Twyford’s arrogance shown up by officials

Credit: Stuff

Another minister is having their policies torn apart by government officials.

Typically for Labour ministers they are just plowing on regardless because they know best. Quote:

Housing Minister Phil Twyford’s package of tenancy law reforms would likely drive up rents by causing some landlords to get out of the market, officials have told him.

Officials said while most of the tenancy law overhaul and other changes to the rental market considered by the Government would not have much of an effect on their own, their cumulative weight could lead some landlords to sell their properties to owner-occupiers.

Because owner-occupiers typically have less people in a house than renters, this could lead to a further shortage in rental properties – and higher rents.?End quote.

The exact opposite of what Labour is trying to achieve.Quote:

The advice came in?a late-April paper produced for Twyford by the Ministry of Business?Innovation and Employment (MBIE) and obtained by?Stuff?under the Official Information Act.

The policies discussed include the Healthy Homes Guarantees Act, which sets more strict standards for rental properties, the extension of the Bright Line Test taxation change, and the expected end of “loss ring fencing” for landlords, a setting that allowed landlords to offset losses on one property against another.

“While these effects should be minor, the cumulative effect of changes to the Residential Tenancies Act 1986 may lead landlords to perceive the effects as more than minor. As a result, even if legislative changes did not materially affect the financial returns of landlords, some many nevertheless choose to sell their rental properties,” the officials wrote.

“The combined increase of these policies will be to increase sales of rental properties, with fewer landlords purchasing.

The analysis was focused on areas which already had a shortage in rental housing and an increasing level of demand – most notably Auckland and Wellington. There was no modelling done on how large this increase could be.

The officials believed that the Government’s attempts to increase supply would not materially change things for at least the next two years, with the housing shortage increasing by 14,600, even if 6000 KiwiBuild homes are built.?End quote.

They are a long way off even getting close to building 6000 homes.?Quote:

Twyford said the advice was “only a scenario” and he “wasn’t assuming that is going to happen.”

“They’ve explored one risk scenario. I think there are too many variables at play. I think we have to be alive to that scenario, but I’m not assuming the numbers [on the housing shortage] they have are?going to happen.”?End quote.

He only thinks they’ve got it wrong. Never before have I seen a minister so convinced of his own infallibility. His arrogance knows no bounds.?Quote:

He accepted the basic assumption that rentals being sold to owner-occupiers would make the shortage worse as rentals had a higher occupancy rate, but said supply was being increased to make up for it.

“The collision between under-supply and excess demand that has been a feature of the market for so long is much less of an issue now,” Twyford said.

“Investor activity in the market hasn’t reduced. In fact investor activity with multiple properties has actually increased over the last couple of months.”

He admitted some landlords could exit the market – but said the market itself would stay strong.

“For some landlords, the idea of having to put in a heat pump, or the idea that you may not be able to get rid of tenants using a 90-day notice, may be the straw breaks the camel’s back – but in general I think markets are very resilent.”?End quote.

He might be surprised. But then again he often is.?Quote:

National Party housing spokeswoman Judith Collins said the advice proved what the National Party had been saying – that the reforms would drive landlords out of the market.

“We have been saying one change landlords can cope with, a whole lot you have people leaving,” Collins said.

“This is going to put more stress on the rental market, put rents up, and at the same put much more people onto the social housing waitlist.

Collins wouldn’t commit to reversing any of the policy changes Twyford was making if National came to Government in 2020 but wouldn’t rule it out either.

The way to fix the rental market was to encourage new supply by reforming planning laws, Collins said – something she said Twyford was talking about but not actually doing.

What are are going to have is fewer landlords and the ones that are there are going to be asking for higher rents.” End quote.

Twyford is dreaming if he thinks increased costs on landlords won’t lead to increased rents. No one ever sees rents go down, and with these reforms, rents will go up to cover the increased risk of dud tenants and capital expenditure on improvements.