No capital gains tax a relief for owners and tenants

Rental property owners and tenants will be relieved that pressure from hundreds of thousands of voters and taxpayers forced the ideologically-driven Prime Minister to drop the ideologically-driven capital gains tax, Tenancies War spokesman Mike Butler said today.

Prime Minister Jacinda Ardern virtually told the media she wanted Michael Cullen’s capital gains tax but the myriads of opponents to the tax wouldn’t let her have it, Mr Butler said.

The arguments used to promote the tax, that a capital gains tax would help reduce inequality and that all New Zealanders would “pay their fair share”, assumed that those to be hit by such a tax were not paying their share, he said.

In fact, those who would be hit hardest are probably paying more than their share, he said.

The only people who appeared to support the proposed tax were those who thought they wouldn’t be caught by it, Mr Butler said, as was shown by responses of 90 percent who told one poll that they objected to having to pay a capital gains tax on their KiwiSaver investment.

However, a capital gains tax is just one silly idea from the current Government that those in the rental property sector won’t have to deal with, he said.

We still have to deal with the costly rental property standards that appear to have little to do with the claimed hospitalisation of children, possible changes to tenancy law that make it impossible to move on disruptive tenants, and the ring-fencing of rental property losses that may cause up to 116,000 rental property owners leave the sector, Mr Butler said.

Stop the War on Tenancies is a group that since last October has been highlighting the evidence that successive governments have ignored while creating rental property policy.

Tech firm: Test rental properties before spending on heating

Housing Minister Phil Twyford should heed a warning from tech firm Tether that if rental property owners don’t monitor the warmth and ventilation performance of their properties, they risk spending thousands of dollars on upgrades they don’t need, Tenancies War spokesman Mike Butler said today.

Kiwi tech start-up Tether – which designs and manufacturers monitoring systems like the EnviroQ to enable healthy living environments – says “diagnosis comes before remediation”.

Tether CEO Brandon Van Blerk said “you need to know what’s going on in the house first. How do you prove consistent temperature? How do you maintain temperature? What happens when the tenant says it’s colder than 18 degrees Celsius and it isn’t?” See http://www.scoop.co.nz/stories/BU1902/S00773/tech-company-urges-landlords-to-delay-buying-heat-pumps.htm?fbclid=IwAR13rhIwy4W58ijd3wtgobTOr9rvw-0SmrEuAN5TafQWp0hCPEf0fW2Mx4w

The Housing Minister has made a fundamental error by assuming all rental properties are damp, cold health risks when the evidence is that only 2.7 percent of tenants surveyed by BRANZ complained of cold and damp, Mr Butler said. Check p40 of the BRANZ report at

https://www.branz.co.nz/cms_show_download.php?id=606738ff7cb47451e094ad80f39cc912fa18f7a8

Based on that error, he has imposed heating, insulation, ventilation, draught-proofing and moisture-proofing on all rental properties that may cost $7000 per dwelling when it is largely not needed, he said.

The Minister has compounded that error by assuming that the 10,800 children hospitalised every year have been made sick by the poor quality of housing while not allowing for other factors present in the dwelling, such as smoking, drug abuse, poor hygiene, overcrowding, not to mention medical issues sick children may have inherited, Mr Butler said.

The 290,000 owners of rental property in New Zealand form a substantial voting bloc. They can see that the Minister is acting against the interests of both owners and tenants and will vote accordingly, he said.

Stop the War on Tenancies is a group that since last October has been highlighting the evidence that successive governments have ignored while creating rental property policy.

Bad time for costly rental property standards

A housing shortage is the wrong time to whack rental property owners with thousands of dollars of additional compliance requirements, Tenancies War spokesman Mike Butler said today.

The new standards, announced today, will require rental properties to have a living room heater, insulation above the current requirement, extractor fans in bathrooms and rangehoods in kitchens, a ground moisture barrier to stop rising damp, adequate drainage, as well as draught-stopping tape.

The additional insulation requirement is the biggie and it looks like Housing and Urban Development Minister Phil Twyford has let the insulation industry write the rules, Mr Butler said.

Official advice to the Minister was that the optimum cost-benefit is to the 1978 standard of R 1.9 in ceilings, as currently required, and anything over that has diminishing benefit, he said.

Moreover, underfloor insulation reduces heat loss to such a small degree that it is wasted money, he said.

Yet the Minister has gone ahead and whacked rental property owners with the most extreme 2008 option of R 2.9 in ceilings, which means that all insulation will have to be redone, which must be a dream result for the insulation industry, Mr Butler said.

Today around the country there will be rental property owners who thought they were doing the right thing by installing insulation as required who now find out that they have to do it all over again, he said.

Claims by the Minister to justify his standards turned out to be wrong, Mr Butler said.

The World Health Organisation never recommended a minimum indoor temperature, as the discussion document claimed.

The Building Research Association of New Zealand found that only 2.7 percent of renters thought their dwelling was cold and damp, which is hardly a crisis, Mr Butler said. (See The proposed healthy homes regulations: an assessment http://www.tailrisk.co.nz/documentlist)

There is not a crisis in the condition of rental property. There is a crisis in the availability of rental property and Mr Twyford’s extra compliance requirements will make this worse, Mr Butler said.

“Owners have three options: Absorb the extra costs, raise rents, or sell. Ask any accountant. Owners are selling,” Mr Butler said. “Then where will renters live?”

Stop the War on Tenancies is a group that since last October has been highlighting the evidence that successive governments have ignored while creating rental property policy.

Capital gains tax plan not geared for capital losses

The fact that the Tax Working Group wants to ring-fence capital losses shows that they haven’t come to grips with how a proposed capital gains tax would work when assets are losing value, Tenancies War spokesman Mike Butler said today.

“Property values have been increasing for a relatively long time so that the proposals released today appear to have assumed that prices will continue to increase forever, creating a goldmine for the Government”, Mr Butler said.

But the golden weather for investors is ending. The proposed capital gains tax comes on top of a raft of punitive changes for rental property owners which make property investment no longer attractive, driving property values down, he said.

Talk to any accountant. Now, many owners are unloading rental properties that have become loss-making liabilities and the Tax Working Group appears to have resorted to loss ring-fencing to avoid giving capital loss refunds to investors, Mr Butler said.

“It won’t be a matter of investors timing the sale of assets to their advantage,” he said.

“It will simply be a matter of investors selling for whatever they can to stop haemorrhaging cash to a loss-making investment,” he said.

We already have 116,000 negatively geared rental property owners who declare an average annual loss of $7138 who will sell if losses are ring-fenced if and when the Taxation (Annual Rates for 2019–20, GST Offshore Supplier Registration, and Remedial Matters) Bill becomes law.

Without those 116,000 owners, by the time a capital gains tax may become law the property investment environment will be vastly different than it is now with many selling at a loss, he said.

Weakness on capital losses is just one of the many problems with the proposal.

Capital gains will be charged at 33 percent for the majority of taxpayers – one of the most punitive capital gains tax regimes in the world, and more than twice the rate proposed by the Labour Party at the 2011 and 2014 elections.

The announcement of the proposed new tax was badly timed and coincided with news that more than 10,000 people are now waiting for a state house when under the previous government it was around 4000, he said.

Where will renters live when rental properties will be even harder to find than now? Mr Butler said

Stop the War on Tenancies is a group that since last October has been highlighting the evidence that successive governments have ignored while creating rental property policy.

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