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Open mike 01/04/2021

Written By: - Date published: 6:00 am, April 1st, 2021 - 112 comments
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112 comments on “Open mike 01/04/2021 ”

  1. Jester 1

    So after 3 and a half years, we have to wait another six months for another working group to start from scratch to evaluate light rail. It doesn't even sound like Dominion Rd is a definite as they've now mentioned Sandringham Rd. So absolutely nothing has been decided.

    No decision on Auckland light rail, as Government opts for 'fresh start' on project | Stuff.co.nz

    • This project was originally sold to us as a much needed rail connection to the Auckland International Airpor. But it definitely won't be connecting to the airport anytime soon. (if ever).

      So what's it all about?

      Don't we ever learn?

      Doesn't anyone remember the vanity project that was the viaduct light rail?

      Developers thought it would be hoot to get rate payers to fund this vanity project to give their condo development a bit of a boho look. This vanity project has served its purpose and, despite all the big talk of extending it down Quay street to the Britomart transport hub, has been moth balled.

      Now again there is talk of developers cashing in. With plans for multi-level condiminiums down the length of Dominion Road.

      Of course these developers want a light rail, tramway, or whatever you want to call it down the length of Domininiou Road. Don't matter if, like the viaduct tramway, it doesn't actually connect to anything, because the tax and ratepayes will be footing the bill. But it will look flash. (for a while anyway).

      Talk is, the construction will drive all the small businesses retailers down Dominion Road to the wall, and the developers will be able to buy up all these properties in a fire sale.

      And the character of Dominion Road will be changed forever.

      I feel I want to throw up.

      I mean really, haven't we had enough of corpoarate welfare in this country?

      Meanwhile Puhinui Road and the South Western Motorway is crying out for relief from traffic congestion to the airport. Let's get all those cars off the road The corridor is there. The need is there. Mike Lee saw the wisdom of it. The main trunk rail line is ritht there. What could be simpler. Even that old dinosaur Winston Peters with his populist air to the ground knew he could make political capital over the light rail vanity project down Dominion Road. The light rail project down Dominion Road, (or possibly down Sandringham Road) benefits no one except very limited special interest groups. It won't benifit workers who want to commute to their airport or nearby support workplaces, who currently find themselves in near grid lock traffic jams every working ding dong day.

      It doesn't benefit arriving and departing air travelers from who want to get into and out of the city centre with as least hassle and time, and with a certaintly of timely arrival.

      It doesn't benefit local businesses and residents.

      Let's hope this disorganised dog's breakfast gets so tangled up in its own hubris that it never actually leaves the drawing board or the fevered imaginations of the condo builders.

  2. Jimmy 2

    So from today the minimum wage increases from $18.90 to $20 which will help some people. (I still think it would have been better to give everyone an extra $40 in the hand by changing the tax brackets so less tax is deducted). The tax brackets have not been adjusted since 2009? and both Nats and Lab have never adjusted for inflation. Any income over $48k is taxed at 30% which is way too high. And income over $70k that used to be 'rich pricks' income at33%. Well $an income of $70k is not what it used to be.

    • Ad 2.1

      Last week we had the largest intervention in the housing market in decades which soaked the rich.

      This week the minimum wage went up again, and taxes on the super-rich went up.

      It's not like they're doing nothing.

    • Descendant Of Smith 2.2

      Wish they would do something about dependent partners – they managed to for the COVID response. The extra tax (about 5,000 per year) a single person supporting two people pays over two people earning the same income might enable things like Kiwisaver that simply isn't affordable supporting two people affordable – let alone saving for retirement for two people.

      Oh that is right they did do something – they removed the ability of partners to get NZS so now the working partner has to work even longer.

  3. dv 3

    It is april 1st!!!

    [TheStandard: A moderator moved this comment to Open Mike as being off topic or irrelevant in the post it was made in. Be more careful in future.]

  4. Tiger Mountain 4

    Yay! minimum wage goes up to $20…

    Boo! Auckland Light Rail development according to Rt. Hon. Jacinda Ardern on RNZ this morning, is open to Public Private Partnerships–the NZ Labour Caucus monetarists (and their fifth columnist prodders in Govt. Ministries) invite further penetration of what should be public infrastructure by private capital.

  5. Have a great April 1st.

    [TheStandard: A moderator moved this comment to Open Mike as being off topic or irrelevant in the post it was made in. Be more careful in future.]

  6. Sanctuary 6

    Penk and Brown? April Fools surely…

    [TheStandard: A moderator moved this comment to Open Mike as being off topic or irrelevant in the post it was made in. Be more careful in future.]

  7. AB 7

    "Chris Penk-Simeon Brown"

    Heh- fortunately I checked the calendar this morning.

    [TheStandard: A moderator moved this comment to Open Mike as being off topic or irrelevant in the post it was made in. Be more careful in future.]

  8. Pat 8

    "It is all about growth. Even when it is clear that more and more people want and need a reliable, trustworthy public broadcaster on free-to-air radio, the ultimate aim for RNZ is about boosting numbers.

    Sometimes this “growth fanaticism” is presented cleverly. It has been described as a ‘moral obligation’ for RNZ ‘to build lifelong relationships with all New Zealanders’.

    But ultimately it is the same ethos as listening to ambitious sales people talk about their targets."

    https://www.newsroom.co.nz/if-the-rnz-totara-falls-is-anyone-listening

    And a Minister who appears to have disproved his earlier promise.

  9. alwyn 9

    In other breaking news on April Fool's Day the Prime Minister has decided that the Deputy Prime Minister will enter a Monastery and Mr Robertson has chosen to take an extended stay in the Kopua Monastery in Central Hawkes Bay. His parting words were "I shall spend my remaining years in prayer that my offences against the New Zealand people may be forgiven. I shall never speak again".

    This is a Trappist establishment. Trappist monks do not take a vow of silence but do not indulge in "idle conversation". This is a problem for Grant as idle conversation comprises his entire repertoire.

    [TheStandard: A moderator moved this comment to Open Mike as being off topic or irrelevant in the post it was made in. Be more careful in future.]

    • GreenBus 10.1

      I think this Housing Crisis situation must be happening in most country's that adhere to neo liberal policy. Pulling back on state house building and selling off the same to reduce "big government" is a huge loser policy for the people that need it. And speculation in housing also rampant around the world with the same result-unaffordabilty. I think supply issues are not to blame in affordabilty, got fuck all to do with it IMHO. Our world pricing systems are all driven by demand regardless of supply levels. Butter anyone? We are surrounded by cows yet the price is up. Same with houses. Controls are needed but won't be forthcoming under neo liberal Govt's. Stuck with it!

      • Macro 10.1.1

        It really depends on the Govt.

        Take WA for example.

        Here is a house 4 bedrooms 2 car garage and 2 bathrooms with a rumpus room, just 500m from a popular and good swimming beach.

        For those buying their first home there is a huge discount provided by the Govt for new builds, so the incentive to buy existing houses by new buyers is just not there, and there is no upwards pressure on the market. House prices for 3 – 4 bedroom homes have stayed around the 350k – 450k range for years.

        • Pat 10.1.1.1

          "It really depends on the Govt."

          It does and it dosnt…..western central banks are members of a club and if you want the benefits of belonging to that club you play by the rules…and the rules are set by the hegemon…currently the US.

          The government CAN decide it dosnt want to be in the club but that means losing the benefits of being in the club….and they fear that more than anything else at the moment.

          Essentially, unless the Government decides the cost of being a member of the club is too high they are little more than middle management or worse, sales reps.

          • Macro 10.1.1.1.1

            Fact is that successive WA Governments have consistently supported their construction and building industries thus maintaining and preserving a dedicated labour force. So there is no shortage of housing stock. They are in the fortunate position also of having abundant land available for development, and they have a well developed public transport system that supports these new developments. The biggest crisis as far as WA is concerned is the availability of water. There is a huge aquifer and a massive salt water desalination plant, but the rainfall in the area has steadily decreased over the last few decades as a result of the Hadley Cell shifting south with AGW and dramatically changing the climate.

        • GreenBus 10.1.1.2

          Yup. Aussie Citz get a 50k handout for new builds I think. If that's true and could be used to support the deposit then a great help, well done AU. SFA this side of the ditch tho!

          Checking out Real estate windows on the Goldie shows pricing cheaper than Tauranga/Hamilton and way down on Auck. Sydney not so good tho. Go figure.

        • alwyn 10.1.1.3

          That might look as if it is in Perth but it is actually quite a long way south.

          It has about the same relationship to Perth as Paraparaumu has to Wellington, or the Auckland CDB to Karaka.

          Perth has been in a depression for a couple of years now with the mines in the north of the state caught up in the Chinese row with Australia and the FIFO people who work there and live in Perth out of work. There are a lot of houses in the area for sale.

          So relies who live there tell me anyway.

          • Macro 10.1.1.3.1

            Warnbro, which is the local station on the Mandurah line, is a 40 min ride into the city. There is a train into the city every 10 mins. You might as well live there as in the City. I enjoy riding the train, and passing the cars on the Freeway as you travel at well over 130kph, and no traffic jams.

            Lithium mining is the future it seems. Some of the FIFO people have packed up and left, but many others lived out of State – even here in NZ!

      • Pat 10.1.2

        Agree…it goes back to the liberalisation of the finance and banking sector that essentially gives the banks a free hand to create credit (debt) as they like and so they have….and why wouldnt they, greater credit means greater profit for them.

        Especially when they now know that when they overdo it the public purse will bail them out a la GFC.

    • alwyn 10.2

      Did people look at the link provided?

      Did you notice what The Chancellor did in 2015 that was meant to solve the housing problem. It didn't do anything did it?

      Now can you see any real difference between that and what Grant has just announced here? No? So what makes anyone think that the current Government actions will do anything at all to even ameliorate, much less solve the New Zealand problems?

      • Pat 10.2.1

        Did anyone look at the link?…i have no idea, but i would suggest a couple of points, firstly they already had a reduced offset ability that was further reduced, unlike here where we have gone from 100 mph to zero in one hit, and as I have constantly espoused it is sentiment driving the market, sentiment spun by the vested interests.

        But in a way you are correct, the underlying driver is the availability of credit which is the point, that is driving the price growth but that easy money (supported by ever decreasing interest rates) has run out of road…where to from here?

  10. Obtrectator 11

    Item about a female stalker from today's Stuff webpage:

    https://www.stuff.co.nz/national/crime/124709613/a-stalker-has-promised-her-victims-she-will-not-stop-until-she-dies

    80 convictions for breaching protection orders. Now if only the authorities had been this assiduous about dealing with certain male stalkers or abusive ex-partners ….

  11. Siobhan 12

    Stuart Nash ..Police Minister, 2019

    Banning gang patches in public places will not curb a rise in gang activity and violence in Hawke's Bay, the Police Minister says.

    https://www.rnz.co.nz/news/national/390755/hawke-s-bay-mayors-gang-patch-ban-rejected-by-police-minister

    Also Stuart Nash …Not Police Minister, 2021

    May be an image of text

    Now personally I don't get all hot and bothered about patches. Living in the un ironically named Nash Street, in the middle of the Hood, I probably should ..but I just block it all out.

    The issue I have is particularly with Nash, who rants and raves about a number of issues…only to disappear from the room when in a position to actually act on his beefed up "manly man" "Get Hard" rhetoric ..gangs, housing, jobs, fisheries…all have been through the same wash with Nash.

    I've often said, given his stance on a number of issues, he should have joined the National Party. And as it turns out…by now he could well be Leader of the National Party.

    Instead Labour are stuck with him. Like the kinda annoying cousin from the provinces that makes you dread the family Christmas year in year out.

    But then again, it would seem he fits perfectly with Labours policy of incremental inaction..

    • Treetop 12.1

      Napier has the highest ratio of people in the country waiting for stable housing. Half of the motels are housing people who would be living on the street. Other areas have a high need as well.

      An older teenager might find joining a gang giving them security or a place to escape. The one thing the government can do is build more state houses to deter youth joining a gang. Once in a stable home then the older teenager could look at job training or furthering their education. Youth are under so much strain when living in poverty. When home is an unhappy place a teenager will find ways to spend as little time there as they can.

      • Siobhan 12.1.1

        Indeed. Like you say…The two problems that lead to gang membership here in the hood …dire lack of affordable, secure housing, and, equaly, wages in the orchards basically at a standstill since the 80's. When we first moved here people who worked on orchards and in the meat works could hope to buy their own home ..now a kiwibuild in Marenui was.$385,000 upwards ..and that was last year. .prices around these parts have escalated.

        People tend to talk about "housing insecurity" in a slightly detached way, as if its purely a financial problem. I'm not sure they understand the effect on children of a life of feeling "less than" with parents at breaking point, time and time again, looking for yet another house…always on the back foot…

        So, whatever, they can ban gang patches ..its not going to stop the problem one little bit…but I guess, out of sight, out of mind for some..

  12. Pat 13

    "Bernard Hickey wrote about this in January, suggesting that the Government could actually use this money to build up to 800,000 new homes: “Rent subsidies paid by the central government are forecast to rise from $2.6b last year to $4.2b by 2025. They have already risen from $1.9b over the last four years, Treasury figures show. Just as first home buyers use their rent to calculate how much they could afford to pay in interest, the Government could currently borrow over $400b with that $4.2b of rent subsidies. At $500,000 per dwelling, that $400b would ‘buy’ 800,000 new homes, which would be half the current housing stock of the entire country”

    https://democracyproject.nz/2021/04/01/bryce-edwards-political-roundup-the-missing-part-of-the-govt-housing-package-state-builds/?utm_source=rss&utm_medium=rss&utm_campaign=bryce-edwards-political-roundup-the-missing-part-of-the-govt-housing-package-state-builds

    An excellent piece that highlights how woeful the Governments action (?) on state housing is (and has been)….why is the Government not ramping up its ability to directly build the housing needed or, if incapable ,at the very least directly contracting to the private sector a construction programme significantly larger than current?

    Fear of success perhaps?

    • RedBaronCV 13.1

      Yeah the rental subsidy has been out of control for a while.The government could build or subsidise young people to build a heck of a lot of assets with it. Personally I think in some of the smaller districts they could add up the amounts paid – work out how much to build to collapse the rental market and then move outwards in ever widening crcles.

    • Foreign waka 13.2

      I think its a rort and I can only assume that the government, regardless of hue is complicit. Surely they must see what other see or are they so naive?

  13. ghostwhowalksnz 14

    "Chris Penk-Simeon Brown Ticket"

    April Fools Day joke…surprising the numbers- on a political blog- who didnt get it.

    [TheStandard: A moderator moved this comment to Open Mike as being off topic or irrelevant in the post it was made in. Be more careful in future.]

  14. mikesh 15

    Why do we need to tax the rental income of landlords? Why not make residential rental income rent free?

    I know that today is April 1st, but the above comment is not made in the spirit of April Fools Day.

    Owner-occupiers do not pay tax on the income imputed to them by dint of their living in their own homes. This income is essentially the rent that they save from doing so.

    Landlords probably pass the tax on as part of the rent, so it just represents an additional burden on tenants, and is probably a form of 'double taxation' (a situation where two lots of tax are paid on the same income tranche).

    It would also put to bed all the arguments flying about over the removal of interest deductibility.

    • Gabby 15.1

      You know, I don't get taxed on the hire fees I don't earn from not providing a taxi service using my car. Not that I'm complaining.

      • mikesh 15.1.1

        I don't think a automobile is deemed to be an investment. I suppose one has to draw the line somewhere between what are considered investments, and what are considered consumption. Houses for some reason are considered investments. I suppose it’s because they are eminently rentable.

    • Gabby 15.2

      Why not make rent payments tax deductible?

      • mikesh 15.2.1

        Why not make rent payments tax deductible?

        The danger with that is that landlords, knowing that tenants are receiving a tax break, would see it as an opportunity to up the rent.

      • Foreign waka 15.2.2

        Because the higher the rent the more tax you can deduct and the more profit. I don't think this is a good idea.

    • bwaghorn 15.3

      Top policy was to put a value and charge tax the advantage people get from owner occupying over renting if memory serves me correctly.

      • RedLogix 15.3.1

        It does serve you correctly. It was one of the more subtle and important policy ideas TOP had – yet totally misunderstood or ignored.

        • Stuart Munro 15.3.1.1

          Problem was it did not account for people on lowish fixed incomes – they'd've been obliged to sell.

          • RedLogix 15.3.1.1.1

            Every time someone brings up this objection – and you are by no means the first – I'm left wondering at the dishonesty of omitting that TOP explicitly covered this off by giving people the option of deferring the CCT until either the property was sold or passed on in an estate. Effectively converting it into a standard CGT or an Estate Tax. But either way they got to live in their home during their lifetime without a hit to their cash flow.

            I've forgotten how many times I've typed that out now. Please don't make me do it again.

          • AB 15.3.1.1.2

            "did not account for people on lowish fixed incomes – they'd've been obliged to sell"

            Quite. And they are most likely to be retired people who over their lifetime have had relatively limited financial resources and acquired only one home, which, when it went onto the market, would most likely be bought by someone with several.

      • mikesh 15.3.2

        My suggestion is pretty much based on the same principle, and may be more useful in the current climate.

    • Treetop 15.4

      Landlords probably pass the tax on as part of the rent,

      Landlords cannot operate like the IRD taxing a tenants rent.

      Is there a way to stop this?

      • mikesh 15.4.1

        Landlords cannot operate like the IRD taxing a tenants rent.

        They don't actually tax tenants' rent. But I would assume that they tailor the rent that they charge so that it takes into account the amount of tax that they themselves are paying on that rent.

      • RedLogix 15.4.2

        The first rule in business is to watch the cash flow.

        Any increase in costs, such as this new tax, must be managed, either the profit is reduced, costs are reduced elsewhere or the price is raised – or some combination of both. What cannot happen is that the cash operating profit goes negative. In that case the shareholder must either add funds, or the business is insolvent.

        This new tax will likely take some unknown fraction of landlords into negative cash flow territory. I know that it's taken us very close to it, and our mortgage is relatively low compared to what it used to be. If this had happened to us ten years ago we would have fallen over almost for certain.

        • Treetop 15.4.2.1

          So are tenants now going to be taxed by the landlord, if so the rent has to increase?

          • mikesh 15.4.2.1.1

            So are tenants now going to be taxed by the landlord, if so the rent has to increase?

            This would not be the case if landlords' rental incomes were tax free.

        • Descendant Of Smith 15.4.2.2

          Yeah but many landlords charge rent completely unrelated to their costs i.e. market rent.

          My mother on NZS has just had her rent put up another $30-00 a week on the mortgage free unit because the "market" says so. Also landlords aren't business people in most senses of the word. They don't even get when the government puts subsidies up by $30-00 that it is a 70 cent in the dollar subsidy. So the $30-00 rent increase means at best the person gets only $21-00 and is now $9-00 poorer. Business people they are not. You might be but many are not – for a large number the relationship between cost and rent isn't that existent.

      • Pat 15.4.3

        There are many….whether they are implemented however is a different question.

        Consider….an investor buys a property 20 years ago with a 20% deposit and a $100k mortgage over 25 years…the mortgage outgoings including principal payment at current interest rates equate to around $100 pw…there are additional costs associated but they remain deductable,

        What is the current market rent for that property?

        Debt ratios are key.

        • Descendant Of Smith 15.4.3.1

          A friend of mine owns 20 rental properties – she had 22 but assisted her tenants to buy them. She paid the mortgages off years ago and charges rents that are affordable and reasonable.

          Market rent is like CEO's salaries – once they start going up the market says they have to keep going up. They become self-perpetuating. They then push the price up as the capital gain starts outweighing the actual value and we end up in a viscous cycle with the working class as pawns in the capitalist game.

          I partly blame Christchurch where profiteering after the earthquake massively increased rents and emboldened rampant capitalism. That is when a rent freeze should have gone on.

          • Pat 15.4.3.1.1

            It was happening long before the ChCh quakes….the rent rort post quakes in ChCh was driven by insurance money….it increased the ability to pay.
            Disaster capitalism

        • RedLogix 15.4.3.2

          There are several ways to do this. What I think you're going for is to take the costs and add a margin. But then every owner will have different costs based on their mortgage, and it would lead to odd outcomes – if for example the owner came into an inheritance or windfall and used it to pay down their borrowings, thus reducing their costs – would you argue for the rent to fall at the same time? Or if the same house was then sold to a new owner with a much larger mortgage – should the rent immediately rise to match?

          That's not how virtually any business works.

          What actually happens I think is that the 'market price' is set by the vendor with the highest marginal cost. It's a bit like the electricity market in this respect – total supply must always equal total demand – and during peak periods when the most expensive generator comes online (because it has to) then everyone else is paid the same price that this generator charges.

          The residential rental market isn't quite so rigidly organised like this, plenty of landlords actually charge well below 'market'. The data that the Ministry of Housing publishes is only for new bonds, it doesn't track older established ones at all – which as a rule are lower than for new tenancies.

          The other way to look at this is to consider what would happen if the owner simply sold the property and put the cash into a bank deposit. This would be considered the 'Minimum Risk Rate of Return", which by convention is set at 3%. So if we took your 20 yr old property that is probably now worth north of $750,000 that would equate to around $22kpa return before tax. If you're going to go to the hassle and risk of renting the house to someone you'd certainly want to do better than this. Consider that your fixed costs – rates, insurance, R&M, new compliance rules, and management fees etc – are going to be at least another $10kpa, this means you need a rental income of around $32kpa just to do better than putting the money in the bank. That's a rent in the order of $620pw.

          This is pretty easy to work out for the property you live in, just go to qv.co.nz and enter your own address. Then do the numbers for yourself – it should give you a sense of what your minimum rent should be if your landlord was being economically rational.

          • Pat 15.4.3.2.1

            And the investor that bought the property for 120K 20 years ago may well decide that original 20K investment that is now worth say 750K today is better off in a TD or somewhere else…thats for him or her to decide…the point is IF the investor has not increased his/her leverage the pressure to increase rents does not exist…..it is a choice.

            • RedLogix 15.4.3.2.1.1

              Nope – you need to have a bit more of a think about it. What would happen if the market consisted of just two rentals – an old one with no mortgage that had fixed costs only say $200pw or a new one with borrowings that had a cost of $600pw? And each landlord charged enough just to cover these costs only?

              And now consider there are only two tenants who can choose between them. Assume both houses are of similar desirability for the sake of the argument. Which one would they both want? The cheap one at $200pw of course. But only one can live in it, forcing the other to pay $600pw to live in the other one. Well the landlord charging only $200pw might be content with this situation, but what happens when demand increases and a third new tenant appears in this market?

              Of course none of this addresses the current problems in the NZ housing market that go well beyond the dynamics of the rental market, which has existed since the year dot.

              • Pat

                a lot of mental gymnastics going on there to attempt to refute the fact the original landlord has a choice….and none of it changes the fact he/she does.

                • RedLogix

                  the fact the original landlord has a choice

                  So the original landlord charging only $200pw retires and decides to sell to a new operator? One with a much larger mortgage.

                  The point is that you're essentially relying on the willingness of this person to leave $400pw on the table indefinitely. You may well have an opinion on the morality of this, but I think you can see that in the context of a real world market – it's just not a stable scenario.

                  • Pat

                    The willingness or not of the investor to set their rent at whatever will depend on multiple factors…one being the quality of the tenant…it is financially advantageous to the investor to have a reliable trouble free tenant who may be able to afford a lesser amount than to risk a series of unsuitable tenants and vacancy periods….real world enough for you?

                    I know investors who operate on this basis and have done for years…a good long term tenant is worth their weight in gold.

                    But all of that aside the original comment was regarding landlords passing on the tax changes to tenants and my comment pointed out that there is no need for many investors to pass on costs as the carry little or no leverage, and have no financial pressure to do so…..and as stated previously, those that are excessively leveraged and operating a marginal investment have the option to rebalance or exit …..non viable businesses are wound up all the time.

                    • RedLogix

                      If two farmers are producing the same crop, but one due to having some competitive advantage – better rainfall or management methods for example – has a lower cost of production, and demand equals or exceeds supply, do you think this farmer will sell at a lower cost than his neighbour? Of course not – that farmer sells at the same price and uses their competitive advantage to make a higher profit.

                      This is how all businesses work, why do you think residential rentals must be an exception?

                    • Ad

                      The most important factors in determining the level of rent is:

                      – Size of mortgage to service

                      – Number of bedrooms

                      – Location

                      Quality of the tenant might help in terms of future rent increases, a little. I have one house which we haven't increased for three years because they are solid and there's zero debt on it.

                      There's two others, only one of which has a mortgage and it's small – we do review that annually.

                      Agree with you about the very marginal investors. They will now get out, or their banks will tell them hard to sell one or two and bring their position down, or the next time they go to their bank for a rollover they are going to get a reality check. That's a desired outcome from government policy.

                    • Pat

                      @Ad..yes dont disagree with factors setting rent but for some reason RL wants to debate a self evident truth regarding financial pressure on low or zero leveraged investors.

                      And yes banks will be having some uncomfortable conversations.

                    • mikesh

                      my comment pointed out that there is no need for many investors to pass on costs as the carry little or no leverage, and have no financial pressure to do so

                      For any given net profit the landlord's tax payment will always appear in the rent that he charges, for example (for a net profit of $100 pw there are two ways that this can come about:

                      (a) At a tax rate of 33% the landlord will need to add $150 to his outgoings in setting the rent, or

                      (b) At a tax rate of zero he will need to add only $100 to his outgoings.

                      Actually there are more than two when one takes into account the fact that different landlords may be on different tax rates.

                    • Pat

                      @Mike

                      I am talking about pressure, not profit/return.

                  • Pat

                    Simplistic…in fact there are numerous determinants in crop sales and the price is seldom the same for all sellers or even for the same seller across the entire crop….and one critical factor is the relationship.

                    But obviously its important to you for some reason to convince yourself that all investors behave the same way when patently they dont and as said originally the investor has choice….or do wish to continue to deny that fact?

                    And as an after thought what happens to the dairy farmer whose cost of production exceeds the MS price?

                    • RedLogix

                      Buyers don't care or even know about the cost structure of the producer. If two truckloads of turnips from two different farmers turn up at the produce market – then all other things being equal – they will sell at the same price. What actually sets the price on the day is the balance of supply and demand.

                      Introducing other factors is irrelevant to the argument here.

                    • RedLogix

                      And as an after thought what happens to the dairy farmer whose cost of production exceeds the MS price?

                      Either they find a way to reduce their costs or they go out of business. Tough on that farmer but good for the economy as a whole because it tends to drive toward better productivity over time.

                    • Pat

                      what happens to dairy farmers who's costs exceed the MS price is an unwelcome visit from the bank….much the same will be occurring with many investors who are over-leveraged.

                      And turnips?….lmao..youre a funny guy

                    • RedLogix

                      Great so what you've finally concluded – which is what I said days ago – is that as over-leveraged landlords exit the market the supply of rentals will go down. At a time when there is already a shortage of rentals this is only likely to put upward pressure on rents.

                      The argument that ex-rentals automatically become first homes is flawed because it assumes that ex-tenants are all going to become first home buyers just because they want to. What happens in reality is a lot more messy than this.

                    • Pat

                      Have you been drinking?….you are arguing with yourself.

                      Go back and read what I wrote.

              • Descendant Of Smith

                Aye but you're arguing that the market rent by necessity must be $600-00 per week because the most leveraged "investor" determines he market price. In you scenario both tenants would pay $600-00.

                "Well the landlord charging only $200pw might be content with this situation, but what happens when demand increases and a third new tenant appears in this market?"

                The landlord charging $200-00 might be even happier because they know that they are providing good support to someone even though demand has increased.

                The rate of return argument is financial trickery to justify such financial rorting. It also becomes self perpetuating as values increase – I must charge this much because I could otherwise do this. The classic paradigm of knowing the price of something but the value of nothing.

                It's nonsense pretending their is a strong relationship between rental income and cost. The fact that so many properties are actually untenanted – if the relationship was as strong as you suggest then you would not be rational to have a property untenanted. Plenty of landlords are content to have this occur.

                Market rents like much of economics is filling an emotional response by landlords. It is nice couching economics in notions of rational players but that notion is a pretence.

                It's why things have to be regulated.

                • RedLogix

                  The landlord charging $200-00 might be even happier because they know that they are providing good support to someone even though demand has increased.

                  This indeed is the position we are in. If I was to achieve the same return from my rents as selling up and putting the money into a 3% TD, I would have to increase them all across the board by $160pw.

                  Sustaining this position is a choice. Up until now I've been reasonably happy to accept a relatively modest cash operating profit because I could anticipate doing better once the mortgage was paid down. Plus indeed we did see it as a social good.

                  Well both of those conditions are now off the table, this govt has now added a new tax that reduces our cash operating flow to zero and has openly told us that what we are doing is no longer considered of any social benefit.

                  So either we increase the rent or do something else. Probably the latter.

                • McFlock

                  I'm by no means a big financy guy, but it seems to me and rando calculator site that a landlord owning a $120k house that is now $750k after 20 years that the landlord already has a calculated return of 9% per annum.

                  Sure, let's say the saint will never sell. Sunk cost is $120k (plus interest on the mortgage that is now paid off), with ongoing rates and maybe a margin for projected maintenance (piles, drains, etc). That's if they're people who are genuinely providing a public service with no thought of profit, just the costs being covered. Not that private ownership is necessarily the best model for that, I'd suggest a trust or charity as an instrument for community rent provision.

                  But none of that has anything to do with market rates. That's a function of supply and demand. Housing shortage, so it's down to how much individuals can afford to pay before they're living rough.

                  Many landlords will be somewhere between those two extremes. Some might well be practically a housing service. #notAllLandlords is the problem with that charitable view, though.

                  • RedLogix

                    @McFlock

                    Persisting in pretending there is no difference between cash flow and capital gain really disqualifies you from any honest participation in this conversation.

                    As for your idea that the market can run purely on a not-for-profit charity model, runs afoul of the fact that sooner or later those charities will have to renew their stock, and find the funds to do this. In the long run they have to operate commercially on pretty much the same basis as private operators do.

                    And then most private operators make relatively low cash operating profit, the difference between them and a ‘not for profit’ charity amounts to sfa.

                    • McFlock

                      You're the one saying the current capital value has anything to do with cashflow on a house bought 20 years ago.

                      If someone buys a house as a public service, the only costs are the costs of purchase (incl mortgage) and ongoing costs like rates and maintenance. And they don't have to "renew their stock" if they maintain the house.

                    • RedLogix

                      Houses in NZ have about an 80yr economic life. This means that roughly 1.25% of them must be replaced every year just to keep pace with existing stock, much less meet a growing population. In my lifetime NZ has roughly doubled it's population.

                      And just about anything older than 50yrs no longer meets modern expectations, and needs substantial investment.

                      So in reality your 'housing charity' has to keep either replacing or adding to it's stock – at current market prices – in order to stay in the game. And it cannot do this on fresh air.

                      Many years back we were involved in Habitat for Humanity in the Wgtn area, essentially the kind of housing charity you have in mind. Once we got involved at the board level we had to be schooled in this lesson the hard way.

                    • Drowsy M. Kram

                      And then most private operators make relatively low cash operating profit, the difference between them and a ‘not for profit’ charity amounts to sfa.

                      "At Habitat for Humanity Australia, we believe in helping low-income families achieve the dream of building and owning their own home."

                      "To date Habitat for Humanity Australia has built more than 160 homes in New South Wales, Victoria, South Australia, Queensland."

                      Habitat for Humanity and land Lords – not so different?

                      In reality just about anything older than 50yrs no longer meets modern expectations.

                      My (one and only) home is ~60 years old; it may not meet modern expectations but it (still) meets mine, and I’ve never had a complaint from occasional visitors.

                    • McFlock

                      So we have an arc in capital value that a well-maintained house goes from 120k to 750k @20 years to $0 at 50 years? I mean, bollocks, but even if it were true you could find that fiscal sweet spot.

                      Because they don't need to create a house from thin air, if the objective is to not lose money they can sell the old one and buy a new one using the increased capital value. And a landlord renewing their stock is renewing their capital assets.

                      But of course any landlord would be lucky to be in the business for 50 years, anyway – one reason to go to a longer term structure than personal ownership.

                    • RedLogix

                      @DMK

                      Well like McFlock when we first started with H4H we too thought like he did, but it turned out we were quite wrong. A couple of older and more experienced members had to be quite sharp with us over it.

                      And H4H is not even a rental charity. That would be closer to the Masterton Community Trust model, and even that very well established entity charges rents that are not all that much lower than the private market in the same town. Certainly they don't hold their rents static for 20 years as McFlock would have them do.

                    • McFlock

                      Certainly they don't hold their rents static for 20 years as McFlock would have them do.

                      Are rates and maintenance static for decades?

                      As for "not all that much lower", that difference is still significant for the people who rent it, so "not all that much" is a relative term.

          • mikesh 15.4.3.2.2

            There are several ways to do this. What I think you're going for is to take the costs and add a margin. But then every owner will have different costs based on their mortgage, and it would lead to odd outcomes – if for example the owner came into an inheritance or windfall and used it to pay down their borrowings, thus reducing their costs – would you argue for the rent to fall at the same time? Or if the same house was then sold to a new owner with a much larger mortgage – should the rent immediately rise to match?

            Differing tax rates also come into it. A landlord on a 17.5% tax rate can afford to charge a lower rent and still make the same net profit as a landlord on a 33% rate

            “It’s a bit like the electricity market in this respect – total supply must always equal total demand – and during peak periods when the most expensive generator comes online (because it has to) then everyone else is paid the same price that this generator charges.”

            This is why the Labour Party's single seller proposal, of earlier years, may have been a good idea. At peak times electricity could be sold, by a single seller, at an average price. A 'single seller' arrangement, however, would obviously not be appropriate in the residential rental market; mortgages, and landlords' tax rates (as pointed out above), would be disorienting factors. This is why mortgages and differential tax rates should not be factors in determining rents. Fairly stable, and equal (after factoring in differences in the quality of the dwelling) rents would seem to be desirable.

            Influences due to differences in tax rates could be avoided if the same tax rate was applied to all rental income – I would suggest 0% ), but I think the influence of mortgage payments could only be avoided by removing them from rent determinations altogether. this latter suggestion would make sense since mortgages should be the landlords' responsibility in any case.

            • mikesh 15.4.3.2.2.1

              PS: If there was a CGT in place the fact that mortgages, including their interest component, are capital expenditure would suggest that the aggregate unclaimed interest might be considered deductible against a capital gain.

    • Nic the NZer 15.5

      This is practice in a few US States, though it seems to be widely seen as an un-natural tax distortion there and is understood to have elevated house prices.

      In considering this I think too much emphasis can easily be put on the differentials and incentives (between occupiers and investors or between landlord renter) and not enough on how much borrowing can be accrued against housing which appears more important to pricing.

  15. Adrian 16

    The problem is that councils now reclaim all of the cost of supplying services to new sections in the first year not over a 30-50 year span from rates as used to be the case. The 4 billion spend announced last week was specifically to negate this practice for goverment builds.

    Thats why sections are so bloody expensive.

  16. Michael 17

    Penk and Simian. Very droll. Two April Fools.

    [TheStandard: A moderator moved this comment to Open Mike as being off topic or irrelevant in the post it was made in. Be more careful in future.]

  17. greywarshark 18

    https://www.rnz.co.nz/news/national/439646/sir-ron-brierley-pleads-guilty-to-possessing-child-sexual-abuse-material

    Reminds me of the Jewish theme of the song 'If I Was a Rich Man' of what he would do. One who lives the ethical life, with little indulgences!

    'Dear God, you made many, many poor people.
    I realize, of course, that it's no shame to be poor.
    But it's no great honor either!
    So, what would have been so terrible if I had a small fortune?'
    If I were a rich man,…

    And then –

    I'd build a big tall house with rooms by the dozen,
    Right in the middle of the town.
    A fine tin roof with real wooden floors below.
    There would be one long staircase just going up,
    And one even longer coming down,
    And one more leading nowhere, just for show.

    I'd fill my yard with chicks and turkeys and geese and ducks
    For the town to see and hear.
    And each loud 'cheep' and 'swaqwk' and 'honk' and 'quack'
    Would land like a trumpet on the ear,
    As if to say 'Here lives a wealthy man.'

    But then –

    The most important men in town would come to fawn on me!
    They would ask me to advise them,
    Like a Solomon the Wise.
    'If you please, Reb Tevye…'
    'Pardon me, Reb Tevye…'
    Posing problems that would cross a rabbi's eyes!
    And it won't make one bit of difference if i answer right or wrong.
    When you're rich, they think you really know!

    https://genius.com/Topol-if-i-were-a-rich-man-lyrics

    • alwyn 19.1

      Only took 38 years to come up with the award. The song, and it was a great one, dates from 1983.

      It is almost as bad as the Nobel Prize is getting. The 2013 Physics Prize, was awarded for work on the Higgs mechanism. The theoretical work had been done in 1964, half a century earlier.

  18. greywarshark 20

    Less government, less regulation, more business and more profit. Well that recipe seems to work well.

    https://www.rnz.co.nz/national/programmes/ninetonoon/audio/2018789809/amazon-s-influence-in-america

    The withering of anti-trust laws which allowed for the rise of behemoth companies started in the 1970s, MacGillis says, and then really intensified in the 1980s with Ronald Reagan.

    “We’re now still experiencing that very lax approach to anti-trust which has helped abet the growth of these giants. To put it crudely, all sorts of business activity which used to be spread around the country in various sectors of the economy is now increasingly dominated by a handful of companies and that commerce, activity, and wealth is sucked into the places where they reside.”

    And what about someone touting for a Silicon Valley here? It will cause as much problem as silicone breast implants did – look good to begin with and then the effects start body deterioration. Has this bloke got eye augmentation?

    https://www.stuff.co.nz/business/124699041/nasa-chief-scientist-says-nz-should-become-a-worldwide-silicon-valley

  19. Drowsy M. Kram 21

    Great fun – thanks. At the moment any laugh is better than none.

    The best April Fools’ Day pranks this year

    "I don't know why Australia bothers with April Fools anymore, we have them every day of the year. Quite a few ended up as politicians."

    [TheStandard: A moderator moved this comment to Open Mike as being off topic or irrelevant in the post it was made in. Be more careful in future.]

    • McFlock 21.1

      Years ago, on April 1 the ODT had two front page articles that to me seemed equally farcical. It turned out that the monorail from Otago to fiordland was a real proposal.

    • Drowsy M. Kram 21.2

      Thought I'd submitted my appreciative comment (@4:39 pm) to the post: National Party leadership spill under way post (Categories: humour), but must have put it somewhere else by mistake – apologies.

      Must be awful to lose one’s sense of humour; worse than losing the sense of smell imho

  20. Pat 22

    Something stinks at Immigration NZ

    Are we concerned about public confidence should we investigate properly?

    • Gabby 22.1

      Or will we get the victims out of the country and then wring our hands over 'lack of evidence'?

      • Pat 22.1.1

        Getting the victims out asap appears to be the plan…a good iteration of the three wise monkeys appears under way.

    • greywarshark 22.2

      I've been listening to the musical Chess, The writers have done a clever piece about the Russian applying for asylum to smug Brit embassy immigration johnnies.

      Embassy Lament

      Oh my dear how boring
      He's defecting
      Just like all the others
      He's expecting
      Us to be impressed with what he's done here
      But he hasn't stopped to think about the paperwork his gesture causes…

      Have you an appointment
      With the consul?
      If you don't we know what his response'll
      Be, he will not see you, with respect it
      Buggers up his very taxing schedule…

      https://www.google.com/search?q=youtube+lyrics+chess+embassy+lament

  21. Peter 23

    When Collins gets the old heave ho she should take a short while, resign her seat then go and try to do something useful. It’ll be after April 1st.

    [TheStandard: A moderator moved this comment to Open Mike as being off topic or irrelevant in the post it was made in. Be more careful in future.]

  22. mikesh 24

    I am talking about pressure, not profit/return.

    I know. I was pointing out that as long as the make a net profit, that the tax on that profit gets transferred to the tenant as part of his rent, regardless of the lack of pressure.

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