28 Apr 2023

Bishop says National's landlord tax breaks and no-cause terminations 'pro-tenant'

2:39 pm on 28 April 2023
National MP Christopher Luxon

National Party housing spokesperson Chris Bishop says his party's changes will ease the rental crisis by encouraging more property owners to rent out houses and get landlords back in the market. Photo: RNZ / Angus Dreaver

National's housing spokesperson Chris Bishop says his party's commitment to bring back no-cause rental terminations and tax breaks for landlords is "pro-tenant".

National plans to bring back no-cause terminations and drop rules that allow fixed-term tenancies to roll into periodic tenancies.

The party has already signalled its intention to restore interest deductibility for rental properties and restore the bright-line test to two years, down from 10 years under Labour.

The government introduced the bright-line and tax changes in part to discourage rampant property speculation by investors, which had helped increase property prices.

However, National frames the housing and rental crisis as one based on lack of supply. It says changes will ease the rental crisis by encouraging more property owners to rent out their houses and get more landlords back in the market.

Bishop told Morning Report Labour had waged a war on landlords, suggesting tenants had suffered from collateral damage in the process as landlords exited the rental market as a result.

He said landlords losing out on interest deductability was a big driver of rent increases, because landlords were simply getting more cash off tenants to make up for it.

"What we want to do is bring some common sense back to the rental market and increase supply and ultimately that's what it's all about," he said.

"We do need landlords in the rental market. Unfortunately what we've seen over the last five years, we've seen the average rental increase by $175 per week.

"That's a massive factor in the cost-of-living crisis. So we do want more landlords. We want more supply. These are common sense changes - make it easier to be a landlord and that's ultimately being supportive of them."

Bishop said current rules around rental agreements meant "vulnerable people" were hit particularly hard, because landlords didn't want to take a chance on renting property to them.

"It's about providing security of landlords, to make that if they take on a tenant, they've got that backstop, that if they need the property back, or the tenancy doesn't work out because of anti-social behaviour for example, we've got that option of giving 90 days' notice to end the tenancy and move on," he said.

"The problem is at the moment there is a regime of issuing notices to end the tenancy on the grounds of anti-social behaviour but it's extremely cumbersome to use.

"Certainly the feedback I've had from people is, brining back the law to what it was two years ago. Essentially giving 90 days' notice will encourage landlords to take a chance on riskier tenants."

Bishop said groups in various sectors dealing with marginal people in society thought the change to be progressive.

"The feedback from some of the groups working with vulnerable people and homeless people, for example, is that that would be a really good change that you could make to encourage landlords to take a chance on people, like ex-prisoners for example, people with poor credit histories, with bad rental histories.

"At the moment, many landlords say 'you know what, it's just too risky. If it doesn't work out I have little legal recourse. I'm not going to take the chance'. Ultimately we do want landlords taking a chance."

He said this was the way to get supply in the market up and prices of rentals down.

Landlords had felt like they were under attack from government, Bishop said.

"They're leaving the market altogether and that's why we're seeing rents go up ... that's why we've seen the social housing waiting list increase by 20,000 under this government."

He was not worried that bringing the bright-line test down to two years instead of 10 year would encourage people to buy and flip properties.

"We're taking the bright-line test down to two years, which is what it was. So if you buy and sell a property within two years you pay tax," he said.

"What Labour's done is extend it out to 10 years and it operates like a capital gains tax."

Bishop denied the proposed changes would bring instability for tenants and increase their vulnerability to landlords' decisions to evict them. Under the changes, both tenant and landlord would benefit, because more landlords would be encouraged to enter the market, bringing the cost of rent down as more rentals became available.

"Our policy is about making it easier for landlords and easier for tenants," he said.

"We shouldn't use this as... us versus them mentality. Everyone has got their part to play in solving this housing crisis. We need landlords in the market and these interest deductability changes will make a big difference as well.

"Unfortunately Labour has introduced these changes and removed the ability for landlords to deduct interest and legitimate expense.

"That is putting pressure on rents. Interest rates are rising as the changes phase in landlords are able to deduct less interest and expense ... and so they've had to find the cash and they're finding it from tenants, which is a big driver of the increases we're seeing."

"So interest deductability chances are pro-tenant and making it easier for the rental market to operate properly and ultimately that's in everyone's interest."

A tenants' advocacy group accused National of championing the interests of "bad landlords" with its policy.

National's policy bogus and predictable - advocate

Renters United spokesperson Ashok Jacob called National's policy "depressingly predictable".

"National here, and Chris Bishop especially, are revealing themselves to be not just the party of landlords, but the party of bad landlords," he told Midday Report.

He said current regulations were there to stop bad landlords behaving badly.

"If you actually look at the reasons people can be evicted under the current regulatory scheme, I think it's very reasonable. You can evict somebody for not paying rent, or anti-social behaviour.

"I don't know if there are any more reasons that you should be allowed to evict somebody and I think National are actually saying we should trust landlords to act with impunity when it comes to people's livelihoods and their homes."

The idea National's policies would allow landlords to consider more riskier tenants and would therefore be progressive, was bogus he said.

Although more fundamental, structural reforms were needed to address rental costs, the meagre reforms Labour had introduced to address rental hardship had made a difference, he added.

"What we've seen over the last five years is an uptick in the number of bonds being lodged, provided to tenancy services. We've seen a general increase in the numbers of our housing stock and we've generally seen an easier time for renters under the nine years of the National government."

For National to erode regulations would be upsetting, he added.

Having a strict regulatory framework for landlords didn't amount to a war on landlords, but simply a reasonable expectation, in the same way employers, estate agents, and others were expected to be subject to rules keeping them from acting unethically and causing harm to others, he said.

"Providing a home, if you're doing that as a business, should be subject to special regulation because it's just such a fundamental part of human life, living in a home," Jacob said.

'Shiver down the spine'

In response, Labour housing spokesperson Megan Woods - currently the minister of housing - said National's policy would "send a shiver down the spine of renters right across New Zealand".

"There's absolutely no need for the change. The status quo balances landlords' rights with the need for renters to feel they have some degree of security in their rental accommodation.

"There are a number of legitimate reasons to end a tenancy, and the rights of landlords are protected to terminate a tenancy under a range of justifiable reasons. This includes where a tenant has engaged in antisocial or illegal behaviour or is at least three weeks in rent arrears."

She said National's claim it would solve rental price inflation shows the party "still doesn't understand the question or doesn't care".

"New Zealand has a housing crisis that was decades in the making and is still being fixed. It needs more housing to meet demand, and only then will rents be more affordable."

Tenancy Services data shows the median rent for all residential property types has risen 35 percent in the past five years, faster than it did during the five years previous.

But in some regions it has risen slower - and in Auckland, has stabilised over the past couple of years.

Woods said more than 200,000 new homes had been built in New Zealand since 2017.

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