnB.. How many bad reviews does it take before no-one books your cold damp hobbit hole in the back of Te-Atatu?

by Believer1980 | 26th Feb 19, 8:39am 1551123563

I 100% believe that houses must be fit for living. The problem is many houses in NZ were made to very poor building standards (ventilation, weather-tightness, energy efficiency etc). The existing stock of residential houses is likely to include a larger number of these older and poorly built (and maintained) houses.

No government or legislation can make these properties warm, dry and weather-tight properties. They need to be wrecked and build as new to modern standards. And if these old, damp buildings are replaced with brand new ones, in all likelihood the current tenants wont be able to afford the rent for that house.

by Foyle | 26th Feb 19, 12:55pm 1551138957

FFS most of us grew up in those poor building standard houses, I remember ice on the inside of my windows, we didn't die, our parents just used their brains to manage the way we lived in them as best they could and options have improved massively. Electricity for a dehumidifier and heat pump for the year in a crappy old house costs only a few $100 dollars. About 2-5% of the cost of renting the house. It's relative peanuts. Whereas the cost of renting a nicer better insulated modern house can easily be 30-50% more. Mandating high standards leaves renters worse off economically. You think you are helping the poor in pushing this barrow, when you are really hurting them. TANSTAAFL

by Pragmatist | 26th Feb 19, 1:55pm 1551142501

Rental costs wont go up 30-50% because a landlord installed a heatpump and some insulation.. Stop being daft.

by Houseworks | 26th Feb 19, 8:43am 1551123802

Useless govt that wants and says one thing and yet is achieving the complete opposite end of the spectrum. Too idealistic, too eager to rule, too many promises. No-one likes a liar. Get them outta here

by Nzdan | 26th Feb 19, 8:45am 1551123920

Maybe a removal of rental properties from the market will see a reversal of this "overshoot" in Rented Dwelling numbers over the past 20 years as everyone chases paper gains.

From June 1998 to June 2018:
Owner Occupied Dwellings went from 1,002,400 to 1,169,000 (an increase of 17%)
Rented Dwellings went from 391,200 to 630,100 (an increase of 61%)
Total private dwellings increased from 1,445,300 to 1,870,000 (an increase of 29%)
Population increased from 3,815,000 to 4,750,000 (an increase of 24.5%)
Link

by VeryInterested | 26th Feb 19, 8:52am 1551124375

So lets just get this straight.... landlords are happy to keep any capital gains on their properties but not spend some money on improvements to make the properties warm and dry for their tenants? Slum landlords are the ones who should have a problem with this the rest should see it as a way of improving the property - maintaining and refitting kitchen and bathrooms and painting as necessary.

by RickStrauss | 26th Feb 19, 9:01am 1551124868

In the same way that unprofessional restaurateurs are happy to provide sub-standard and unsafe food for higher profits, really.

And the argument that they themselves can live in a house that is worse than their rental also falls down. A chef can serve him or herself raw chicken at home, but that does not make it reasonable or legal to serve unsafe food to their restaurant patrons.

If a person is renting out dingy properties that they do not maintain and are unhealthy, it suggests they're just the type of unprofessional landlord does not need. And we should stop socialising the healthcare cost of their substandard investment portfolios: https://www.radionz.co.nz/news/national/383318/poor-housing-conditions-…

by skudiv | 26th Feb 19, 9:19am 1551125972

Tenants have a choice, they don't have to live in a s#itty house if they don't want to. It's a free country, if you don't like it, change your self instead of expecting everyone else to change everything for your benefit. Society has got such a victim mentality it is sickening!

by RickStrauss | 26th Feb 19, 10:27am 1551130066

In that case, end NIMBYism and allow a more libertarian approach to land use. It's a free country, if you don't want someone blocking your view then buy the land nextdoor. This victim mentality of preventing people from building higher or more intensely on their very own land is sickening! If they can't afford to buy the land around them to secure their view, it's not society's problem to fix for them.

But of course, we should absolutely do away with food safety standards for restaurants.

Hardening up for a moment, you need to appreciate the fact you live in a political free market. Members of society are free to push for policies they believe will work more effectively. No use whining like a victim about the political free.

by Carlos67 | 26th Feb 19, 11:20am 1551133259

I'm with you skudiv, if you don't like it move on, if you still don't like it then maybe you should try and buy what your expecting to be able to live in below market rent. Maybe you will then find out what it really costs to live in something that meets your expectations. New Zealand is turning into a really expensive place to live and wages are not keeping up, its a simple as that.

by Miguel | 26th Feb 19, 9:22am 1551126148

Exactly. Any landlord who has owned a property for 5 years has likely seen massive capital gains during that time. Yet its too much to ask for them to spend $20-$30K to install insulation/heatpump etc to make the property livable, while increasing the value of their investment?

Instead it seems most instead leverage up those gains to snap up more properties.

by skudiv | 26th Feb 19, 9:26am 1551126382

You didn't read the article, this legislation is also designed to decrease the value of their investment, not increase it.

by Averageman | 26th Feb 19, 11:44am 1551134644

Agreed. With the gains this spend should be easy. Shows how out of wack the whole rental model is, and has just became debt farming for capital gain and tax offset above all else. Agree is landlords begin bailing in number it will depress prices. Anyone buying will factor in heat pumps and insulation deduction fro asking price as a minimum. Great time to fence sit.

by kpnuts | 26th Feb 19, 12:31pm 1551137485

there are very few slum landlords -- as their rental is their biggest investment and if they are smart enough to have one or more -- they are generally smart enough to look after it

most of the damp and mould issues are tenants not heating or venting a property not the property itself --

i discovered a lovely black bathroom ceiling in one of my rentals -- despite a window and extractor fan in the bathroom - and the fact that both the previous and new tenant have never experienced any mould --

Its not these requirements that are the issue for landlords - its knowing that there are a whole load more to come -- to add to changes in tenancy law / how tribunals work / CGT making it all but impossible to evict bad tenants far less claim the damages

but on the bright side -- when all the landlords get out of renting - the renters will all be able to buy the homes and fix them themselves, the banks will be falling over themselves to lend them the money - no one will possibly chose to Air B and B instead of selling -- likewise all teh rental houses will be occupied by larger numbers of buyer than renters per property and overnight solving the housing crisis -

And as Jacinda put it -- counting the number of houses built is not a good way of evidencing the success of kiwibuild -- - Queue multiple TUI Adds

by Foyle | 26th Feb 19, 1:08pm 1551139705

I encourage you to become a landlord then (I sure as hell wouldn't want to be one). Typical returns on rentals are 3-5%, hardly minting money. https://www.interest.co.nz/saving/rental-yield-indicator
Then you can walk a mile in their shoes. Deal with non-paying, property wrecking, drug using, middle of the night complaining, toilet blocking, garden wrecking ne'r do wells at the low end of rental market, all to earn less money than the sharemarket returns (excepting possible capital gains).

If you mandate higher standards (and therefore higher rental costs) all you will achieve is creation of more marginalised and homeless. There are always negative consequences to balance when pushing such agendas. Something the cheerleaders and left wing politicians find so easy to gloss over with their deep caring and shallow thinking.

by IT GUY | 26th Feb 19, 8:54am 1551124496

All these rentals in Manurewa will be sold to who? Not to first home buyers at current prices.... We are going to see Sydney price falls if landlords abandon the Auckland market as the first time buyers bid is well below the departing Investor / Chinese asking price, remember the FTB left this market a good 3 years before the peak

by Nzdan | 26th Feb 19, 9:11am 1551125487

What we will see is more and more landlords taking their properties off the market, carefully dismantling them piece by piece and selling the materials on TradeMe.

by printer8 | 26th Feb 19, 9:13am 1551125585

I totally support the notion of healthy homes - it would be hard to argue that homes should be unhealthy.
However, it appears that the government's policies - including new anti-landlord tenancy regulations, cost of additional healthy homes requiremetns, and possible capital gains tax - have been piecemeal without consideration of the cumulative effect.
Labour seem to have the notion that landlords are somewhat evil, wealthy, exploitative fat cats with unlimited deep pockets (I can see delegates at Labour Party conferences with calls for landlords blood and come up-pence!).
While landlords have done very well over the past decade, this has largely been due to capital gains and not the rapidly decreasing yields (currently a gross 4% prior to expenses including rates, mortgage interest, insurance and maintenance) on their investment.
The reality is that the likelihood for future capital gains - taxed or otherwise - are unlikely to be there for the foreseeable future. A gross 4% return on investment with expenses, necessity of a hands-on involvement, and a reasonably high risk level - makes being investment properties unattractive. Even the paltry returns on term deposits look far more attractive.
We have already seen news of rental shortages, such as in Wellington, as tenants compete for rental properties. RBNZ mortgage data shows that there are fewer - either new or existing investors - buying properties and there will be many investors leaving.
A shortage of affordable rental properties will be this Government's legacy to significantly compound the already housing supply and affordability issue.

by guwop | 26th Feb 19, 9:10am 1551125445

OMG enough with this scare mongering. Hard working professionals will always be able to afford rent in NZ. Sure, the students and beneficiaries need to leave the city centers but what else is new? They don't have to live so central anyway.

by skudiv | 26th Feb 19, 9:23am 1551126236

Great point, people need to be encouraged to get out there, work and be successful. Not playing the victim and blaming the world for their sorry state of affairs.

by BuyLowSellHigh | 26th Feb 19, 9:38am 1551127095

Obviously a good thing for homes to be insulated, ventilated and heated to a good standard, but don’t deny that it will increase rents. Rents aren’t immune to free market forces.

by Foyle | 26th Feb 19, 1:13pm 1551139995

Exactly. Renters already have that choice. In Auckland $500 a week for a crappy cold house or $800 a week for a nice warm house. All that these regulations achieve is removing that choice. Find the $800 a week or live in a car. The road to hell is paved with good intentions

by BuyLowSellHigh | 26th Feb 19, 1:32pm 1551141154

More along the lines of what was previously a $500/wk cold/damp house will become a $510/wk house with better heating/insulation/ventilation standards.

by Foyle | 26th Feb 19, 4:41pm 1551152480

Heat pumps are alone probably add $20 a week in costs - they need occasional maintenance and replacement, and that has to be paid for after tax. I think it will generally be in range of 5-10% rent increase to cover the extra capital and maintenance costs of the improvements (assuming rental house in $3-600k range and $20k work)

by waymad | 26th Feb 19, 9:31am 1551126713

HNZ estimations are likely to be 50% or more understated, if the usual track record of Gubmint drones trying to budget 3-5 years out is anything to go by. In particular, the expectations of tenants will have already been raised: 'where's My fixed heating appliance then, eh, wot?' And a further cost, but not (of course) in Vote:Housing, is the recourse to emergency grants on the grounds of Power Poverty. Because, despite the presence of that shiny new 'appliance', the ability to pay for the electrons to pulse through it, hasn't changed for the better....

by skudiv | 26th Feb 19, 9:32am 1551126772

I can't believe I am still alive after all these years of never having an extractor fan in the bathroom. I'm shocked to realise how horrible the housing has been, that I have lived in for my entire life! I should be dead by now, I'm so lucky the government has passed these laws.

by kiwimm | 26th Feb 19, 10:40am 1551130808

You're right, we should set policy on n=1 experiment rather than on nationwide hospital admissions data

by skudiv | 27th Feb 19, 8:38am 1551209897

Health has more to do with genetics than the next 10 factors combined. If you want people to be healthy, you would look there first.

by 2 Tooth Bora | 26th Feb 19, 10:00am 1551128434

Time for Government to bring in professional rental providers (bit like aged care) to build and manage affordable rentals and move away from this hotch potch amateur scene with unqualified property managers and Landlords with their malign threat of rent increases.

by skudiv | 26th Feb 19, 10:21am 1551129697

Better yet, government should be providing all the housing for renters and we should imprison landlords!

by Boatman | 26th Feb 19, 10:29am 1551130166

Imprison landlords ?

Why not just do what Chairman Mao Tse Dung did and execute all landlords in public , heres an extract from Wiki when you Google "mass killings of landlords "

Death toll of the 1947–1951 killings
The actual number of people killed in the land reform campaign is believed to be lower than Ren Bishi's estimate, but it still runs into the millions,[7] because there was a policy which required the selection of "at least one landlord, and usually several, in virtually every village for public execution".[11]

by saving4AUhouse | 26th Feb 19, 1:16pm 1551140186

Ironically doing this in Auckland would kill a lot of chinese communists.

by RickStrauss | 26th Feb 19, 1:48pm 1551142126

Well, Boatie, it's currently no use being pro-National and anti-Chinese-Communist-Party anymore, is it now.

by Foyle | 26th Feb 19, 1:18pm 1551140329

Oh yes because the govt has such a magnificent record in managing large infrastructure projects (said no one with half a clue in the last few decades). Lets nationalise/socialise it all! #Venezuela.

If you are genuinely trying to improve people's lives building govt bureaucracies is almost always the opposite of what you should be doing.

by murray86 | 26th Feb 19, 1:41pm 1551141691

Not necessary. we just need a balanced market where housing is affordable for everyone not just the wealthy. Then people can choose to rent or buy. The vast majority will rent for a few years as they enter the workforce, but also be able to save a deposit if they want and then buy. Thus there will always be a need for landlords. Run the numbers cheaper is better.

The distortion today is not, and should not be seen as normal. We need to be targeting an accomodation cost as a percentage of take home pay. I suggest 20 - 30% is reasonable. That will leave enough to pay bills, provide for children and so on. Address poverty properly. Some have suggested the ratio of house prices to income from the 70s is a good level. i tend to agree.

by Boatman | 26th Feb 19, 10:25am 1551129931

Well , in my travels in and around Auckland it is noticeable that State houses are often in an appalling state of both disrepair and condition , and even lacking any effort at being clean and tidy .

So apart from expensive heat pumps in State houses, the taxpayer will foot the bill for Twyfords so called "known interventions ", a euphanism for a shed -load of work to be done on these run down houses.

And landlords will have to provide heat pumps, something may of them probably dont own themselves , all within 24 months, while the State sets its own rules with a 4 year window to do the same

by waymad | 26th Feb 19, 10:32am 1551130327

Plus the maintenance of aforesaid 'fixed heating appliances' needs to be factored in. Heat pumps are fragile things: the air handlers have filters that have to be clean to be efficient, and the outdoor units can suffer corrosion and need professional cleaning annually. Not a huge cost - $1-300 per year. But cheap heat pumps have a short service life - 5-8 years tops....plus are often impossible to repair, cheaper to replace (another capex item). More recurring costs.....

by kiwimm | 26th Feb 19, 10:41am 1551130884

Replacement is a capital expense and deductible against CGT :)

by kpnuts | 26th Feb 19, 12:34pm 1551137686

currently ! but given that the proposal specifically excludes inflationary costs unlikely to be under any future regiem

by Pragmatist | 26th Feb 19, 11:34am 1551134090

The major amount of work to be done on most of those state houses in Auckland is putting a bulldozer through them, then replacing that one state house on a 1/4 acre section with 3-5 new houses. Which is probably one of the reasons the govt gave HNZ a longer timeframe to meet the new rules.. not much point installing heatpumps etc when its going to be bulldozed in a few years.

https://www.hnzc.co.nz/housing-developments-and-programmes/auckland-hou…

Edit: in some cases its much more.. 4 houses becomes 40 units

by Foyle | 26th Feb 19, 1:24pm 1551140651

I think the heat pump initiative is on balance a good one. Renters can't install them themselves, and they are relatively cheap - only about 1-2% of house cost, so should add very small amount to rent.

by BuyLowSellHigh | 26th Feb 19, 2:57pm 1551146220

What the heck kind of fancy heat pump are you talking about? They cost about 3K installed. 1% - 2% of the national median house price would be $5.5K - $11K. $8K - $16K in Auckland.

I'd say 5K for underfloor and roof insulation, 3K for heat pump, 1K for bathroom extractor, 1K for kitchen extractor. So 10K all up. Landlord would need/expect 5% return on that investment, which would add $10 to the weekly rent.

by Pragmatist | 26th Feb 19, 2:57pm 1551146267

And even that is probably on the high side. $1k each for the extractor fans? Must be a pretty flash fan, a combined heat lamp, light and extractor fan unit is ~$250 (+ install). Maybe that high in a few places where its a real PITA to install (Knocking holes in concrete block walls etc). And many rentals will already have those, haven't they been required in new builds for decades, and most people would install one when renovating anyway.

by BuyLowSellHigh | 26th Feb 19, 3:54pm 1551149696

I paid $750 for an extractor fan installed in Auckland 2016. I'm rounding up. The fan itself was cheap ($200). Add labour ($300), ducting ($34.25), reducers ($64.61 for two), vents ($52 for two), GST ($97.63) and it gets up there. I was actually thinking range hood in kitchen, which would be over 1K installed.

There will be a spectrum - many newer builds will have some or all of it all already, many old villas in Dunedin will have nothing.

Add this to the effects of CGT (if it happens), ring-fencing and letting fees. Rents are going to go up significantly in the coming years.

by Pragmatist | 26th Feb 19, 3:50pm 1551149419

Yes, they will go up, but not significantly like some of the people here are trying to imply.

And for those in the worst of the rental slums, an extra $20/week in rent will save them $150/month in winter on power bills from trying to heat an uninsulated icebox with a plug in bar heater, so overall they may be no worse off.

by saving4AUhouse | 26th Feb 19, 4:02pm 1551150124

Insulated rentals in NZ are not 20 a week more than iceboxes. It's $1-400 more, depending on location.

by Foyle | 26th Feb 19, 3:48pm 1551149290

Not everywhere in NZ is Auckland. There are many colder districts in NZ with average house prices below $300k that need bigger more expensive heat pumps that can operate in sub-zero conditions hence my 1-2% range. Such heat pumps can frequently cost >$5k installed

by Gummy Bear Hero | 26th Feb 19, 4:43pm 1551152614

... I've often contemplated that one of the nation's toughest jobs must be a refrigerator salesman in Dunedin ...

Who needs fridges when for much of their year the average room temperature is around 4'c anyway ...

by Ocelot | 26th Feb 19, 10:49am 1551131365

Any advantage you give landlords just pushes up land values, which increases debt against land and pushes up landlord costs. Put more responsibilities on landlords and it just pushes land values down. Yields decide land values. The things that affect rent prices are what people are willing and able to pay to rent that space, and the supply and demand. You want rents to fall, you need to pressurise landholders to utilise their land productively and efficiently, to do that you need higher land taxes. You also need to liberate landholder to build up (or down).

by rastus1 | 26th Feb 19, 11:29am 1551133770

So we have factored i the costs but forgotten about the savings? These dogbox rentals are costing the health system a bundle....so suck it up landlords..if your budget is so c##p you can't do this, then sell up and let a home buyer create a nice warm home for family. I'm sick of the whinging from this landlord mob and the unchallenged b###c##p they are peddling in the media.

by redcows1 | 26th Feb 19, 11:39am 1551134357

Yeah I thought farmers could whine and talk total bollocks having picked up on one piece of evidence that may or may not be real or relevant . Landlords are really good at it.

by Foyle | 26th Feb 19, 1:28pm 1551140939

Do these returns look enticing to you?: https://www.interest.co.nz/saving/rental-yield-indicator
Remember to factor in the risk, inconvenience, hassle, maintenance, non-payment, intentional property damage...
And also factor in that the sharemarket provides better returns. Particularly with spectre of capital gains and a plateauing market.

by Carlos67 | 26th Feb 19, 12:39pm 1551137944

Never had a heatpump myself and they will not fix damp mouldy homes, all you get is warm damp mouldy homes. Lets be honest the shocking build quality of our homes coupled with very high humidity figures (it was 92% on Friday last week in Auckland) means you need a significant amount of dehumidifying capacity. I used to have to empty out the 4 litre container every two days in my old place and that was just in the lounge/dining/kitchen area ! Renters need to buy themselves a decent dehumidifier or two.

by VeryInterested | 26th Feb 19, 1:14pm 1551140060

Some heat pumps have a dehumidifying setting. The dampness issues in our bedroom completely disappeared once we had a heat pump fitted. Opening a window did not get rid of the damp air, and you can't go out for the day and leave the windows open!
The biggest problems though for many low income tenants is that there is simply no money left at the end of the week or month to pay for heating so it doesn't really matter if it becomes compulsory your tenant may not be able to afford to use it. For example - The New Zealand Air Force installed a heat pump in the houses at Whenuapai Airbase a few years ago. Our friends who lived in one of these rot boxes couldn't afford to turn it on! These homes have now been bulldozed and make up the area where Hobsonville is. When the RNZAF tried to sell these homes to Housing New Zealand they were told that as they were so substandard
they didn't want them!

by Foyle | 26th Feb 19, 1:35pm 1551141358

How about create an electricity plan with a fixed monthly price for a seasonally adjusted monthly allocation of 'free' electricity for those who are too infantile to manage their finances over the year.
That would be cheaper than mandatory heat pumps (that typically have poor pay-back in Auckland and north).

by Foyle | 26th Feb 19, 1:37pm 1551141457

dehumidifiers are heat pumps they produce about 2x heating out vs electricity input. So if a rental doesn't have a heat pump at a minimum the renters should use a dehumidifier - just to save on power billl.

by Yvil | 26th Feb 19, 12:56pm 1551139014

We are heading for a major rental crisis. As I said multiple times before, the government will be forced to become a large scale landlord as private landlords exit the market.

by Yvil | 26th Feb 19, 12:58pm 1551139094

...and, no, renters will not buy the houses en masse to become home owners

by Pragmatist | 26th Feb 19, 1:41pm 1551141710

So the houses will stay empty? Or are these houses made of dry ice so they will evaporate without a trace? (would explain why they are referred to as iceboxes..)

by rastus1 | 26th Feb 19, 12:59pm 1551139172

..and as we have said multiple times....are they taking these houses with them? Nope. Show me a landlord who has built a standard family home for rental purposes.

by Carlos67 | 26th Feb 19, 1:44pm 1551141891

Hey Rastus, regardless renters will tell you they are unable to afford the houses as landlords exit the market. I think that landlords will tell you that they purchase a house based on the suitability to rent it. The price and general condition makes it a "Rental" you don't go building a new house for your typical renter to then wreck the place.The string of horror stories I continue to hear from Landlords put me off getting a rental for life. They deserve all the rent and capital gains they get. Make it not worth their while and they will simply sell and give the government the middle finger and leave it to them to pay the ever increasing emergency Motel /Hotel bill.

by rastus1 | 26th Feb 19, 3:19pm 1551147559

yes Carlos I agree in part. Many of the homeless are that way due to they way in which they continually abuse properties. I object to paying to Motel these people. However I welcome the door opening for the fb's who are shut out and want to get ahead with a do up. The pendulum is swinging.....and I'm, sure it will overshoot. But that's the way.

by Pragmatist | 26th Feb 19, 7:02pm 1551160968

The truly homeless are mostly in need of mental health services or addiction services, no matter how cheap or expensive housing gets they will end up in the same place. Its a seperate issue from housing, with only minor overlap.

by RichMuhlach | 26th Feb 19, 2:26pm 1551144368

Major rental crisis? Very doubtful. Stop the scaremongering.

We have a glut of new builds coming into the market, and our immigration numbers are 30k less than what we were told. House prices in Australia are down by more than 20% in some places. NZers are more likely to move across the ditch and rent there if they cannot afford to rent here.

If you're a landlord and cannot get your rental up to scratch, then don't be a landlord. You wanna hold on to your $500k Manurewa shitbox and leave it vacant? Fine, but don't expect the rest of the landlords to think like you do. I bet 90% would be happy to cut their losses and sell it back to its 2014 CV of $350k. At that price, it should make it more affordable for 2 people on minimum wage of $20 per hour.

by rastus1 | 26th Feb 19, 3:21pm 1551147698

Yep thee are plenty of empty (older established) homes around my area. And that's before I even look at the truckload of new builds. I wonder where these people live now? I see a few under the bridge most days, but they sure as hell won't get into a new spec home.

by Boatman | 26th Feb 19, 3:38pm 1551148711

Who in their right mind would want to be the landlord of a residential property ?

It was bad enough before, with tenant defaults, low-lifes trashing the property , massive clean -up costs , collection costs, legal expenses , pathetic yields , and a ton of risk

Now you have an openly hostile and antagonistic Government, that does not want you to provide rental stock, just to add to your woes

And there is a piece in the Herald today saying 23,000 people are homeless in Auckland alone.

That , if you believe the statistic, is a lot of people, and clearly the State cant give them a roof.

by Foyle | 26th Feb 19, 3:53pm 1551149635

The Herald would never report that when Labour and the Greens are in power. After all Jacinda promised shelter for all homeless people within 4 weeks last May.https://www.theguardian.com/world/2018/may/04/jacinda-ardern-pledges-sh…

Jacinda doesn't lie. She told us so.

by Property Leader | 26th Feb 19, 5:22pm 1551154925

Why are there many negative comments on the accommodation subsidies. There are 200,000 tenancies receiving AS some as low as $20 per week. But there are 550,000 private rentals. So most private tenants get no help from the tax payer. Yet Housing NZ squanders the tax payer millions at full market rent income and can not even claim their tenants are healthier than private tenants.

by Yvonnelee | 26th Feb 19, 10:31pm 1551173487

So what do you landlords think if this:

https://nzentrepreneur.co.nz/property-speculators-parasites-not-entrepr…

by Mike Antamanov | 15th May 19, 10:14am 1557872096

Yeah, but I personally don't feel that this is the only problem. Yes, buying a house just for making money out of it - that's like a sickness on NZ economy, coz it drives prices up without increas in actuall value.
The second big point is that when the prices on realestate are so high it's easy to forget about other costs of living that are too high as well. For example electricity prices according to GOVERNMENT ELECTRICITY MARKET REVIEW (https://www.powercompare.co.nz/n/government-electricity-market-review). The results of a Government review have revealed there is a two-tier electricity market in NZ. To quote: "The NZ electricity market review has found that since 2000, New Zealand’s residential prices have risen faster than most other OECD countries and there are now over 100,000 households who are spending more than 10% of their income on domestic energy in 2015-16."