Government policy causes rising rents

Times are tough for renters. Rents are rising faster than just about anything else right now, and have been doing so for some time. The previous government did make a few changes to make life more difficult for landlords, but the current government is going all out to improve the lives of tenants. As is always the case, the law of unintended consequences kicks in at some point, and that well-meaning government policy is now making life much harder for tenants because those policies aimed to help tenants are in fact forcing landlords out of the market in droves.

A newspaper reports: quote.

Renters are spending an average of $30 more on rent each week compared to a year ago, with the National Party blaming Government policies that are hitting landlords.

In some regions such as Wellington, figures from the Ministry of Business, Innovation and Employment show that rents have jumped by nearly $50 a week compared to a year ago, meaning tenants are paying close to $2600 more a year in living costs.

The National Party says it is a far greater rate of increase than under the previous Government, when rents rose by an average of $13 a year. end quote.

This government fails to recognise that private landlords are providing an important social service for free. Instead of the constant landlord bashing policies, the government should be providing incentives to landlords, such as subsidised insulation. But no. Landlords are fat cats and must be punished at every opportunity. quote.

“This Government prides itself on being kind, but these rent rises will really be hurting people, especially at the bottom,” leader Simon Bridges said.

When the government changed last year, the mean weekly rent in Auckland was $536. It has now jumped to $555.

But the biggest rent rises are in Wellington, Hawke’s Bay, and Manawatu-Whanganui, where rents rose by just under $50 in the last year. In National’s nine years in charge, rents rose by an average of between $6 and $10 a year in these spots.

Rents rose at a greater rate in all regions except Northland and Christchurch in the past year compared to when National was in charge. end quote.

And there is more nasty stuff on the way for landlords, with the requirement of the installation of fixed heating appliances and for pets to be allowed without landlord discretion. Having seen what a cat or a dog can do to a property if they are not properly controlled, I think that would be a deal breaker for me. The landlord owns an asset which the tenant is free to wreck. How this can ever be seen to be good policy is beyond me. quote.

Bridges blamed a series of Government policies which penalised landlords.

The Government has banned foreign buyers, introduced stricter standards for insulation and heating, got rid of “loss ring fencing” for landlords, and extended the period which investors have to pay tax on resold properties from two years to five years after purchase.

Bridges said the measures had a cumulative effect, forcing landlords to either lift their rents or get out of the rental market – reducing the rental stock. end quote.

There is an error in the above quotation. This government has not ‘got rid of loss ring fencing for landlords’. It is introducing ring fencing of losses. quote.

The rent rises would hurt lower income tenants the most. He noted that the number of hardship grants had risen by 54,000, or 19 per cent, in the past year.

Ministry of Social Development data shows that this increase is mostly due to greater demand for assistance with food. end quote.

Yes because, once the rent is paid, there is no money left over. It’s obvious when you think about it. quote.

Housing and Urban Development Minister Phil Twyford said he was concerned about rent increases, but said it was due to inaction by National when they were in power.

“Reserve Bank research shows that rents are driven primarily by supply and demand, not landlord costs. Our Government inherited a dire shortage of housing around the country after the former government ignored the housing crisis.” end quote.

Nine years of neglect, eh, Phil??quote.

“National saying that landlords are selling up is simply scaremongering. Corelogic data shows that landlords purchased 38 per cent of properties in October, which is consistent with the last two years ? there has been no change in landlord activity.” end quote.

This is my favourite bit. It shows what an idiot he is. So the number of investment properties bought has not changed markedly but how many have been sold? I think you will find that a lot of former rental houses have been sold in the past 2 years. Are all those investment properties recently purchased being rented out to local tenants, or are some of them to be rented out on AirBnB? Conveniently, these points are not raised. quote.

He noted Government policies to increase housing supply, from KiwiBuild to the goal of 6400 more public houses over the next four years. end quote.

Kiwibuild is intended for first-time buyers struggling to afford their first home… oh. Scratch that. They can rent them out now. I had forgotten about that little policy change. As for 4,600 new public houses in the next 4 years, I understand the waiting list for public housing is already in excess of 6,000 so that problem is not going away. In the meantime, people still need somewhere to live.

Rents are going to keep increasing, because the government has more landlord-bashing policies lined up. Firstly, they have banned letting fees, so that the cost of a property manager finding a tenant will have to be passed onto the landlord. Next, they are looking at allowing rent increases only once a year. So, if I were a landlord, I would make sure the annual rent increase is a hefty one. Life will just get harder and harder for tenants in private housing.