Why do all political parties hate renters so much?

By Seamus Hogan 30/08/2014


There are two main ways people can meet their accommodation needs: renting and owner occupancy. Both involve making annual payments for housing services either in rental payments, interest payments on a mortgage, or to the extent that an owner occupier has paid of his or her mortgage, in the opportunity cost of forgone interest from having money tied up in the ownership of a house. A lot of people, myself included, prefer to own their own home rather than renting. For others, renting is the preferred method of meeting accommodation, and a third group would prefer to own but rent due to not being able to secure a large enough loan.

Now I can understand a desire to help those in the that third group, particularly since they are likely to be disproportionately drawn from the poorer members of society, but if the mechanism for doing so is to make buying a house cheaper while simultaneously making renting more expensive, the mechanism will actually be hurting the most vulnerable members of the group it is seeking to assist–those sufficiently liquidity constrained that even with the assistance house purchase will still be out of reach.

And yet, the three main political parties’ policies on housing seek to penalise this group of renters. The reason for this is that rental accommodation and owner-occupied accommodation are pretty close substitutes on both the demand and supply side of the market, and so their prices are very closely linked. Any policy that either makes it easier to purchase a house for owner occupancy or more costly to own a house that is rented out, while not doing anything to increase the total stock of housing, must make renting more expensive.

So, for example, a policy (Labour-Greens) to level a capital gains tax on residences but exempt residents’ first homes, will make it more expensive to be a landlord in a market where house prices are expected to increase in the future requiring a higher rental rate to compensate. A policy (Labour) to prevent foreign non-residents from owning domestic residences to be rented out will have the same effect. And a policy (National) to give tax breaks to first-time house buyers will similarly favour owner-occupiers at the expense of renters, operating here through the demand side.

I would love to see each of the leaders questioned in the televised debates on why they think the effect of their proposed policies on renters would be an acceptable cost.