First do no harm

I shake my head in disbelief about the way that the government treats private landlords.

It all started with a media beat up on landlords having special tax breaks. They didn’t of course. They had all the same tax breaks as any other business and this is something our friends in the media do not seem to understand. Owing a rental property is owning a business. It may be a small business but there are lots of those around.

The previous government ate away at the rights of landlords. Firstly depreciation on buildings disappeared. Mostly when property prices increase it is the land that goes up in value. That could have easily been dealt with by an adjustment at the time of sale, but no. Then attributing losses went by the board. The Loss Attributing Qualifying Company was a vehicle intended to provide simplicity for small, closely held companies. But it worked too well for landlords, who were seen as having special tax breaks. Qualifying companies were not just for property. Lots of trading companies used them as well.

But, there is something the current government, in particular, overlook. Because they hate capitalists they conveniently forget that private landlords provide a significant social benefit and the government are rapidly killing off the goose that laid the golden egg.

Socialist governments believe that rental housing should be provided by the state but are hamstrung because of the enormous cost that entails. Since there is social good in providing shelter for all, they should always choose the most efficient means. At the moment the private sector provides considerable efficiency. If that is the case then the government should be giving some kind of incentives to private landlords but, instead of providing government subsidies, the theme now appears to be providing anti-subsidies (capital gains tax, bright-line test, warrant of fitness, ring-fencing of losses) – where is the sense in this?

Maybe this is Jacinda’s real nuclear moment and it could very well blow up in her face.

Surely, it makes no sense to withdraw the ability of any sector to provide a public good. It is just good socialism to keep that good going. The actions of this government are doing damage to a sector that saves the state huge amounts of money. Why do they not see this?

Also, when it comes to living conditions, the building code is the place for dwelling health and safety. If a building is unsafe or unfit in some way for habitation then the local council should prohibit occupation. It makes no sense that there should be specific legislation on building health based on the whether the property is rented or owner-occupied. I don’t have to put in underfloor insulation to my own house, but I do have to put it into my rentals and all that does is to push up the weekly cost for my tenants.

Rocinha is the largest hill favela in Rio de Janeiro (as well as in Brazil and the second largest slum in Latin America). Although favelas are found in urban areas throughout Brazil, many of the more famous ones exist in Rio.

I am not advocating for substandard dwellings, although I think favelas may be coming to New Zealand soon. But, think of it like this: you go to a car rental company only to be told that legislation dictates that they can only rent you a Bentley or a Rolls Royce (although you are still allowed to drive a beaten up Ford Mondeo if you own it yourself), and that will be $1,500 per day as they are very expensive cars. All you want is an adequate vehicle that is capable of getting you to your destination safely. You would never rent a car again and car-hire companies would go out of business, so everyone ends up worse off.

It reminds me of the oil and gas industry.

I wonder how many people will be living in cars this winter, Jacinda? Remember what the medical profession say: When in doubt, first do no harm.

 


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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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