12 Landlording Myths that Hold Back Residential Tenancy

Press Release – Auckland Property Investors Association

The twelve landlording myths that hold back residential tenancy in New Zealand

The recent strident criticisms of residential landlords and their actions mostly rely on erroneous facts and incorrect assumptions.These errors effectively stall any progress in improving the residential tenancy laws and regulations in this country. Debunking these 12 myths about landlords may be a start in fixing a system that many consider broken, and may help in establishing a more
co-operative rental market.

“The public and political perception of landlords is quite bad. We are seen as uncaring rip-off merchants who lead idle lives while enjoying large, tax-advantaged incomes” says APIA Vice-President Peter Lewis. “The reality is quite different.”

Landlords Are Always Buying and Selling Property
There is investing, and there is speculating. Bookshop owners sell books, not their shops. Similarly, Landlords rent out accommodation rather than trade properties. Those people who do trade in property are traders, developers or renovators – not landlords, and are taxed on a different basis. Many long-term landlords never sell a property.

Landlords are Wealthy
Landlords are often assumed to be wealthy with posh cars and posher houses. Wrong. Over 90% of NZ landlords own just one or two rental properties. When you attack and condemn landlords you are not attacking Google or Apple, you are actually criticising your next door neighbour, your plumber or your local school teacher.

It should All Be Free
Politicians like to promise ‘free’ social benefits. There is no such thing as free. Free means someone else is paying for it, often the end-user. When dollar spent on mandatory rental upgrades will eventually be passed on to the tenant.
Fairness is The Only Way
Fairness is a highly nebulous concept, what appears fair to you may seem highly unfair to another. Fairness between a tenant and a landlord can only occur when both are aware of their own rights and obligations, fulfill those requirements, and recognise that each actually needs the other. Indeed, we do need each other.

Overheads? What Overheads?
Most tenants have never owned property. They believe that the rent they pay goes entirely into the Landlord’s pocket and then is spent on overseas trips and flash cars. However, if you do own your own home, you will appreciate that the price of the house is actually only the down payment. Even without any mortgage burden the constant stream of bills for rates, insurance, water, and household services add up to a substantial and unavoidable sum each and every year. Even on a modest suburban house the first $80 or more of rent you pay each week goes straight back out of the landlord’s pocket to pay for these utilities.

Just Force them

We’ll force them to . . . is a constant refrain. Compulsion never works, at least not for long. Those with grey hair can remember back when the 1970s Labour Government tried to bring in a Maximum Retail Price scheme. Each item you bought would have an MRP figure printed on it, and could not be sold at a higher price. All that happened, of course, was that many items just disappeared off the shelves. If the supplier could not profit from selling it the manufacturers simply did not make it. Later on, they tried to ‘force’ property developers to do this and that. Again, a massive fail. Where are Universal and Beazley Homes these days?

Landlords are Lazy Parasites
The man on the top of the mountain did not fall there. Hardly any of today’s Landlords woke up one morning to find – surprise surprise – that they had got a rental or two overnight without any effort. Acquiring an investment property and then renting it out is, for those of us who don’t win Lotto, a long hard self-sacrificing slog. Landlords, generally speaking, are hardworking, thrifty and goal orientated. These are the people that any sane society should acknowledge, not vilify and punish.

Landlords And Their Tax Loopholes
Landlords seek to make a profit by renting out a property. Their income is the rent they charge, and like any other business they can then deduct the costs involved before paying tax on that income. There are frequent demands for the tax loopholes that landlords enjoy to be removed. This never happens – for the simple reason that there aren’t any.
Back in 2007, at a Parliamentary Select Committee hearing, Deputy IRD Commissioner Robin Oliver was asked why people had the impression that there was some tax advantage in investments in rental housing. His reply was blunt: “The short answer is there are none.”

Landlords Should Be Charitable
Landlords are frequently asked to ‘help’ their tenants. “Lower the rent you charge” they are told “and your tenants will then be able to afford the electricity to heat the place”. Quite why Landlords should effectively subsidise the power companies is never explained. Landlords are not WINZ. We pay taxes which fund WINZ, and no-one demands that petrol companies sell their fuel cheaper to the impoverished.

Tenants Have No Rights
The Residential Tenancies Act was an attempt to be even-handed. Both landlords and tenants seem to think that it favours the other side, but the reality is that it does confer rights on tenants. Every time I see a solo mother of five crouched under a leaky roof with a bucket for a toilet I think “Why doesn’t someone tell her!”
If tenants don’t know about existing law, surely an educational programme will work better than just inventing new and harsher laws?

Long Term Is The Best Term
Long term tenancy is the current catch cry. They do it in Germany, why not here? Those who push this barrow always conveniently omit the substantial requirements that are imposed on those who enter into those tenancies. No benefits will ever come without any reciprocal obligations, both parties need to know that.
Hurt them Until Their Eyes Water
Every Government action creates two after-effects. Costs go up, and then people try to alter their behaviour to avoid or minimise the effects of that action. Already, the recent demands put upon rental housing has removed from the market those many houses rented out by owner-occupiers who are off overseas for just a year or two. The expense of making the house compliant now exceed the return. Overtime, if the current trends continue, more and more landlords will simply retire by either selling up or leaving their properties vacant.

“Some see this as a welcome trend. I disagree,” says Mr Lewis, “I make a profit out of my rentals, and the Government gets a share of that profit from the tax I pay. Conversely, one observer has calculated that the Government makes an average loss of around $100 per week on every HNZ dwelling. The Government seems to be a poor and inefficient landlord.

Can our society afford to subsidise each and every tenant at this level if all private rentals are driven from the market?

Only time will tell.”

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