The Salvation Army predicts more homelessness, rent rises and struggles for private investors could be on the way without serious changes to the housing market.
A new paper 'Beyond Renting', released today by the Army offers a bleak outlook for the private rental housing market.
It calls on the Government to start investing invest heavily in home-ownership programmes and more public and social housing to meet future demand.
"The rental market is not going to be adequate to meet future demands for housing," report author Alan Johnson said.
A government subsidised home ownership programme is required to assist modest households into home ownership rather than having to rent, he said.
"KiwiBuild is a great initiative, but on its own, it is not enough for the problems we face. We need a KiwiBuy scheme."
The report says over the past 30 years New Zealand has relied extensively on private rental housing and small-scale 'mum and dad' investors to supply the majority of housing for new households and young families.
Over this time, rental housing supply has grown 145 per cent, nearly three times the rate of growth of owner-occupied housing, the report shows.
Over the past five years, more than two-thirds of new households have gone into rental housing.
However, as this reliance on renting has continued, investment yields for rental properties have fallen.
In Auckland, yields have fallen from seven per cent in 1993 to approximately 3.5 per cent now.
While yields may pick up as rents rise over the next few years, it seems likely property prices have reached the top of the cycle, and further capital gains will be small, Mr Johnson said.
"That outcome is not great for tens of thousands of tenant households given the likelihood that rents will continue to rise faster than wages and salaries. Household budgets will be stretched further-especially for low-income families-and there is a real chance the levels of homelessness will continue to rise," he said.
'KiwiBuy' should aim to help people earning around the medium income, not twice the medium income as KiwiBuild, Mr Johnson said.
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