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The government says a tax change won’t fix housing, but it could help. (Getty Images)
The government says a tax change won’t fix housing, but it could help. (Getty Images)

The BulletinSeptember 29, 2021

Two big changes for landlords and tenants

Contributing writer
The government says a tax change won’t fix housing, but it could help. (Getty Images)
The government says a tax change won’t fix housing, but it could help. (Getty Images)

The government has detailed new interest deductibility rules and rewritten the country’s leases to help tenants during future lockdowns, Justin Giovannetti writes in The Bulletin.

A 20 year definition of new for the country’s houses. A cornerstone of the government housing programme when it was unveiled in March was a significant law change on interest deductibility. Ministers announced then that the amended law would prevent many residential property investors from deducting interest as an expense when paying taxes, in a bid to push more investment into new builds. Yesterday, the change was detailed and new builds will be exempt, with “new” defined expansively as 20 years from when houses receive a compliance certificate. For investors with older properties, the deduction phase-out starts Friday. Interest, quite appropriately, has written about all the details unveiled yesterday.

This one tax change will raise $1 billion over the next four years. Stuff reports that some experts concluded the details of the change to interest deductibility were more generous for investors than they’d expected, but it’ll still increase many individual tax bills by thousands in the coming years. A Treasury analysis had forecast that the overall tax take from property investors could increase by $800 million annually once the deduction is fully phased out for older properties, which is due to happen by 2025.

What will this mean for rents? There could be another concession in the coming months as housing minister Megan Woods unveiled yesterday that she’s considering creating new exemptions for purpose-built rentals that could last longer than two decades and be more generous. While both Act and the National party have warned that rents will increase from Friday because of the deduction change, revenue minister David Parker rejected the suggestion, stating in effect that rents are already as high as landlords can push them. Rents, he said, aren’t set by costs facing landlords anymore, but are “by and large set by the ability of people to pay”.

Changes are coming to commercial and residential leases. Two hours after the interest deductibility rules were unveiled yesterday, the government sent an unexpected press release that it was rewriting tenancy agreements without notice. According to Stuff, a clause will now been inserted into commercial property leases requiring that only a “fair proportion” of rent be paid when tenants are impacted by Covid-19 restrictions. Landlords who can’t agree with tenants on what constitutes a fair rent will be forced into arbitration. The rules came into force yesterday, almost immediately. Also, residential tenancies can no longer be terminated under level four and it’ll be easier for ministers to create new restrictions on landlords.

Angered, the Property Council put out a statement calling the sudden change “a kick in the teeth for the backbone of the nation”.

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The handbrake has been removed. Labour announced a similar plan last year after the first lockdown, but was blocked by coalition partner New Zealand First. At that time, then deputy prime minister Winston Peters had said that forcing arbitration on owners would violate the sanctity of commercial contracts. A voluntary scheme was put forward . In a story worth rereading, The Spinoff wrote about businesses headed towards bankruptcy and landlords who were unwilling to drop rents.

This is part of The Bulletin, The Spinoff’s must-read daily news wrap. To sign up for free, simply enter your email address below

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It could be the beginning of the end of the closed border. (Hagen Hopkins/Getty Images)
It could be the beginning of the end of the closed border. (Hagen Hopkins/Getty Images)

The BulletinSeptember 28, 2021

Self-isolation trial to start next month

Contributing writer
It could be the beginning of the end of the closed border. (Hagen Hopkins/Getty Images)
It could be the beginning of the end of the closed border. (Hagen Hopkins/Getty Images)

Up to 150 business people will try home isolation after an overseas trip, as government looks at ways to reopen, Justin Giovannetti writes in The Bulletin.

A first step to reopening the country’s border. A self-isolation pilot, allowing 150 travellers to leave the country on a short business trip and return with only self-isolation at home will debut next month. First proposed in August, the trial will allow returnees to avoid managed isolation, where bookings have been exceedingly difficult to obtain. The pilot will be limited to fully vaccinated business people who have the full backing of their employers and will return by December. The prime minister has promised to name and shame any returnees and businesses that break the rules. And those rules are pretty strict; they’ll need to be isolated in a private dwelling, without shared ventilation, but with cellular coverage to ensure frequent checks.

The pilot is a sign of the opening possible with high vaccination levels. The country’s border facilities have been the frontline in the Covid fight since last year, but Jacinda Ardern confirmed yesterday that changes are coming as vaccination rates climb. “There has been no room for error with this virus, it has been very tightly run,” the prime minister said of managed isolation. “The only reason that we are running this self-isolation pilot now is in preparation for a highly vaccinated population.” Stuff has written an explainer with more details on the pilot programme.

It’s a trial for three big changes proposed to MIQ in the coming months. So what else is coming? Shorter stints at border facilities are being contemplated, self-isolation at home for returning residents could start in the first quarter of 2022 and more rapid testing could be rolled out at work places and at the border, Ardern said after cabinet yesterday. The changes would be a relief for the tens of thousands of New Zealanders overseas looking to come home. As well as the frankly unknowable number within the country who haven’t been able to leave in nearly two years to see family, study or work abroad with confidence they can come home. Another release of 3,000 MIQ rooms is planned for this evening.

It’s not as significant as the change some have been calling for. The MIQ system is under a heavy level of scrutiny at the moment, especially from the one million strong diaspora. According to The Guardian, the closed border has led to questions abroad about what it means to be a New Zealander. While Sir John Key can write about a “hermit kingdom,” Ardern has been carefully dismissive of concerns. There was little subtlety when she noted last Monday that many of the thousands who queued in the MIQ lottery were only interested in spots around Christmas. Polling for the NZ Herald (paywalled) found that 64% of respondents don’t want changes to MIQ until at least 90% of the population has been fully vaccinated. One unpopular proposal in the poll was to allow for private MIQ. The NZ Herald also reported that Amazon had unsuccessfully pitched such a facility before scrapping its massive Lord of the Rings project.

This is part of The Bulletin, The Spinoff’s must-read daily news wrap. To sign up for free, simply enter your email address below