COMMENT: The rental housing conundrum
Monday 20 April 2020
Still simmering away below all the Covid-19 virus activity is the Government’s “reform” of the Residential Tenancy Act and that’s something we should all be concerned about, writes Auckland Property Investors Association vice-president Peter Lewis…
Written submissions on the proposed tenancy law reforms closed back in March, and oral submissions are being heard right now.
There are calls for the Government to place all such non-urgent business on hold while the current state of emergency exists, as the restrictions now in force hamper the full and democratic procedures that normally function when Parliament is in session.
However, despite all the other travails the country is facing, they seem to be absolutely determined to proceed with this one.
Looking at the proposed amendments I can see that they are based on a certain view of the rental housing market and of the overall supply of housing within New Zealand.
For at least twenty years New Zealand governments of all political persuasions have tried to “solve the housing crisis” by enacting various pieces of legislation.
But looking at the latest statistics, there can be no doubt that these measures have failed - and failed comprehensively.
There are more than 600,000 rental households in New Zealand with about a million people living in them, up from 453,000 in 2013 and 388,000 in 2006.
The proportion of households that rent has risen from 27% in 1999 to 32% now. And it’s worth noting that rental households generally have more people in them than owner-occupied housing.
The government cannot build public housing fast enough and now there are over 14,000 tenants on the public housing waiting list, more than twice as many as there were back in 2017.
That is not 14,000 individuals, but 14,000 prospective tenants, including their families. We could be talking about over 33,000 people here.
Of rental properties, 85% are provided by private landlords and 90% of those privately-owned rentals are provided by Ma-and-Pa landlords who, individually, own just one or two rentals. In some cases, these landlords rely on those rents to put food in front of their own families.
The public housing sector is, and always has been, a very small part of our rental housing market, and each publicly owned rental inevitably requires open-ended taxpayer support. The reality is that the government is a high-cost and inefficient landlord.
Most of the political initiatives around rental housing in recent years have been based on dogma and false assumptions.
All the legislation that has been enacted in recent years has been based on the institutional belief that private landlords are wealthy large-scale operators who habitually hold all the power over their tenants and not only make large-scale profits out of their affairs but are then, somehow, able to avoid paying any tax on those profits.
This view of the rental housing market is totally wrong and entirely misrepresents the way it operates.
Most Kiwi residential landlords are the hard-working, thrifty and goal-orientated individuals that any sane society should cherish and nourish, not vilify and punish.
Yet that’s what both the recent and the Government’s proposed tenancy law reforms set out to do, penalise these people who, I can remind those pushing this legislation, are all voters.
Given my experience, background and industry involvement I think you can assume that I know what I am talking about.
Yet not once, in my almost thirty years as a landlord, has any Government representative come to me and said “We have a rental housing problem. How do you suggest we could work together to improve the situation?”
No-one can be forced to be a residential landlord. If passed, this legislation will give residential landlords another very good reason to exit the market.
What the Government is then going to do with the resultant huge number of unhoused tenants is anyone’s guess. That will be the Government’s problem.
But the Government should care about this because the homelessness in New Zealand is set to get a lot worse. And the Government’s actions - which are intended to create open-ended tenancies and unilaterally impose large fines on landlords - will be pretty much entirely to blame for that.
The Government has a choice here. They can work towards solving the rental housing problem or they can punish landlords.
They must choose one, they cannot do both.
*Both REINZ and the NZ Property Investors Federation have called for the proposed tenancy law reforms to be put on hold while the country is on lockdown due to Covid-19. The NZPIF is also running a petition opposing the reforms. It can be signed here.
Comments from our readers
Sign In / Register to add your comment
Auckland’s housing market saw another slump in sales volumes in May but prices are holding steady, according to the city’s largest real estate agency.
Periods of house price decline are rare and "short-lived", says economist Tony Alexander, amid forecasts of a drop of 10%-15% this year.
The Reserve Bank says the commercial property sector is vulnerable to the Covid-19 crisis. But PMG Funds' chief executive believes that while there’ll be short-term pain, the biggest long-term impact will be structural change.
Mortgage lending fell to its lowest level on record last month as the property market ground to a halt during the Covid-19 lockdown.