Real estate companies pocketed wage subsidies during eye-watering property boom

By Nita Blake-Persen for RNZ

Real estate agents are under fire for failing to repay millions of dollars in wage subsidies, despite record property prices and a booming market.

Checkpoint can reveal more than $13 million was paid out to the real estate industry. Auckland-based Barfoot and Thompson received $4 million alone.

As COVID-19 slammed into New Zealand's economy, many feared the housing market would tank.

Alert level 4 lockdown cancelled property viewings and most sales ground to a halt, with agents and their colleagues accessing the wage subsidy to get by.

Those costs reached more than $13 million for various businesses.

Many suffered significant financial loss, Real Estate Institute chief executive Bindi Norwell said.

"This was available for businesses across New Zealand… they had to provide evidence they'd had financial loss."

Some of the biggest claims in the real estate industry were from the biggest players - Barfoot and Thompson receiving more than $4 million for 600 employees.

Property Brokers Limited received $1.9 million, Bayleys Real Estate got $1.4 million, and Eves Realty received nearly $560,000.

However many real estate agents are self-employed and earn commission, so exactly how each payout has worked is different.

"There's no one-size-fits-all really, so it really will depend on how their structures work, whether they're a franchise, a head office, a branch, whether they had salaried individuals versus agents who are commission-based," Norwell said.

"It really depends on so many factors."

While many of those employees met the wage subsidy criteria of a predicted or experienced 30 percent drop in revenue, the fears about a tanking housing market never eventuated.

In fact, house sales are hotter than they've been in years. In September 2020 there were more houses sold than in the previous 42 months.

January 2021 house prices were up 12.8 percent on a year earlier - the highest annual growth rate since March 2017.

"Given the benefit of the doubt, when they applied for the subsidy in the beginning perhaps they anticipated their incomes were going to drop dramatically," University of Auckland business ethics expert Professor Tim Dare told Checkpoint.

"Perhaps when they applied they met the terms and they applied in good faith, however now in retrospect when you look at it they're in an area where that just didn't happen.

"I would hope, especially an enterprise the size of Barfoot and Thompson, I would hope they'd think: 'Here's an opportunity to do the right thing. We can afford to do it. We should show we're ethical, regardless of the technical legal entitlement.'"

Prof Dare said the wage subsidy scheme had to be rolled out with a certain level of trust in order to get support to people quickly.

"So it's particularly disappointing that having been given an opportunity to act appropriately, to show themselves to be trustworthy, some industries have basically, bluntly I think, been greedy.

"[They] have taken the subsidy and thought, 'to hell with the social contract, being trustworthy, we've got the money in our pockets we're going to keep it' – I think that's deeply disappointing."

Barfoot and Thompson made some minor repayments to its $4 million take. Last year it repaid $5272.20, relating to staffing changes. That is approximately 0.13 percent of its total wage subsidy claim.

The company did not respond to requests for comment.

Overall, $716 million in wage subsidies has been paid back. The Ministry for Social Development [MSD] says 1011 cases have been referred for investigation, 457 have been resolved and 386 are underway.

To date, no charges have been laid. MSD says decisions on enforcement and recovery are being made in the coming weeks and months.