The Prime Minister says the Government is “keeping an eye on” rent prices to make sure they’re not outstripping the expected increases in people’s incomes.
The aide-mémoire from the Ministry of Housing and Urban Development (HUD) to Housing Minister Megan Woods today showed the raft of changes being considered in the package would “potentially reduce the rate of property price increases (including by avoiding further speculation on existing properties) and could benefit first home buyers”.
But the December 2020 document noted housing supply would not be increased.
“In addition, if these measures apply to existing housing stock, they could have a negative impact on the households who rent these properties, particularly those on lower incomes.”
It continued: “The greatest change in behaviour is likely to come from investors who are less able to absorb additional costs, although we expect most landlords may consider increasing rents.”
The document said investors who couldn’t cover increased costs would potentially sell their properties.
“If a number of landlords choose to sell, the associated ‘churn’ in the rental market can impose significant costs on renters,” HUD said. They include moving costs, new bonds and rents in advance.
Ardern told reporters today the Government hadn’t seen “exponential” increases, after “the suggestion” from a number of groups, including National and ACT, that recent policy changes would drive rental prices up.
“What we’ve tended to see over a period of time is that they’ve been in the order of three per cent. What’s been key for us is keeping an eye on whether or not those rent increases are outstripping, for instance, what we’d expect in people’s income increases.”
Commentary that rent prices would increase also came after the Government passed the Residential Tenancies Amendment Bill last year, with its changes coming into force last month.
Under the new laws, rental bidding and ending a tenancy with 90 days' notice will no longer be allowed, while enforcement measures have been ramped up.
From August last year, rent increases had also been restricted to once every 12 months. Before, they could be increased once every 180 days.
“Overall, the significant house price growth we’ve seen, we haven’t seen translated in the same way to the rental market,” Ardern said.
She said the once-a-year changes to rents would help ensure any increases would be “manageable” for tenants.
As for the advice the Government takes, Ardern said it was normal for departments to take different views, and that her focus was to tip the balance towards first home buyers.
The latest Trade Me Property data released last week showed median rents nationwide had grown by six per cent compared to last year, to $540 a week.
The Trade Me Rental Price index showed the national median weekly rent in March matched the all-time high first recorded in January, and represented the largest year-on-year increase in two and a half years.
“We’re not seeing any let up in the foreseeable future either. Demand is high and supply isn’t keeping up. Chances are the record high national rent price will be broken in the near future,” Trade Me Property sales director Gavin Lloyd said.
Lloyd said, nationally, demand had increased by 28 per cent last month when compared to March 2020. However, supply had only gone up 17 per cent.