Economist: Regulatory cap on property investors will only go so far

Author
Demelza Jackson,
Publish Date
Thu, 28 Jan 2021, 5:00AM
(Photo / NZ Herald)
(Photo / NZ Herald)

Economist: Regulatory cap on property investors will only go so far

Author
Demelza Jackson,
Publish Date
Thu, 28 Jan 2021, 5:00AM

Kiwis desperate to buy homes are calling on landlords to drop their investment properties – but an economist warns it could leave renters stranded.

The biggest law change to the Residential tenancies Amendment Act in 35 years becomes operative from February 11, bolstering renters’ rights.

But social media users catching on to the news were more interested by a figure included in one article, stating that there are just under 600,000 rental properties in New Zealand which will be impacted by the changes.

Many on Facebook and Twitter were calling for the introduction of a regulatory cap for property investors, putting a limit on how many houses they can snap up to rent out.

Economist and Sense Partner Dr Kirdan Lees says he loves the intent behind people thinking outside the box to fix the housing crisis, and predicts a cap could work short-term to free up some homes.

But, Lees warns a widespread limit on the number of rental properties will drive up costs for tenants.

Lees recommends policymakers look at why investors are buying existing housing stock – rather than building to provide a new property.

"The United Kingdom has had a lot of success with a build to rent programme. That means developers, rather than building up sites to sell to home owners, develop land as a long-term rental proposition,” he says.

"That seemed to be favoured by a lot of people in the market not looking for a short-term rental, but wanting something more stable."

Lee says it’s an enticing option for boosting housing supply and yet there’s a lot of red tape that would need to be trimmed.

He says it all goes back to land supply and the lack of support for infrastructure.

“Some of that’s related to funding, and there’s work in place to try and deal with that but it’s been slow to come through. Until that happens expect housing supply to remain tight, and that’ll really impact first-home buyers.”

The Labour Party made a pre-election promise to axe and replace the Resource Management Act, which has been blamed for burdensome regulations on building new homes.