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Mark Withers: What about the plight of the ma-and-pa investors?

Wednesday, April 22, 2020

IMAGE CREDIT: UNSPLASH

As the government continues to roll out relief measures to meet the economic challenges of COVID-19, I ask that it be mindful of the plight of those mum and pa property investors who supply 34% of housing in New Zealand. In addition to the ongoing compliance cost increases associated with owning rental properties and new legislation that surely increases the risk of prolonged periods of no return on investment, these investors are about to enter into the 2020 tax filing season that will, for the first time, ring-fence rental tax losses. 

These investors are hard-working middle New Zealanders many of whom, through their day jobs, are financially impacted by COVID-19. On top of that, they face further financial exposure if their tenants lost their job and fall behind or rent or simply refuse to pay rent altogether. Though the government has imposed measures to make it illegal for landlords to terminate on tenancies that fall behind on rent for less than 60 days, it has offered no meaningful relief for landlords to wear that risk. 

Many mistakenly think mortgage holiday means that landlords' mortgages are waived by the banks. Not at all. What is on the table for landlords is a mortgage deferral mislabelled as a holiday. Interest continues to accrue throughout the deferral period which, in many cases, may well put the landlord in further hardship.  Many investors are also locked into fixed interest rate contracts that prevent them form taking advantage of lower interest rates at the height of the crisis.

The loss carry back scheme does not allow investors to carry ring-fenced losses back from 2020 back to 2019, nor are business loan schemes available as investors are generally not considered to be in business

I call on the government to scrap or delay the implementation of residential loss ring-fencing as a measure to relieve some of the financial consequences of unexpected losses from the virus from residential investors who have thus far been left to provide a financial cushion for their tenants without being offered any material assistance themselves. I ask that any landlords or interested parties reading this to take the time to sign APIA's petition to this effect. The petition closes 15th May 2020. 


ABOUT THE AUTHOR

Mark Withers  

Mark is a founding member of the Auckland Property Investors' Association, a chartered accountant and Director of Withers Tsang. He is a respected industry commentator and frequent contributor of the New Zealand Property Investor Magazine. 

 

 

 

 

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