Bigger cots for rental homes?

David Farrar posts Little thinks increased cots don’t get passed on at Kiwiblog – yeah we all make typo mistakes, I don’t think he means that rental homes should have bigger cots for bigger babies.

But he has a point. He quotes from Newshub  Healthy Homes Bill won’t up rents – Little

Andrew Little says it’ll only be “greedy landlords” who hike rents on the back of his proposed Bill to insulate and warm homes.

But Mr Little rejected suggestions the new requirements would lead to an increase in rents, saying landlords will have plenty of time to absorb the cost.

“That in my view, is a cost landlords will be able to bear over that time, given the increasing value the property will enjoy over that period.

“This does not need to lead to hikes in rents, and only greedy landlords will be seeking to hike rents for this reason.”

Farrar responds:

This reflects the mentality of someone who has never run a business. Like many unionists Andrew seems to think that it doesn’t matter if costs go up, as owners can wear it and won’t increase their charges.

If you force landlords to spend $5,000 more on a property, then that cash needs to come from somewhere.

Farrar is right. I don’t know if Little is naive or ignorant of basic business economics, but in general it’s inevitable that increased costs will result in increased charges.

But both Little and Farrar miss a key point.

If a landlord pays to install insulation and better heating (usually a heat pump) then it’s likely they will put rent up to covered their increased costs.

So the renter may have to pay more for rent. It should only be a little more. But their reduced costs for heating and potentially for medical costs should easily compensate for that.

There may be some landlords who baulk at putting more money into their rental properties, or simply cannot afford to pile more money into their investment. So some landlords may sell up.

This is a different issue but also potentially an important one. Another landlord will buy the property and may charge higher rent. Or a home owner may buy the property and live in it, reducing rental stock. If a number of landlords quit property investment then reduced supply could also force rents up.

It’s a lot more complex than suggesting that only “greedy landlords” will put up rents.