By Anne Gibson in the New Zealand Herald.

A study out yesterday highlighted the rise of the new phenomenon, revealing that more people in their 50s and 60s are renting rather than owning a house.An entire new class of Aucklander is destined to remain beholden to landlords until they die, forking out rent instead of paying off their own house.But they could be in for a shock because landlords are preparing to increase Auckland weekly rent by up to 20 per cent in the next two years.

The number of Aucklanders aged 65-plus renting privately has more than doubled in the last decade, from 2058 households to 4236 last year.

Add to that the number of elderly Aucklanders renting from Housing New Zealand and territorial authorities and the figures climb much higher.

The Centre for Housing Research released a study from DTZ Research which analysed housing data in Census06.

It highlighted the fact that nationally, the number of elderly renters has almost doubled, from 8196 households in 1996 to 15,372 households last year.

Study author Ian Mitchell, manager of DTZ Research, said older Aucklanders were being forced to rent and were not tenants by choice.

“They’re renting because they have to, whereas some younger people are renting because of a lifestyle choice. If you’re not a homeowner by your mid-40s, you’re unlikely to ever be one and be forced to rent,” Mr Mitchell said.

The study showed that generally, home ownership levels have fallen faster in Auckland than elsewhere.

In 1996, 69.2 per cent of Auckland households owed their house, but that fell to 64.6 per cent in 2001 and 63.8 per cent last year.

Renters are on the rise faster in Auckland than any other areas.

“The Auckland region had greater percentage increases in private renter numbers,” the study said.

Auckland had just 73,000 households renting in 1986 but now out of the country’s 451,000 tenant households, 145,000 of households who rent are in Auckland.

Wellington is second with 53,000 households renting, followed by Waikato with 44,600 tenant households.

Steeply rising house prices are taking a big toll of people’s home ownership dreams. Nationally, home ownership fell from 67.8 per cent in 2001 to 66.9 per cent last year.

Younger age groups between 20 and 40 years are suffering the most, experiencing the greatest percentage point declines in their share of owner-occupier tenure, the study said.

Ownership levels will soon plummet further. By 2016, just 61.9 per cent of the population will have a house, the study found.

Mr Mitchell is worried about the social implications for elderly Auckland tenants.

“Older households will face more housing stress, defined as paying more than 30 per cent of their gross income on housing costs,” Mr Mitchell said. Andrew King, vice-president of the Property Investors’ Federation and an Auckland landlord, said savvy pensioners could be better off in a rented place. People should not be negative about elderly flatters.

“It makes sense for them to rent. If you’re elderly and you have a mortgage, you’re better to rent. But the best thing for people is still to buy a house and pay it off fairly early and not have a mortgage when they retire,” Mr King said.

Rents were at historically low levels compared to house prices, he said. But Auckland rents could rise by 20 per cent in the next two to three years.

Away from family and friends and renting at 77

Sheila Priestley, 77, has been renting in Massey for the past three years.

Asked how she liked being a tenant at her age, she described herself as “contented” with her lot.

Once a clothes model in Britain and a photographic character model here, she says she would prefer to own a house.

“Then you can decide where you want to be,” she said, recalling how in 1981 she came close to buying.

But poor health and a job loss took their toll and she has remained a tenant.

For 10 years she lived in Domain St, Cheltenham, in a terrace house.

She adored that area of the North Shore for its character, ambience and neighbourhood. But the place was owned by Housing New Zealand and despite making it known she wanted to stay there and telling authorities the only way she would leave was in a box, she had to move.

So she shifted to Massey three years ago.

Initially she did not know that area, which is some distance away from long-established friends and relatives.

“I had to get to know Henderson. I had to pay someone $50 an hour to take me around.

“I lived most of my life on the North Shore so family and friends are over there.”

By IAN LLEWELLYN

Inland Revenue says it is a myth that investments in housing have a tax advantage over other types of investment.

Revenue Minister Peter Dunne and IRD officials appeared before the finance select committee today and were quizzed about why people had the impression that there was some tax advantage in investments in rental housing.

Deputy Commissioner Robin Oliver was blunt: “The short answer there is none.”

Rules about expenses for deducting costs such as interest, upkeep and maintenance, as well as paying tax on income were the same for investments in shares or anything else.

Mr Oliver said the rules were tougher for housing investment than other types.

“In fact under the housing case, the capital gains boundary is brought back a bit. There are tighter rules to what is a capital gain,” Mr Oliver said.

Mr Oliver said the concern appeared to be that housing was easier to get and it was easier to get loans from the bank to invest in property.

“The concern is the level of (debt) gearing that is possible in the house market which… is a matter of the willingness of banks to be laid.

Mr English said Finance Minister Michael Cullen and Reserve Bank Governor Alan Bollard had given the impression that one of the problems fueling inflation were favourable tax laws for investment housing.

Officials and Mr Dunne hinted that people seemed more likely to abuse tax rule in housing investments saying it was an area where they picked up greater non-compliance and clawed more tax back.

The budget had allowed for $14.6 million more in spending by the IRD to crack down on housing tax laws.

“Why is there a widespread view that… housing has a tax advantage,” Mr English asked.

Mr Dunne replied that it seemed to him the belief was part of the national psyche of home ownership and it had been decided by Government to enforce current tax law and not impose new taxes on housing.

Committee chairman Shane Jones said the clear inference from Dr Bollard that part of his “woes” with housing was due to a vagueness with tax law or the way it was enforced.

“What you have told us today is that it is not true,” Mr Jones said.

Mr Dunne said his view was that the IRD had carried out enforcement of tax law vigorously and more resources had been allocated to do even more.

Mr English said there appeared to have been strong political pressure for IRD to appear to do something because Dr Cullen and Dr Bollard had said housing had tax advantages, when in fact it did not.

- NZPA

By Anne Gibson, NZ Herald

Property speculators who are reaping millions of dollars from the super-heated housing market are about to feel the heat from a tough new tax crackdown.

Finance Minister Michael Cullen said Inland Revenue would get an extra $14.6 million over the next three years to strengthen property transaction audits. Speculative activity was driving up house prices and household debt levels, he said. So giving IRD more money would help it enforce the law.

Property auditing gathered $100 million between 2004 and 2006, he said and it was important for IRD to have the resources it needed.

Of the country’s 1.4 million houses, around 400,000 are owned by investors. If a landlord buys with the intention of selling, tax must be paid on any financial windfalls.

Sharon Cuzens from Inland Revenue in Wellington yesterday welcomed the boost.

“It will enable us to pursue further, in-depth investigations and education on a risk area we have been actively targeting for some years,” she said.

IRD would improve information so people were more aware of their liability, monitor major developments to ensure accurate return of sales or profits, boost research and analysis of risk areas and increase audit activity in areas of identified risk, she said.

One housing investment expert also welcomed the Budget package. Andrew King, Property Investors’ Federation vice-president, said speculators who evaded tax were taking high risks. He encouraged those people who were eligible to come clean, declare their profits and pay tax.

“It’s like playing Russian roulette if you don’t,” Mr King said. But he also criticised existing tax law, saying it had too many grey areas.

Matthew Gilligan, an Auckland chartered accountant and specialist tax and legal structures consultant, also welcomed the package, saying IRD was too poor to do its job properly and the money would help.

“They’re grossly under-resourced,” he said, citing long waiting lists for taxpayers seeking rulings and waiting for investigations to be concluded.

Mr Gilligan, whose firm has 4500 property clients investing in residential housing, called for clearer rules on housing investment tax liability. Many IRD staff were excellent but it was not uncommon for staff to change so fast that some taxpayers were dealing with three IRD staff members over one issue, he said.

“That’s not uncommon on an audit.” Nor was it unusual for a taxpayer to be given conflicting advice by various IRD staff members, Mr Gilligan said.

Greg Haddon, a Deloitte tax partner, said the $14.6 million was not nearly enough to tackle the issue.

“This extra money won’t make a big impact,” he said, and failed to address the reasons for so many people investing in housing, because they regarded it as a surer bet than other forms of investment.

IRD has already announced the success of previous crackdowns.

Two years ago, it netted just under $11 million from a campaign in the Queenstown/Otago region. Its concentrated audit blitz on developers and speculators started in March 2004 and by November 2005, it had 120 cases either under investigation or heading for prosecution.

Auckland was also a target two years ago, when IRD said it was increasing resources to hunt down speculators and developers who had kept their profits a secret.

Senior Auckland department official Richard Philp said in January 2005 that an extra $106.6 million was gathered nationally within two years on property transactions, including $52.9 million from Auckland.

The rules

* If you invest for the long term, there is no tax on money when you sell the rental property.

* But if you buy with the main aim of selling for a profit, any money you make is taxable.

First-home buyers wait for Government handout

Prospective first-home buyers hoping for help through a Government-run shared-equity scheme will have to wait a little longer.

Housing Minister Chris Carter said $1.4 million had been allocated in the Budget for work on the potential design of a such a scheme, but a pilot would not be funded until at least next year.

Mr Carter has said the most likely location for a pilot scheme is Auckland and it could involve the Government paying for a 25 per cent or 30 per cent stake in a house, effectively reducing the purchase price of a $400,000 property to about $300,000.

If the house was sold, the Government would take back its percentage share. The scheme is expected to be aimed at the lowest quartile of the housing market.

Mr Carter said the Government was keen to explore how much demand there was for a shared-equity scheme.

If the scheme “flew”, it would be introduced as part of a suite of new measures including a possible Housing Affordability Bill. “Shared equity will also be introduced at the same time as the Government seeks to increase the number of houses in the price bracket affordable to first-home buyers.”

Mr Carter yesterday also announced $43.6 million over four years for other housing initiatives.

That included $23.8 million to increase the life of the Healthy Housing programme and extend it into the Wellington region for the first time.

The programme targets overcrowded households and assists them into more appropriate housing.

The Housing Innovation Fund, which provides government assistance to local authorities and community groups to develop affordable housing, would also receive a boost of $19.8 million.