Cherished ‘damp rental’ beliefs rubbished

Cherished ‘damp rental’ beliefs rubbished

Fewer than 3 percent of tenants find their homes cold and damp, the World Health Organisation did not recommend a healthy temperature, and client-friendly research helped understate the costs of heating and insulation proposals for rental property, according to a discussion document released today.

Iconoclastic economist Ian Harrison of Tailrisk Economics has taken aim at the cherished beliefs of Housing Minister Phil Twyford in a discussion document titled The proposed Healthy Homes Regulations: An Assessment.

Twyford is finalising a series of standards for New Zealand’s 588,700 rental properties on heating, insulation, ventilation, moisture and draught-proofing under the so-called Healthy Homes Guarantee Act that was passed last December.

As justification, the Minister points to assertions that many New Zealand houses, not just rental houses, are “cold and damp” and that this has health implications.

A key touch point is that our homes don’t meet the World Health Organisation recommendation that indoor spaces be heated to at least 18C.

The Healthy Homes Standards discussion document put out for public consultation in September has six pages of references which give the appearance of sound and thorough research. But for anyone who goes to the papers and checks the claims, it quickly becomes obvious that:

  1. Only 2.7 percent of tenants thought that their rental was cold and damp, according to a survey by the Building Research Association of New Zealand in 2017, and of that percentage it was not clear what proportion was due to inadequate use of heating and a failure to ventilate by tenants.
  2. The World Health Organisation did not recommend a minimum indoor temperature of 18C. What they did say was that no conclusions could be reached on the average indoor ambient temperature below which the health of the general population may be considered endangered.
  3. Research evidence shows that the common New Zealand practice of lightly heating bedrooms does not present a health risk.

The bulk of the paper was devoted to a cost benefit analysis done for the Government by the New Zealand Institute of Economic Research, that Harrison described as “client friendly”.

Key “unhelpful” documents were sometimes ignored, costs were systematically understated, and unrealistic methodologies were adopted that overstated the net benefits, Harrison wrote.

Harrison redid the cost benefit analysis by including the unhelpful documents while correcting costs and methodologies to find that a heat pump in every living room would come at a capital cost of $457-million bringing a net loss of $500-million.

Insulation top-ups would cost $410-million bring a loss of $269-million, ventilation would cost around $200 million with very limited benefits, moisture proofing would cost around $300-million with no material benefit, and draught-proofing would cost around $300-million, again with limited benefits.

The NZIER’s assessment of the cost of insulation was based on outdated prices and only considered ceiling insulation, which by excluding subfloor costs, increased its benefit.

When questioned on why underfloor insulation was not included, NZIER said that they were directed by the Ministry of Business, Innovation and Employment not to consider it.

The value of underfloor insulation is marginal because only 10 percent of heat is lost through the floor while 40 percent is lost through the ceiling.

The evidence shows that “healthy homes guarantee” slogan is nothing more than political spin, which is very bad news for all rental property owners who may be forced to spend around $7000 per dwelling on unnecessary upgrades.

Since an insulation top-up costs the same as insulating from scratch, all those “good” rental property owners who have installed insulation since whenever have probably wasted their money because they may have to re-do it.

The proposed Healthy Homes Regulations: An Assessment may be read at http://www.tailrisk.co.nz/documentlist.

Ian Harrison, who has a BCA Hons from Victoria University Wellington, and a Master of Public Policy SAIS Johns Hopkins, has worked with the Reserve Bank of New Zealand, the World Bank, the International Monetary Fund, and the Bank for International Settlements.

Impact of rental property tax change could be huge

Impact of rental property tax change could be huge

The impact of a law-change to ring-fence rental property tax losses could be huge and sudden because owners absorbing loss with no prospect of gain will sell, Tenancies War spokesman Mike Butler said today.

The Taxation (Annual Rates for 2019–20, GST Offshore Supplier Registration, and Remedial Matters) Bill  that introduces ring-fencing of tax losses for rental properties passed its first reading today.

Based on comments from Inland Revenue reported yesterday, there could be around 104,000 private rental property owners who lose money every week expecting that loss to reduce their tax liability while hoping to sell in the future and make a capital gain, he said.

If rental property tax losses are ring-fenced from April 1 next year, and if capital gains are to be taxed, as the Government is pondering, the rational option for negatively-geared owners is to sell now, Mr Butler said.

If each of these owners has two properties, and if each sells to owner-occupiers, that could take 208,000 properties away from renters looking for a home, he said.

Of course, this is speculation, but the problem is that neither Revenue Minister Stuart Nash nor Housing Minister Phil Twyford know how many owners are negatively geared so they do not know the impact of this change, Mr Butler said.

Owners won’t necessarily protest about this rule-change. They will look at their financials and either absorb the loss, increase the rent, or sell, he said.

The prospect of a capital gains tax makes selling now the preferred option, he said.

The Ministers should provide evidence of both the benefits and the costs of this proposed law change, Mr Butler said.

Any failure to do so would show that we have a government running on religious zeal instead of sound evidence, he said.

The known figures are that there is a total of 588,700 rental properties in New Zealand of which 64,500 are state or social housing, leaving 524,200 private rental properties.

The number of private rental property owners could be 262,100 assuming each have two properties.

The number who are negatively geared may be deduced from a statement from IRD that 40 percent of owners had rental losses in any one year (See below).

The group Stop the War on Tenancies aims to empower both owners and tenants in the face of ongoing government ineptitude with housing.

See

See: Officials warn tenants could take impact of end of tax breaks for landlords. https://i.stuff.co.nz/business/109254032/officials-warn-tenants-could-take-impact-of-end-of-tax-breaks-for-landlords?fbclid=IwAR0jJ6T4Dxs5y54EIMkIF7TOtmxU8wLkoHNyuCJ3_eg1IgfK4dr7mtKh0sg

Auckland meeting on tenancy law change, standards

Auckland meeting on tenancy law change, standards

A panel discussion on proposed changes to tenancy law and extra standards for rental property will take place in Auckland on Sunday, Tenancies War spokesman Mike Butler said today.

The meeting, at the Balmoral Community Hall, 258 Balmoral Rd, which will start at 2.30pm on Sunday, December 9, will take the form of a panel discussion.

Panelists include National Party Hunua MP Andrew Bayly, ACT Party candidate Stephen Berry, Tenant Protection representative Angela Maynard, Stop the War on Tenancies founder Mike Butler, property investor and lawyer Naveen Goel, and real estate consultant Paul Davie as moderator.

Big changes are proposed for the Residential Tenancies Act and these will reduce the control that owners will have over their property and make it more difficult for renters to find a home, Mr Butler said.

Extra standards required for insulation, heating, ventilation, draught-proofing, and water-tightness, that will cost around $7000 per property, are proceeding against official advice and have nothing to do with health, he said.

The meeting is important for everyone involved in tenancies and people from across the political spectrum have been invited, Mr Butler said.

The group Stop the War on Tenancies aims to empower both owners and tenants in the face of ongoing Government ineptitude with housing.

Contact

Mike Butler                 (027) 2777 295