The country’s rental market is a tameless beast.
Over the past five years, New Zealand’s median rental price has increased by a whopping 25 per cent.
Back in 2016, we were looking at paying around $435 a week and now it’s $545 – with a $35 per week increase in the last year alone.
Meanwhile our average incomes have increased by crumbs in comparison.
Rents have increased by 25 per cent over the past five years.
In around that same time frame, wages have only gone up by 13 per cent, from a median of $937 in 2016 to $1062 in 2020. The 2021 data release from Statistics New Zealand is expected in a couple of weeks.
Escalating rent prices are nothing new but the lack of action to solve the problem is an issue that really needs to be addressed.
As a non-homeowner, the prospect of having to find somewhere new to live terrifies me.
Are rent controls the answer?
The Green Party wants rent control options to be investigated by the Government, pointing to the rent freezes during Covid-19 as an example of a type of rent control working and calling New Zealand’s current rental market “outrageous”.
Many economists would argue rent controls actually damage the housing market, with the potential for there to be a decrease in affordability and an increase in gentrification for some areas.
In fact, 92 per cent of top economists say rent controls harm supply and quality of rental accommodation.
But the Greens refute the idea rent controls would be counterproductive and instead say if there’s enough supply, then we’ll be all good.
“If we just leave it to the private market, there will be a problem. So we need the Government to increase supply but in the short term, they could freeze rent increases. The key thing is there needs to be supply at the same time [as rent controls],” Green MP Julie-Anne Genter told 1 NEWS on a rainy day outside Parliament.
“This weather is a great metaphor for renting in this country. Pretty grim,” Chlöe Swarbrick mused.
The New Zealand Property Investors Federation simply say “rent controls don’t work”, listing reduction of rental homes and diversion away from building rental properties as reasons.
“We have 27,000 people in emergency housing thanks to changes made by the Government, this number will only increase” if rent controls are introduced, chief executive Sharon Cullwick said. She also claimed it would push more landlords out of the industry if implemented.
Earlier this year, The New Zealand Initiative put out a document titled: “Rent controls: the next mistake in housing policy” , leaving very little room to guess how the pro-free market think tank thinks.
In it, David Law spells out how he believes rent controls would exacerbate problems within New Zealand’s rental market, calling them “a recurring policy mistake”.
At all costs, rent controls should be avoided, the document said as it referred to overseas examples where they’ve done more harm than good.
If you’re in a rent-controlled property, that’s all well and good, but it’s the properties that don’t fall into the rent-controlled category that’ll see prices skyrocket, according to the paper.
Plus there’s the potential for landlords to let maintenance further fall to the wayside if they can’t raise rents more than they already have.
Researchers looking into San Francisco’s rent controls found that between 1994 and 2010, people who lived in controlled properties benefitted by a massive $4 billion.
But flip it in reverse, and the researchers found the people who weren’t able to get into rent-controlled properties were then the ones having to pay $4 billion in higher rents.
The reality of renting in NZ
I perused TradeMe’s current listings for a bedroom to rent in Wellington and here are the cheapest places I found:
$160 per week for a furnished single room in a boarding house
$170 per week for another furnished single room, again in a boarding house
$185 per week for a room in a house with seven other people, BYO bed
Note: only one of these is remotely close to the CBD.
Now for the most expensive:
$800 per week for a fully furnished one bedroom unit on Lambton Quay
$795 per week for a fully furnished one bedroom apartment on the waterfront
$760 per week for a one bedroom, two bathroom apartment near the airport, but with a solid sea view, BYO bed
Note: even if I were to share any of those with someone, I’d still be unable to afford to pay half the rent.
We know rents are too high for what we pay for in New Zealand.
Earlier this year, 1 NEWS revealed a boutique real estate company, Lowe & Co, was charging four students $870 per week to live in a house that was falling apart.
There were holes in the bathroom floor, a suspected bug infestation, rats and mice in the walls and ceilings, gaps under doors leading outside, and a constant smell of mould.
To make matters worse, the owners of the home were two Lowe & Co employees, and property websites OneRoof and homes.co.nz had the house listed as a two-bedroom property, not a four-bedroom.
It’s understood the women living in the home have been paid a substantial amount in compensation since the story aired on 1 NEWS and that work is underway to remedy the issues.
Those developments aside, the issues at this home are a stark reminder of some of the places Kiwis are living in.
The four women were paying more than $200 per week each to live in a house that was constantly cold, making them sick, forcing them to throw clothes out, and may or may not even be meant to be used as a four-bedroom home.
So where does this leave us?
Housing Minister Megan Woods has previously asked Treasury for advice on temporary rent controls in a bid to offset any negative impacts from the Government announcing it was extending the Bright Line Test and reducing tax deductions on property investments.
In the end, no such rent controls came to fruition.
They would’ve only been temporary anyway, and officials were concerned tenants would all of a sudden get hit with even higher rent bills once controls lifted.
Finance Minister Grant Robertson hasn’t ruled out rent controls in the past, but has also said they’re not coming any time soon.
He also said today he’s keeping “a very close eye” on the situation of rent rises.
Today, Woods also said rent prices are something she’s “tracking very closely”.
And the Prime Minister today told reporters she’s also “monitoring" the rental market "very closely”.
But when you simply look at how wages have increased versus how rents have, these responses simply don’t cut it.
The statistics are there and they paint a very clear picture; wages aren’t keeping up with rent prices and something needs to be done about it.
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