New Zealanders are set to head to the polls this month. So Miriam Bell takes a look at what the different parties are promising in terms of policies that impact on property investors.
30 September 2020
Party hoardings are up, politicians are on the campaign trail, and policy promises are starting to flow. While lockdown 2.0 may have put election year shenanigans on hold temporarily, with just a few weeks to go until the new election date it’s all go.
However, the activity and atmosphere around election 2020 is somewhat different to that seen in previous elections. At the Labour Party campaign launch in August, Prime Minister Jacinda Ardern said it would be the “Covid election”.
That has turned out to be the case. There’s simply no escaping the shadow of Covid, with related health, economic and border management issues dominating discourse. It’s a big change from the 2017 election where housing was the number one issue for politicians and voters alike.
In stark contrast, at the time of writing, little has been said on housing related issues by any political party, bar the Greens. So we set out to find out what politicians across the spectrum are promising on the housing front, as well as what property investors hope might emerge. Here’s what we found out.
Labour: Increase Housing Supply
Kiwibuild’s failure and the eventual decision not to introduce a capital gains tax dominated much of the headlines around the Labour Party’s housing action in government. But, as investors well know, Labour has activated many of their 2017 campaign promises in this area.
The bright-line test was extended to five years, new rules around the ringfencing of rental losses were introduced, letting fees were banned, and the Healthy Homes standards became law. Perhaps most controversially, tenancy law reforms have also now become law.
What then might they have planned in the housing space should they be reelected come October?
At the Property Council’s recent Residential Development Summit, Labour Party housing spokesperson Megan Woods said there would be “no large policy u-turns” on housing postelection and that their focus was on increasing the supply of public housing.
Subsequently, we spoke to Woods and she told us that while in government, Labour has made it a priority to invest in housing. They now have the largest public housing programme in decades underway and over 18,000 public and transitional housing places are set to be delivered by 2024, she says.
‘Labour is proud of its work programme to ensure that rental homes are healthy and that gives the people living in them some security over their tenure’ MEGAN WOODS
“Addressing the massive housing shortage in New Zealand has been a strong focus of our Government. The GFC taught us the valuable lesson that restricted availability of credit in the economic downturn resulted in a shortfall in new affordable housing and the loss of skilled workers in the sector.”
That means they are determined not to let the strong pipeline of residential house building falter in the wake of Covid-19. To that end, they have introduced a $350 million fund to support developers’ access to credit to encourage construction.
“Financial support is available to Kāinga Ora and community housing providers to enable and incentivise the building of additional public houses. Additionally, build-to-rent is an area of residential construction that Labour is interested in seeing develop to ensure there are more options available for those seeking market rental properties.”
Woods says Labour is proud of its work programme to ensure that rental homes are healthy, through the Healthy Homes standards, and that gives the people living in them some security over their tenure through the Residential Tenancies Act (RTA).
“Going forward, we have been asked to look at regulating property management and we are considering this, as well as how to boost the Tenancy Tribunal.”
At the time we spoke to Woods, Labour had not announced any further housing policy. It had, however, announced its tax policy. That policy introduces a new top tax rate of 39% on personal income earned over $180,000, a change which will affect 2% of earners. It also ruled out any other new taxes, or further increases to income tax, being implemented over their next term.
National is concentrating on boosting housing supply and is focused on reducing regulatory constraints on landlords as well as reforming the Resource Management Act.
What The Polls Say
Fewer polls have been conducted in the run-up to this election than in the past. But, at the time of writing, the polls were running firmly in favour of the Labour Party – as they have been since late February. In fact, they are currently showing that a Labour-led coalition is likely to win by a substantial margin, and that Labour could even get the numbers to govern alone.
The most recent poll is a 1 News-Colmar Brunton Poll which has Labour on 48%, National on 31%, ACT on 7%, the Greens on 6%, and New Zealand First on 2%. Another recent poll, from UMR research poll, had Labour on 53%, National on 29%, ACT on 6.2%, New Zealand First on 3.9% and the Greens on 3.2%.
Of the parties outside Parliament none have polled anywhere near the 5% threshold needed to make it into Parliament at any point.
Polls are always subject to questions over how reliable they are, but it is accepted they tend to reflect trends. With just a few weeks to go until the election, it’s worth noting that Prime Minister Jacinda Ardern continues to maintain a very high approval rating. However, this year has demonstrated just how unpredictable things can be – so all bets remain for the taking.
National: Unnecessary Regulation To Go
Like Labour, the National Party is concentrating on boosting housing supply in a bid to address the country’s chronic shortage of housing. But National Party housing spokesperson Jacqui Dean told us its focus remains on the repeal and reform of the Resource Management Act (RMA) to encourage more land supply.
This would help streamline consenting processes – which would enable more development. “National would also adopt an interim consenting process which would mean more private and social housing could be built. The Hobsonville Land Company is a good example of National’s previous work in this area.”
While National has not released any details of its plans in this area, the party’s leader, Judith Collins, has said that, if elected, they will build more state housing. She has also said they believe in community housing providers.
The significant difference between Labour and National Party housing policy comes in the area of private rental properties and the regulations surrounding them. In September, Collins made waves when she said they would repeal many of the rental law changes made by the Labour-led government.
However, National would not repeal all of the recent rental standard changes, Dean says. For example, the changes relating to insulation will be kept.
“But we will remove those regulations that cause an unnecessary burden and drive up the cost of rents, such as the rules making it difficult to remove problematic tenants, the ability for tenants to modify rentals without permission, and regulations prescribing heating output on qualifying heaters that require advanced mathematics to interpret.”
She says National wants tenants to live in warm, dry homes but pitting landlords and tenants against each other is not the solution. “Too much regulation, too quickly on landlords without any incentives only leaves fewer people willing to be landlords. All that will happen is rentals become even more expensive, or landlords will sell up and there will be fewer places to rent.”
The recent changes are all stick and no carrot for landlords and a National Government would fix this, Dean continues. “We value responsible landlords as a critical provider of housing most people rent at some time in their life and rely on good landlords owning houses. The best way to help tenants, is to have more landlords offering more properties.”
On the tax front, National will reduce the bright -line test back down to two years and repeal the ring-fencing of losses on residential property in their first term, she says. “We have also made a commitment to having no new taxes while adjusting the income thresholds for inflation. We stridently oppose the Greens’ proposed wealth tax.”
Greens: Homes For All
Of all the parties currently vying for votes, it’s the Greens who have made housing a key segment of their policy platform. They released their “Homes for All Plan” back in August and have been campaigning on it ever since.
The plan aims to “lay the foundation for an Aotearoa where everyone has a warm, dry and affordable home”. In order to do so, the Greens want to deliver enough affordable rental homes to clear the social housing waiting list, which currently numbers 18,000 people, within five years.
As part of that goal, they want to stimulate a sustainable non-profit rental sector by offering Crown financial guarantees for community providers to build new rental properties which would be rented out long-term. They also want to remove funding and regulatory barriers to encourage community housing projects and overhaul the building code.
Of most relevance for investors, the Greens want to “make renting fairer” by requiring landlords to be registered with the Ministry of Housing and Urban Development and by extending the current regulatory framework for real estate agents to include property managers.
Finally, they’re keen to introduce a warrant of fitness (WOF) for rental properties as an enforcement mechanism. This would require all rental properties to be independently assessed for compliance with the Healthy Homes standards.
Green Party co-leader Marama Davidson says successive governments have sold off too much social and community housing, while letting the homes they do have fall into disrepair. “They’ve also allowed speculators to over-invest in property, pushing up house prices and leaving too many families struggling with the high cost of rent.”
Housing is a human right and the Green’s plan is a blueprint to ensure everyone is in a warm, dry home, whether they rent or own, she says.
The Greens also believe that taxes should discourage speculative investment in non-productive assets. Therefore they want to apply a capital gains tax to properties, apart from family homes, and they want to introduce a wealth tax as well as two new top
] income tax brackets.
The Rest Of The Field
ACT has announced some policy in this area. To solve the housing crisis and achieve housing affordability, New Zealanders must be free to build and councils should be encouraged to invest in infrastructure, they say. That means ACT wants to replace the RMA with a law that lets people build without restrictive zoning.
It would also let councils issue targeted rates to pay for infrastructure for new housing developments, remove councils from the building consent and inspection business and introduce mandatory private insurance for new housing.
Additionally, ACT leader David Seymour says they would ensure a full reversal of this year’s RTA changes and put a moratorium on new regulations.
“The new tenancy laws will reduce the number of rentals and increase rents for a generation of renters who have been locked out of home ownership. The biggest winners are corporate landlords and property management companies who get paid to navigate the complicated rules. The biggest losers are mum and dad investors and down and out tenants.”
ACT also wants to make changes to tax rates, including cutting the 30% tax rate. For the first $14,000 earned, 10.5% would be paid; on the next $56,000, 17.5% would be paid; and then the rate on income over $70,000 would remain at 33%.
Changing The Law
While various political parties are promising to immediately repeal some of the new legislation around rental property standards and tenancy requirements, changing existing legislation is actually not a quick or easy thing to do.
That’s because new governments cannot simply declare they don’t want a piece of legislation anymore and get rid of it. Rather there’s a whole Parliamentary process involved. And should that process actually happen, it takes time.
In order to change a law, that law must be repealed (cancelled) by a new Act, or changed by amending Acts. Any proposed new or amendment Act must make it through three readings in parliament before it can get Royal Assent and become law. If the proposed legislation does not gain a majority of votes in one of its readings, that’s the end of its passage through the House.
Additionally, in between its first and second readings, the proposed legislation must go through the Select Committee process – which can result in changes to the original proposals. This all means that even if a piece of legislation sails smoothly through the parliamentary process, it is rarely a quick process.
Of the other smaller parties, neither New Zealand First nor the Maori Party had released any housing related policies at the time of writing.
But The Opportunities Party has a suite of housing policies. They include taxing housing the same as all other assets; introducing fairer rights for renters; introducing new legislation to encourage more affordable inner-city housing; and supporting community providers to build affordable rental housing.
For investors who have been hit by a swathe of new tax policies and rental housing regulations over the last few years, the overwhelming hope for a new government of any form is that there’ll be no more new legislative requirements.
NZ Property Investors’ Federation executive officer Sharon Cullwick says all the policy changes are deterring people from being rental property providers, with some selling up and others raising rents to cover costs. “The more changes there are the more it creates a situation which is not good for either tenants or landlords.”
It’s policies around increasing housing supply that will make the biggest impact, she says. “Changes to the RMA, for example, as they would better enable development. The current restraints and costs prevent people from building housing. Boost supply and that will help the housing crisis.”
Such policies would be good but Cullwick also thinks whoever the next government is, it should just leave the rental property sector alone. “Let it settle down following all the recent reforms. Give it space to breathe and to adjust. That will make a difference to landlords!”
Ideally, Auckland Property Investors’ Association president Andrew Bruce would like to see 90-day “no cause” notices returned to the landlords’ arsenal post-election. “I have hardly ever issued a 90-day notice but, as a landlord, you want to have the ability to use one if need be, if a tenant goes rogue.”
The increased risk means that for marginal tenants, who might have a chequered history, finding a rental property will be a lot harder, especially if there is going to be greater regulation of property managers, he says.
“I think a ‘them’ and ‘us’ situation has been created: big fat-cat landlords versus poor tenants. There needs to be a more balanced environment, rather than the extremes we are seeing. There are lots of good landlords and tenants out there. I’d like to see some policies that recognise that and create more of a healthy balance.”