Rent control policy questioned

Friday 13 September 2013

Rent controls proposed by Labour party leadership hopeful Grant Robertson have been panned by Act leader John Banks.

By The Landlord

He plans to introduce a private member's bill to get "rent stabilisation" across the city.

The party’s replacement for David Shearer will be announced on Sunday but Robertson said he would push the idea whether he got the top job or not.

The proposal would keep a lid on the amount that rent could be increased per year.

New homes would be exempt and the policy would have a sunset clause of three to five years.

Robertson said people were charging crazy rents in the quake-hit city. The 12% annual rent increase meant something had to be done, he said.

Banks said rent controls would just make it harder for would-be tenants to find a home.

“When housing is limited it must be rationed.  Higher prices create an incentive for people to make houses and rooms available for renting.  It encourages renters to economise by taking less space …This makes rented accommodation available to more people.”

He said forced lower rents would reduce the incentive to meet market demand.

“This will make the rental housing shortage worse.  It will particularly disadvantage those who are looking to rent and their desperation will make illegal under-the-table payments inevitable.

Comments from our readers

On 6 January 2015 at 10:35 am wishbone said:
Rent controls are exactly what Christchurch needs. The problem with market forces is that they will always benefit the parties with more assets and wealth and can be socially unjust. The recent explosion of the buy-to-let properties has forced first-home-buyers out of the market, barring them from generating their own equity. An almost unregulated market such as New Zealand's property market is blind to the human cost of poor housing and high rents. It needs more controls. There is far too much speculation, which has left some would-be-landlords in Palmerston North paying mortgages on houses which have been untenanted for months, resulting from an over-supply of poor quality rentals in Palmerston North. Renters should not have to economise on the space they require. Students already share rooms in rentals out of necessity, for their low incomes barely cover rent and bills. They even give up the lounge as a room, if it is separate, something unthinkable to older generations. Despite this, more people each year are finding the rising cost of renting causing financial stress. Overcrowded conditions can have long-term impacts on health. High rents cause stress for a great many tenants. If no landlords believe that rent controls should be initiated, look into London's housing crisis. Chronically high rents has priced long-term residents out of their areas, forcing them to move out to suburbs. Outlying areas also have their own housing shortages, so now some councils are bringing in a requirement that social housing only be allocated to applicants who have lived in the area for two to four years (it varies by council). Therefore, people escaping the rent hotspots of the city by moving to nearby districts are once again denied housing. It is a very real human catastrophe that thousands of people are forced to suffer insecurity and instability resulting from buy-to-let property speculation, sale of property to international interests and an unregulated rental market. Rent controls are not about stifling the market. They are intended to ensure tenants are protected from unscrupulous practices when renting property. An alternative to rent controls is an empty-homes tax, which the UK initiated in response to the widespread shortage of housing despite many more houses remaining empty. This can work just as well to provide incentive to meet market demand. There are many empty homes in New Zealand which should be tenanted to save tenants from unhealthy, overcrowded conditions. New Zealand's markets may seem to bear little resemblance to the UK's dire situation, but look at it as a possibility of where New Zealand may find itself in the coming years. Look to Auckland, where the beginnings of a housing crisis have appeared. The city lives in an unsustainable housing bubble, already breaking apart the city's social weave. Higher rental prices are not the answer to New Zealand's housing problems. They create poverty and debt for the unlucky ones who do not have a housing portfolio.

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