Poverty and housing advocates are claiming that landlords are capitalising on the high demand and low housing supply to charge tenants higher rates. According to a joint paper released by the Treasury dubbed ‘What Drives Rents in New Zealand?’, landlords are setting rent prices as high as the income of their tenants allows. This means that even with pay rises, the additional income is consumed by enlarged rental costs, ending up straight into the landlord’s pockets.
The paper indicates that for every percentage increase in the income for a household, there was a similar percentage increase in rent. The study also found that with every 1 per cent increase in the average number of people in a household, there was a 1.5 per cent increase in rents. Changes in mortgage rates were found to have little effect on rental incomes.
This trend also means that rent prices are rising at a faster pace than inflation. This means that despite interest rate hikes that have led to higher mortgage rates, landlords are still benefitting more than any additional costs they are taking on. The ability to set rent prices as high as possible is being driven by the inadequate housing supply.
Renters United president, Geordie Rogers, has lamented the shortage of housing and said that the rental costs were rising faster than additional costs were being placed upon landlords. The Child Poverty Action Group has said that parents were now spending a greater proportion of their income on rent than before.
Housing spokesperson, Alan Johnson, has also expressed concern that people are now having to pick between buying decent food for their kids and paying rent. He said that rent had become a significant contributor to hardship and poverty. He noted that there had long been a reliance on mum and dad landlords to provide affordable housing for rent and that there was a need to turn to the government for the same. Johnson is also recommending a review of tenancy laws to address inequalities in the renters’ and landlords’ relationships.
Despite the findings in the joint paper, the vice president of the New Zealand Property Investors Federation, Peter Lewis, has come out in defence of members, stating that property owners were like working-class ordinary people stressed by growing costs themselves. He listed some of the rising costs they had to deal with including council rates, insurance expenses, maintenance, and utility costs. Lewis said that to stay viable, property owners had to recover the increased costs from tenants.
Lewis termed the phasing out of the interest deductibility on residential investment properties as a tenant tax that was compelling landlords to either transfer costs to tenants or sell their investment property. He is urging the government to consider reversing this change.
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