The problem with all stick and no carrots


Claire Williamson

In another life, I spend a lot of time in the bush, taking action to support nature and biodiversity to improve and grow, and restore native forests and ecosystems.

A lot of nature is about symbiosis – our native trees and birds rely on each other for survival and longevity, and it’s magical how these two come together for food, seed dispersal and the long-term success of both species.

This is how I’d like us to think about providing rental accommodation in New Zealand; property owners being trees that need to attract birds to spread their seeds. The birds are like tenants who come and go, but often birds return to areas where there has always been a good food source of food over time.

Property has long been the choice for “mum and dad” to put their money. Bricks and mortar, whether residential or commercial, has been seen as a ‘safe’ investment that appreciates over time, and you can drive down the street and see with your own eyes.

In recent years, the balance in property investment businesses has been affected by several factors, many of which have been legislated by central Government and are now starting to bite across the sector.

This includes the extension of the Bright Line Test to 10 years for existing properties and five years for new builds. The loss of interest deductibility for rental property businesses, the Healthy Homes standards in 2019, the changes to the Residential Tenancies Act, and the Credit Contract and Consumer Finance Act are some of the other changes we’ve seen hit investors.

It looks as though National and Act policies will be front and centre as a result of the election. It will be important to address a problem we’ve been ignoring for too long – the demand for rental properties is starting to outstrip supply by a considerable amount, and this having a negative impact on tenants.

The big issues we’re trying to tackle are for tenants to have the option of warm, dry, safe homes, ideally for a decent length of time, so they can put down roots as a family and have a level of certainty about their futures.

Investors want good tenants to pay their rent, low maintenance homes, and a modest return on their investment, and largely the freedom to do what they want with their properties within reason.

I believe we’re currently looking at it all wrong, and we’re all stick and no carrot. There’s not enough consideration to pull towards the positive – where do these two ‘needs’ intersect?

  1. Warm, dry homes (up to standard) – big tick for the Healthy Home rules here
  2. Certainty over time, both in rent and tenure of occupation

Why can’t we incentivise these outcomes?

For investors, if they provide all these things (perhaps even guaranteed rent) for a period of three years, couldn’t they receive some form of small tax benefit? Would that stop the incidences of selling quickly, flipping properties, and having to vacate properties to maintain them?

For tenants, if they had certainty of tenure and rental payments and successfully completed their term, could they get some kind of universally accepted recommendation?

I’m seeing so many landlords fed up with trying to meet a plethora of legislation requirements, unable to meet tax payments, and worrying about whether their tenants will look after their property or not. It’s not encouraging the supply of better quality, long-term accommodation, which New Zealand desperately needs.

I’d love to see the new government do more to fix it than just oppose legislation that wasn’t fit for purpose.   Incentivising positive behaviour, creating some real benefits to those who are putting their money into building up good quality rental stock with long-term outcomes in mind.

And while I advocate daily for home ownership for more Kiwis, there are many who can’t afford to buy a property, or choose not to own their own property. They too deserve the right to put down roots in a community, live in good quality homes, and raise their families in an environment of certainty.

And some of the great forests of Aotearoa prove what’s possible when symbiosis is at its best. Long living, quality ecosystems full of thriving trees, birds and people.

  • Claire Williamson is a mortgage advisor for My Mortgage.




About Author

Claire Williamson

My Mortgage director and mortgage adviser.