THE RENT QUESTION

Dominion, Volume 9, Issue 2841, 4 August 1916, Page 7

THE RENT QUESTION

LETTER TO THE PRIME MINISTER,

In, the course of a letter to the Primo Minister on the subject of the proposed legislation for the limitation of house rents, Mr. G. Lambert writes as follows:—"As one of the property-owners who had tho honour and privilege of being a member of the deputation which waited upon you yesterday, and as owiug to the sparsity of time at your disposal wo wero unablo to avail ourselvtfs of the opportunity of being able to place before you our views of tho matter for your information, may I, with your kind permission, be pormitted to add a few further remarks which may interest you without trespassing too much on your valuable time in doing so? "While cheerfully recognising and accepting the kindly and generous motive of tho proposed amendment of the Government with a view of preventing any unjust measures being enacted to the injury of inoffending property-owners (especially those having house property), may I say that to allow only 8 per cent, gross on tho property tax valuation of any house property, and. land as a basis upon which a maximum rent should be exigible, such a proposal, as I will endeavour to show you, will inflict untold injury on people who have been, foolish enough (if the Act should become law in its present shape) to invest money in the purchaso of houso properties, especially in Wellington, for the following reasons: When properties are sold, tho price asked for same is usually a sum to half as much again as the mortgage, if any, that being generally reckoned to bo its true -market value on the assumption that the mortgage advanced thereon is always about equal to a proportion of two-thirds of the actual value based upon its rent-producing capabilities, not property tax valuation,, which would not apply. «

"In the case of many properties in Wellington, with old houses thereon, ifthey are in good condition, ropjete with every modern convenience, and let well," any depreciation as provided by the official system is not taken into .consideration in these transactions. Thus the Government procedure of valuation ivitl) its automatic method, of allowing,a cor.tain scale of depreciation for improvements (house, etc.), being grounded on aji entirely different principle, aloes not come into tho calculation. , Tnir-parties concerned sell upon the provejl value as corroborated by the mortgage and ront receivable, and the buyer, on being convinced that by accepting the proposition it will givo him a fair return for his investment, pays tho : price asked for it. "The system of valuation adopted by owners, buyers, and mortgagees of properties, compared with the methods adopted by tho Government Valuation Department, are, in the nature of things, in such ca6es, diametrically opposed to each other, because if the automatical reduction for depreciation periodically made upon the improvements (tho part of tho property which ensures the owner, apart from the land, any return tor liis investment) is carried out to its logical sequence, tho prospect of any house as a. rental product must in, time absolute- 1 * ly cease, although it may still even then bo in the best possible state of repair and condition, and fully deserving of all tho rent asked for it. Tho accoptatifn of such a-principle would be absurd in the circumstances.

"If as is proposed to allow only 8 per cent: gross on the Government valuation for rental purposes, permit me to state a case for your satisfaction, merely premising there aro hundreds of such similar cases in Wellington. "Here you have a property with a very good, but old, house theveon, with every comfort and convenience, for which anyone is willing to pay tho rent demanded. Tho mortgagees consider the place well worth, tho money advanced thereon, and the insurance remains the same N as formerly, but owing "to the automatic principle above referred the present improvements aro some hundred pounds or so even beneath the current insurance, and now you will see how the S per cent, gross amendment as proposed would work out. This is an actual example:— Present capital value, including improvements (house, etc.), ,£6OO (houso alenc could -not bo replaced in its present condition under *£750).

"Rent to bo received on 8 per cent, basis, J3IS.

"Against which owner would have to pay interest at G per cent, on mortgago (i-'GOO), ,£3G; city rates, .£4; insurance on .£SOO, £3. Total—,£J3.

"Leaving a balance of ,E3, whicli is all the return he 15 to bo allowed to receivo for the ,£350 ho put into the property to purchase it. And-.what about repairs, which nil properties, tho older thev get the more necessary, which will always arise with tho best of tenants? In such an instance you ire not only handing over the unfortunate jnan's property to benefit his mortgagees, but you aro depriving him of his hard-won savings for tho sake of an idea, tho carrying out of which is of advantage to 110 one. "Now if I might, without being considered impertinent, venturo the suggestion that you fn tho rato limit (this would prevent any caso of extortion) so as to allow provision for the payment of rates,, taxes, insurance, and repairs, this latter 011 the rate of depreciation allowed by tho Department, and in addition a further amount sufficient to cover interest at tho rate of G per cent, on the amount actually paid by tho owner, including mortgage, for UlO purchase of tho premises, 110 wrong can bo possibly inflicted upon anyone, outside the observation oven with so satisfactory arrangement as this tho owner will not always bo.guaranteed his 0 per cent., because there will always bo some loss owing to premises being vacant, or a tenant, as i? often the case, leaving his rent owing. But this item need not bo taken into consideration.

"It ia needless to stress tho point that any legislative measure which will only teml to forfeit one's property will not encourage thrift. Capitalists will not build, nor mortgagees advance un any undertaking. The parning power is not only restricted, but will finally bo extinguished altogether by such restrictive and unnecessary regulations. "In conclusion, in making this last appeal to your goodness and kindly consideration, I do so, apart from myself,

on behalf of :ny unfortunate confreres, who, less gifted than the writer, while fully recognising the extent of the calamity that would be likely to befall, thorn from such ill-timed legislation, ar£ unablo to put before you their side of the question to your satisfaction as they would wish."