Andrew King: Make home insulation and heating tax deductible

The Property Investors' Federation says it will be interesting to see how the health statistics change following compulsory insulation. File photo / George Novak

COMMENT

The writer of the editorial (NZ Herald, February 7) says it is inexcusable that an increasing number of families have been living in substandard accommodation when the health and social effects of doing so are widely known.

Studies show that about 40,000 children are hospitalised each year at least partially from living in a cold damp home.

One of those children was Emma-Lita Bourne, who tragically died in 2014. A coroner stated that the cold, damp state house she lived in was a contributing factor to her death, yet the house Emma-Lita lived in was insulated and had heating.

The NZ Property Investors' Federation supported compulsory insulation and smoke alarms in rental properties because it was a genuine and cost-effective way to improve tenants living standards. We have been promoting the provision of heat pumps in rental properties for about 10 years and provide discounted prices to our members to keep rent increases as low as possible.

Surprisingly, we have heard from our members that many tenants are not using the heat pumps, telling our members the running costs are too high. We know this was the case with Emma-Lita's family.

Based on this feedback, we proposed that the families of children admitted to hospital where cold, damp living arrangements were a contributing factor, should receive a winter electricity grant. We proposed that the grant be targeted specifically to this group to maximise the payment, with the funds going straight to the electricity provider. This is because these families are under financial pressure and it would be extremely tempting to spend the funds on other things if it was paid to them in cash.

The Property Investors' Federation says many tenants are not using heat pumps because the running costs are too high. Photo / File

Labour's Winter Energy Payment was based on our proposal.

The editorial states that, because the Government of the day were conscious of what the changes would mean for those footing the bill, landlords were given three years' warning to get their properties up to scratch. This isn't quite correct.

The three-year period was mostly to provide insulation suppliers and installers sufficient time to handle the increased workload. Regarding who foots the bill, while landlords pay the up-front cost of the insulation, it is tenants who ultimately pay through higher rental prices. Rentals that already had insulation had higher rental prices than those that did not. When uninsulated properties were brought up to the same standard, owners could offset the cost by charging the same rental price as previously insulated rentals.

As the NZ Property Investors' Federation supported compulsory insulation, we agreed that a penalty should apply to landlords that didn't comply. In coming up with an appropriate penalty, we believed that it should be up to $1000, the same penalty as tenants abandoning a property owing rent. Tenants not paying rent accounts for about 70 per cent of all Tenancy Tribunal applications and is the biggest problem that the industry faces.

Ultimately, the government of the day decided that a penalty of up to $4000 paid directly to the tenant would be appropriate. This was seen as a real incentive for tenants to hold their landlords accountable.

The Tenancy Tribunal is awarding an average $1000 to tenants, so they appear to believe the current penalty is more than sufficient. There would be no benefit to increasing this penalty.

The Property Investors' Federation says while landlords pay the up-front cost of insulation, tenants ultimately pay through higher rental prices. Photo / File

Although there were predictions of tens of thousands of uninsulated rental properties before the new laws came in, these were not based on good information. The predictions were based on an ECCA study into how many rental property owners hadn't taken up the government insulation grant.

The government grant gave a 50 per cent discount off the cost of insulation. On the face of it, this sounds like a wonderful saving. However, the price of the government grant insulation was often more than twice what you could find elsewhere. Consequently, many NZPIF members who had installed insulation said that they didn't take up the government grant to do this.

The low number of Tenancy Tribunal applications for not meeting the new insulation rules backs up our own research that not many rentals were uninsulated. Tenants receiving a $4000 windfall if their rental wasn't insulated is a good incentive and the low number of applications further points to only a few rentals not being insulated.

Tenants do deserve a warm, dry home to live in, and it will be interesting to see how the health statistics change following compulsory insulation.

While the editorial says tenants should not bear the cost, the end consumer of a product or service always ends up paying for any cost increases one way or another. Our suggestion to minimise this cost to tenants is to make insulation and energy-efficient heating tax-deductible business expenses. Most people would probably be surprised to hear these items are not tax deductible already.

• Andrew King is the executive officer of the NZ Property Investors' Federation.