Another reason not to be a landlord

 

The saddest thing about the current Labour Government is that those people who voted for it did so because they believed that Labour would do something more for the downtrodden in our society. A lot was made before the election about the ‘rockstar economy’ only benefiting those at the top, whereas a lot of people lower down the ladder were suffering, and this is what Labour said they would do. They said they would help ordinary people to get ahead in the brave new world post GFC.

If only they had even the slightest idea of how to go about that.

Housing Minister Phil Twyford has tabled a bill that would ban landlords from charging the letting fees to tenants.

“Around half of all Kiwis now live in rented homes. This Bill could put up to $47 million into the pockets of Kiwi families each year.”

“Letting fees are an unjustifiable tax on renters” Twyford said, describing them as a method of “gouging renters”.

“I don’t know of any other area of the law where two parties can contract for a provision of services but then charge a third party.”

In those few sentences, he demonstrates how very little he understands about business. And rental property is big business.

Firstly, a letting fee is not a tax. It is a payment for a service. It wouldn’t be a tax (according to him) if the landlord was paying it, so it is not a tax at all, whoever pays it.

Isn’t this guy part of the current government? And he doesn’t know what is a tax, and what is not?

Secondly, there are lots of situations where two parties contract for services but a third party pays the bill. Think of banks offering to pay legal fees on the purchase of a house. Think of commercial tenants paying insurance for the building they are leasing. It is not as if a tenant moving into a property owned by a landlord is not a party to the contract at all. The tenant is very much part of the transaction when they are renting out the house.

And in the following sentences, he makes it even clearer that he has no comprehension of market forces. Absolutely none at all.

Speaking to Stuff earlier this year Twyford said letting fees were unfair.

“Under the current laws, particularly when there is a shortage of housing and it’s a landlord’s market, the market can be harsh and oppressive to people,” Twyford said.

So because a landlord’s market makes it tougher for tenants, it is only fair to ban letting fees? How exactly does he think that is going to work?

There are so many possible ways around this idea, that my head is positively spinning. Change the name. Call it key money. Call it an administration fee. Or tell the tenants that the landlord will pay the letting fee, and then add an extra $10 to the rent each week, for additional costs.

And that, of course, is going to be the outcome. Rents will go up. He thinks they won’t. Of course, they will.

We have a housing shortage. A ‘crisis’ even. In just about all of the cities and also many of the rural areas, there are simply not enough houses to meet the demand. Which means that landlords are able, for the first time in a long time, to charge rents that go some way to matching their outgoings. And market rents keep increasing because demand is outstripping supply. Simple Economics 101. A Government Minister ought to understand this.

So, the chances are that by banning letting fees, landlords will simply increase rents to cover the additional cost of having to pay the letting fee. And, in the end, the tenant will probably end up paying more in rent than they would have done before.

It also needs to be remembered that in July next year, there will be stringent new rules in place that require a very high standard of insulation in all rental properties. This is going to cost many landlords a significant amount of money. Obviously, many of them will pass on the cost of this, if they can.

And don’t forget that, on top of all of this, the government has not ruled out ‘ringfencing’ losses on rental property, meaning that landlords may not even get an immediate tax credit on the extra expenditure that they incur.

This government has got to stop treating private landlords as fat cats. Many are not like that at all. They are simply ‘mum and dad’ investors, who are trying to provide a bit of extra money for their retirement. Because one thing that is already happening is that landlords are leaving the market in droves. Yes, they are mostly selling their houses to first-time buyers but there will always be people who will need to rent, for one reason or another. And this government, that was supposed to help the poor and downtrodden, are actually adding to the housing crisis. Let’s see how many people are living in cars this winter. And it will all be down to the new government, and their ridiculous anti-landlord policies.

-Stuff

 

 


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Accountant. Boring. Loves tax. Needs to get out more. Loves the environment, but hates the Greens. Has been called a dinosaur. Wears it with pride.

To read my previous articles click on my name in blue.

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