The Human Rights Commission has called for a repeat of the temporary six-month rent freeze imposed during the first year of Covid-19 and an increase in the Accommodation Supplement to help those hit hardest by cost-of-living shocks to rent and food.
“Too many New Zealanders are sacrificing their fundamental human rights to pay the rent,” said Chief Human Rights Commissioner Paul Hunt.
“We’re very concerned that some students, low-income or single-wage families are having to make trade-offs between the right to adequate food and the right to a decent home," Hunt said.
He said the Commission wanted the government re-instate a temporary freeze on rent increases and immediately increase the accommodation supplement to aid low-income renters.
“The government of the day has to ensure all New Zealanders can meet their basic living needs. The Cost of Living Payment doesn’t go far enough to address unaffordable rents faced by many low-income renters,” Hunt said.
The Commission said the increase to the accommodation supplement should ensure those on the lowest incomes paid no more than 30% of their after-tax income on housing. Almost half of renters spent at least 30% of their disposable income on rent in the year to June 30, 2020.
The Commission also has an ongoing inquiry into housing.
The Human Rights Commission’s Housing Inquiry Manager Vee Blackwood said the current rental system was not designed for this growth in renters or the emergence of a permanent rental class.
“Alongside these urgent measures, a systemic overhaul of the rental system is necessary to enable all New Zealanders to achieve their human right to a decent home grounded on Te Tiriti o Waitangi,” said Blackwood.
“We’d like to see the government re-evaluate what a fair rent system looks like in order to meet the human rights of tenants," said Blackwood.
The Human Rights Commission is due to launch the next stages of its housing inquiry later this month.
“We want to hear from people about their experiences and their views on what a fairer housing system would look like, whether they are renters or landlords, homeowners or those struggling to find a place to call home,” said Blackwood.
Greens back call
The Green Party said it backed the Commission's call.
"A home is considered unaffordable for someone to rent if they need to spend more than 30% of their income to keep the roof over their heads. Every dollar over this limit that is spent on rent means less for other essentials, such as healthy food and heating in winter," Green Party Co-leader Marama Davidson said.
Housing Minister Megan Woods was not immediately available for comment, although the Government has previously rejected calls for a new rent freeze.
AS review under way
Finance Minister Grant Robertson said after this year's Budget in May that the Government was reviewing both Working For Families and the Accommodation Supplement. The Government currently spends about $1.5 billion a year on the Accommodation Supplement and has spent $1 billion on temporary housing since its election in 2017.
The Salvation Army has also called for the supplement to increase, including a doubling in some regions. It has pointed out the current Accommodation Supplement levels were based on rental data that was six years out of date. Rents have risen 23% over the last six years.
107 Comments
all rent supplements should be stopped, not added to!
If all were removed a number high volume would need to move to a house that is more economic to their situation. that would cause rents to drop as landlords looked to keep & attract tenants in that section of the market, which in turn reduces the value of that property as an investment to true "market conditions"
Rental supplements are essentially welfare for Landlords.
Of course you would want to remove these supplements in an orderly manner with a notice period, but in my opinion it needs to happen
The supplements could be "grandfathered" to reduce disruptions.
Existing tenancies that attract existing supplements could be kept unchanged. But if the tenants move, then the supplement could be withdrawn. It wouldn't be perfect (might trap some tenants in undesirable houses) but it would be an improvement.
The accommodation supplement is just welfare for landlords. Ridiculous policy when house prices have been rocketing. We could spend that money on healthcare or any number of better things.
lowercase capitalist,
Right. If any additional supplement was paid to the tenant, some/all? of that would be take by landlords, so a different approach is needed. It could be mandated that rent could not exceed a certain proportion of a tenant's income-say 35%- so any increase would remain in the tenant's hands beyond that limit.
... has it occurred to the Greens & the Human Rights Commission that a rent freeze might play into the hands of landlords ...
Left to itself , the housing market is slowly correcting , prices heading down ...
... wouldn't a rent freeze lock in current rentals , thus preventing them from coming down ?
Got ya, though I'd have thought in a falling market while demand is low it gives control to the tenant in that the landlord can't end the tenancy and look for a higher price with a new tenant. Definitely happened to me back while I was renting. "Pay more or get out."
Edit: property was owned by a church, built by the church 100 years earlier. Go figure...
Landlords don't seem to reduce rent voluntarily anyway. I can't count the number of times it's happened in the 15-odd rentals I've lived in - because it never happened.
I thought we might've had a good chance this time - rental listings in our neighbourhood have been dropping approx $150/week from initial price before they are successfully let, and there are over 130 similar rentals currently available in our suburb and neighbouring suburbs. For Rent signs are now starting to spring up like the For Sale ones a few months ago...
But nope, couldn't do a rent drop - nor even a fixed-term tenancy as might have to sell the house [not something a tenant wants to hear].
So we're moving on, and based on the house we're moving to, our current one is about 40% over-priced. (Mind you, we like our current landlord, and are only moving because we're going to a bigger house - but a preemptive rent drop in a falling market might've forestalled us).
There is a mountain of evidence that regulating rent doesn't work. Market force is the thing that does and as far as Govt intervention goes this present Govt has done more than many recently. I think it is a case of everyone expects things to happen over night. Just wait.
'Just wait' works for everyone not in the position of being unable to afford to both pay the rent and live healthy/comfortably at the same time.
Saw a person interviewed this week whose family has been in a motel/emergency accommodation in Rotorua for five years now.
'Just wait' just doesn't cut it for so many in this same position.
I appreciate what you are saying Kate, but freezing rents won't suddenly make more housing available. When there is a lot of homeless in a society it is basically up to the state to rectify. One thing that could be legislated for in the private sector is minimum 10yr occupancy with right of renewal. That should make housing as an investment less desirable. Back that up with tax incentives to build rental properties and supply may increase.
Either way this is a very complex issue, but I agree with you it needs to be sorted.
There are some appearance similarities. But he needs to come up with some policies while drunk, will be an improvement no doubt.
I saw Nichola Willis saying National will remove the “Ute tax”. Funny that she didn’t call it by it’s proper name, the clean car rebate.hopefully NZ wake up to what national are really going to do: tax cuts for rich, property investors, polluters, how can that be a vote winner, shows the selfishness out there.
Landlords don't charge unfair rents, rather the rent is determined by demand and supply.
Here's an exercise for you, why don't you calculate the cost of providing an additional unit of accomodation somewhere of your choosing (house/townhouse/apartment), look at what it will cost to finance that with an LVR of 67% (use a cost of equity of 12% and mortgage rate of 7%) and then tell me how that compares to the rent. Add 10% for the cost of dealing with tenants drama and that is your marginal cost of supply. I will wager the rent is fairly priced.
You seem to ignore that the cost to finance, is influenced by the cost to purchase, which is influenced by how much people are willing to pay for a property, which is influenced by what rent they can charge.
All else being equal, if you force rents down, the cost of houses will drop.
Rubbish Te Kooti
the country has subsidised landlords with accomodation supplements and employers with working for families
and just as subsidising farmers and manufacturers in the seventies and eighties the country will nearly go broke again
its going to be a brutal few years for many
the easy decisions become the hard decisions later
and we took all the easy decisions
GNX, what percentage of renters receive an accomodation supplement? You seemed to have missed my point entirely, the rent is determined by the cost to build, deal with councils etc etc. None of these are impacted by a subsidy, that doesn't bring the cost of labour or raw materials down. All a subsidy will do, at the margin, is increase the quality of any rental. A Government subsidy increases the amount of rent that can be paid which in turn increases the quality of accomodation provided. Go check out the Cape Flats in Capetown if you want to see what accomodation looks like with no Governement assistance.
There is no magic bullet here, rent's will not come down much, if at all. Stop blaming investors or the Govt and start applying some rudimentary economics and finance.
GWW, rental accomodation is provided by the individual (who buys or family), the rental market, or the State. Landlords provide capital, there is nothing stopping the State providing accomm, but it's not as easy or cheap as many make out which is why we have private landlords. Someone has to pay for the land and building products. If you want this to be the State, that's fine. However the State is not that effecient
Oh, 100%.
I guess my position is that the clearing rate (i.e. minimum healthy specification meets minimum reasonable rent) should be a function of state housing, and should effectively be the price setting mechanism.
Anything over and above that, the market can and should handle, minus any expectation of handouts.
The state can be more efficient by establishing significant, multi-year contracts with the private sector to facilitate building state rentals that yield a fair profit to the builder, given that it owns a sh*t-ton of desirable land, can adjust legislation at the local and state level, has significant buyer leverage, and can issue its own capital.
How many landlords have debt free properties? Their cost of supplying is near zero. The rents are pure profit.
Those who paid gazillions by leveraging their properties out of sheer greed could be introduced to something called state intervention and realise that it wasn't their amazing nous, just a tax loophole.
But why is the land so expensive? 1 mil plus for a house in a crap part of south Auckland that is only fit for demolition.
All kinds of things are at play, but people speculating on capital gains through rental investment has to be one of the biggest causes of high house prices and hence high rents.
JJ the big prices in SA are bought by developers who then provide medium density accom, so the section of $1m is shared between 4 townhouses. This is the way a free market provides accomodation - the Government incentivises by change the zoning, banks provide debt and developers provide the risk capital. If you want the State to replace this then you are moving on the spectrum from capitalism to socialism. To do this, you either believe the Government is better than the private market or you want other tax-payers to subsidise your rent.
I don’t rent. But the reality is that it all comes down to land cost. There is no way a 700m2 section in SA should cost that regardless of what it will be used for. The demand for land exceeds the supply, and it’s not due to a real demand supply imbalance, it’s due to greed by speculators, governments tax incentives, and councils protecting existing property owners. We don’t need socialism to fix it, if anything we need the opposite, a proper free market and a fair tax system that does not encourage debt write off.
It’s not capitalism. The supply side is so constrained by council and government regulations and the demand side is overheated through tax rules that encourage you to go into massive debt and then write it off (which Labour have changed but National will repeal one day).
You have answered your own earlier question as to why prices are so high.
And of course, I have provided the reasons why, repeatedly.
The first rule of thumb, is 1) it's hard to make things cheaper by making things more expensive.
Second Rule, 2) Any potential savings will not get passed on to the end user but will be captured by any restrictions with the system.
So they need to just ask themselves this:
1) Have I added a cost?
2) Are there restrictions within the system?
If the question to at least one of these is Yes, chances are that the price will not decrease with the intervention, and most likely go up.
Yeah dead right Te Kooti, and the Govt handing tax incentives to develop new housing will only encourage this positive type of housing investment, rather than just buying existing housing stock. Should have happened years ago, would have changed the market. Just to add, if there had been a policy to make it manditory that new migrants had to build homes, that was a simple requirement which would also have changed the market dynamics.
There is no magic bullet here, rent's will not come down much, if at all. Stop blaming investors or the Govt and start applying some rudimentary economics and finance
To me, when all costs are rising with relatively fixed incomes, I would think that there is pressure for rents to be "constrained" and / or potentially fall. Less spend into the consumer economy will impact asset prices like housing. I cannot empirically prove that so I accept that I could be wrong. Nevertheless, if I am wrong, expect to see greater socio-economc decay and crime.
To answer your question Te Kooti there are 360,000 people receiving accomodation support as of May 2021
$30m a week or $1.5B a year
https://i.stuff.co.nz/business/125195278/accommodation-supplement-propp…
You talk about the cost of materials….pruned logs were $170/ton in 1992. Thirty years later they are $190/ton. So that’s not the problem.
Finished products….that’s another kettle of fish…..monopolies and corruption.
Labour costs should have reduced in construction but we haven’t adapted and used new technologies like clt….we have tradies standing in the mud with nails guns putting them together stick by stick.
It’s the lack of investment in world class manufacturing and the banks endless supply of credit that created so much inefficiency and allowed the cost escalation.
I agree, the cost of building here has always baffled me. That's not my point though, my point is the marginal cost of providing an additional dwelling will be close to the market rent.
I hadn't realised it was that much, 360,000 people. We seem to pay a high price for very average housing here.
The don’t really put it up stick by stick, the framing is almost always pre fabricated and goes up in days. It’s the foundations and services that take the time and cost (particularly as most remaining sections are not that suitable)
I still find it funny that people think the cost of building a new house should determine the cost of buying an old existing one. I can’t think of any other market like that (except vintage stuff). A 15 year old second hand car costs a lot less than a new one because it has wear and tear and a lot less features.
House <--> Car comparisons aren't that good though - simply put, a house is more durable, expensive and has the ability to be maintained by an amateur (if necessary). Also, there has been bugger all legislation until recently relating to minimum standards for housing (unlike vehicles) and effectively no enforcement for infractions. You also don't need a car, but you certainly need a home.
If there were a shortage of cars, NIMBYs were intent on stopping new cars being used on 'their' roads, they lasted 50 years, they cost $1m a pop and there was basically no regulation relating to how they needed to be maintained or operated, you'd see a different market!
I think if it weren’t for all those other factors you raised, the cost of a 30 yr old single glazed less insulated house with outdated kitchen and bathroom needing maintenance should be around 50% of a new one, so let’s say $180k for the house itself. So if such a house in a regional town where there is plenty of land around costs $800k, that means all the other stuff you mentioned is adding almost all that extra cost.
Yes building costs are a factor, but not by any means the main factor.
That is if you believe that new builds are better quality, I don't necessarily believe that at all sure it may need to be insulated and have the building standards tick boxes checked, but people are incredibly good at cutting corners to save money, I would not be at all surprised if all the new house that are being built right now quickly and cheaply don't turn out to fall apart after 10 years. Sorry was burnt by a leaky home and that was a "new house", new is no guarantee that it will last longer.
Yeah but the framing doesn’t come with insulation inlaid and gib cut and fixed already….except from one plant, Hector Egger, in Otago.
The one and only modern frame plant in Nz… as opposed to the 90 or so old fashioned frame and truss plants.But hey you can’t expect the merchants to invest in their plants because it’s all about sweating the assets, cosy market allocation and high margin business models.
and the framing needs to sit on joists and board….and the joists are all placed and fixed individually.
It’s all fifty years out of date mate.
And the biggest con
From what I’ve seen there doesn’t seem to be much cost saving in building in a factory. There are some appartments near us built by an Aussie contractor to HNZ which was all built offsite, but they went under. There still seems to be a lot of work to do after it’s brought in. Putting in gib and insulation is probably only a few days work for a specialist team.
mass production of many of the same house would be a different story, but hard when sites these days are so constrained and space needs to be maximised.
If fairness is determined by competition, the rental market is one of the most competitive markets there is, more than thousands of landlords out there. Compare that with other basic needs like food, clothing, medicine and power it which have main providers that be counted on your fingers. Sure the accommodation supplement skews the price that landlords charge but that is true of any benefit to someone just getting by. As soon the government gives people the money it will immediately be sucked up by people providing essentials, be it rent or food.
The problem is not specifically landlords but a society that deems it acceptable for people to make as much money as they can without any semblance of fairness. Also you could argue that the government providing housing lowers rents, I have seen rents of $110 per week, that would not even cover rates and insurance.
It would seem with the Governments "Build to Rent" changes, rents will adjust downwards or at the very least stagnate long term anyway.
https://www.stuff.co.nz/business/opinion-analysis/129564357/build-to-re…
Its good to see Landlords squeezed under the pressure of rising interest rates, seeping valuations and stagnating rents. Those in it for a long term income would not be so obsessed about portfolios and valuations like some here.
Rents reflect the most that people can afford to pay and they have risen like clockwork by between 3% and 4% per year since 2010 (in line with wages). The amount of extra supply that would have to come on stream to actually push rents down is unrealistic for the next few years at least.
From that article:
'However, even if build-to-rent housing takes off, Eaqub says it will likely operate at a higher price point than other rentals, something which will still benefit renters who can’t afford to live in these developments.'
This is what these idiots don't get. It is meant to make it cheaper to rent, not dearer. So what they are saying is any savings this interest deductibility is going to achieve are all going to the developer, not the tenant. And since all savings in a restricted market get captured by the most restrictive part, ie land and/or council processes, then within one build cycle, even the developer will be no better off.
This is completely counter to how BTR operates in the country of origin, ie Austria, etc.
The point is that the savings the BTR renter is meant to achieve are then invested in other asset classes, so by the time the renter gets to retirement they are in the same financial position as a homeowner, which would mean, as a renter they can still afford to pay the rent in retirement. In fact, many do end up buying a house for the non-financial benefits homeownership gives people.
But under this NZ version of a BTR, has anyone done the numbers to show how a tenant could afford to rent these into retirement?
Total rent paid to private sector landlords in NZ: $550 per week x 560,000 homes = $15bn to $16bn per year (depending on occupancy rates etc).
Total costs of running 560,000 homes based on $6k per year maintenance, interest payments on $90bn of outstanding mortgages, and 15% management fee = approx $9bn a year.
So, around $5bn to $6bn a year of transfer from renters to property owners - including $1.5bn of accommodation supplement. It's madness. And, that's before we consider capital gains.
A rent freeze is a necessary first step - but it's a sticking plaster without a plan to reboot the market and transition the supply of housing for rent to the not for profit sector.
Love it when people pull big numbers out of their backside. Rent pretty much only covers the owners outgoing expenses, I did the math years ago and unless there are capital gains its a waste of time and you have to put up with drop kick tenants. If you think your rent sucks go buy a house and see what you are really in for. I sold the house rather than rent it out, not worth the hassle.
In jurisdictions with true housing affordability, houses are cheaper and increase only at the general rate of inflation, rents are still dearer as a % of the price than in NZ but the absolute rent is less than in NZ, ie tenant is better of, and the landlord makes his profit on yield, not capital gain. Much more akin to commercial property.
Yeah but most of the owners outgoing expenses are the mortgage on the overpriced home. Let’s say instead the average house cost $200k and the average rent was $350 a week, both the landlord and renter would be happy. But the self fulfilling prophecy of capital gains changed everything.
I am not a landlord, but looking at my own property. Maintenance/repairs would be closer to 10k a year, then you have rates and insurance. So I would say your maintenance costs are light, and that 15k pa is probably closer to reality. So an extra 4-5b a year.
This would lead me towards Te Kooti's comment, that the rent is probably "fair".
Based on the rough calculations, it would also imply that the Govt subsidy is, on balance, necessary to a functional private rental market.
This creates a dilemma, as I firmly believe the subsidy should be scrapped, but to do so would mean even more reliance on Government, who have proven at all levels they are simply not capable of managing this.
So what do you do?
The maintenance costs are based on data from property managers. Individual landlords with no economies of scale or regular contractors may well have to pay a bit more than that. As I said above, current rent levels will only just cover costs for relatively new or heavily leveraged landlords, but most landlords are not new or heavily leveraged - they are sat back earning a cracking margin.
"but most landlords are not new."
In my experience when this is the case the property is often rented at below market value (at least to existing tenants). Where the issue presents itself is when new tennants come in and all of a sudden the current market rent is charged.
This is a real issue, and not just for renters. A house from the 80s, is simply just not worth the same as a new build. Yet in most cases to buy or rent it, is. That is just asinine.
There is clearly some lag in rent rises where people have got good long-term tenants - you can see this in the slight increase in the spread between median and mean rents by region (median has gone up by more than the mean in recent years). But, in these cases, the outstanding loan on the property is typically low (so margin is still good).
Whichever way you cut it, the private rental sector as a whole is a $15bn industry making a 30% - 50% margin - before capital gains. It's a regressive tax on working people.
What do you do?
one option and probably the most likely is to do nothing and let the market implode on itself and the banks need recapitalising.
then the IMF can work with Chloe who will probably be running the country at that point to sort it out….and they can tell us all that we can’t afford the subsidies, our dollar will sink and people won’t be able to afford to visit the grandkids in Aussie.
another option is for our main parties to accept we have a problem and grandfather them out
The government of the day has to ensure all New Zealanders can meet their basic living needs.
That's a good and noble aim, everyone should have basic living needs. I'd like to ask one question though; is there not an individual responsibility from each person to do what it takes to have basic living standards? I know my parents have always felt responsible for their family to have basic living needs and today I feel the same towards my family.
Sure - but when one of those basic needs (housing) consumes vastly more of your disposable income than it did 30 years ago, you have a problem.
There will always be people less well of than others - should we as a society accept that they be crushed by the invisible hand, while we're also quite happy to give landlords a handout?
Increasing the accommodation supplement is the worst recommendation ever.
The only way out of this is regulation of rental prices to meet that 30% of median household income standard.
We have all the data and systems to do that;
- Stats provide median household income by region
- Tenancy services provide market rents, and could easily change that to regulatory rents by local area
- All councils provide publicly searchable data on rateable valuation
So, you regulate a formula for weekly rent value maximum to equal:
(RV/1000) minus a variable 'x' (the value of 'x' is determined based on the median property value in the region)
or (RV/1000) - x% = weekly maximum rental.
Example, let's say the median house in Wellington has an RV of $500,000 and the median household income of $74,300 (from above link for 2016 census), ,means that 30% of that median income on a weekly basis would equate to $429 as median weekly rent maximum. So, that is the target for Wellington's median weekly maximum which is used to calculate the variable 'x'. In this case, the formula looks like:
(500,000/1000) - x% = $429
x = 14, or... (500) -14% = $429
The variable is a constant for the region over the three year valuation period; after which time it is reset once again to reach that 30% of median income target.
So, the Wellington property with a $1,000,000 RV would have a weekly rent maximum of:
(1,000,000/1000) - 14% = $860
Instead of the tenancy services website showing market rents - it would show the current variable for the region and the formula with an indication for high, medium and low - and provide a calculator so that people could plug in the exact number for the RV on the home they are looking to rent in order to know what the weekly rent maximum is.
All accommodation supplements end at the time the regulations are brought in.
" A systemic overhaul of the rental system is necessary to enable all NZers to achieve their human right to a decent home grounded on Te Tiriti o Waitangi"
Im still trying to figure out what the TOW has to do with any of it. Just trying to figure out which article of the treaty might apply to the rental market. If there is some disparity between Maori and Other cultures then why not just hit the nail on the head....however still difficult too see what place the TOW might have in overhauling the rental system. Classically it could be argued that Tribes should be housing Iwi and that might sit well with those that favor tribalism but I suspect there are many Maori that just are not interested in a reservation lifestyle. I guess it could be a hint that tribes are considering jumping into more community housing projects and might be headed hand in cap for some loose capital.
The problem I see with funding such ideals is that there is little initiative for participants to move on into the private market and become more self sufficient. Communally held land/property for a single cultural group might sound nice but if it cant foot it with what the General populace enjoy then it in itself is an inferior holding thus if the reference to the TOW was about levelling a tilted playing field the Commission may have overlooked the obvious being a communal title will never foot it with a freehold titled. Given such what would be the point in establishing cultured rent villages when exposing folk to the wider markets forces is where you need to be. Privateers are quite capable of soaking up all cultures . Tribes would do better to carve up landholdings and sell via rent to buy...but why would they want too do that? Sitting and floating omnipresent is the hand of control and my thoughts are a tribal corporate entity is bound to what is best for the majority not the individual. If your sitting on the lower echelons of the 'totem pole' your likely to be exploited. I dont say this as a dig against tribal society rather its just the way the world rolls. 'Individualism' is not gonna carry you far in many communal type cultures nonetheless it features heavily in capitalism.
If your young and making your way in the world its hard to ignore the effects of Capitalism. Bottom line is most cultures must engage with the majority system or diminish. Nice to give folk a hand up in life....but they also need to be willing to walk their own path and not remain dependent on their overlords. Hopefully the commission will be looking forward and not to the past for some of its initiatives.
The human rights commission is getting confused, it thinks they are experts in residential rents. Last time I checked, we don’t live in communist Russia lads. Stick to your knitting, what ever that is, but I’m also pretty sure it’s got nothing to do with the treaty of waitangi either. Perhaps a freeze on pay at the HRC would help keep inflation in check.
What this will do is kill off the remaining periodic tenancies and push them all on to 1 year fixed term, which the landlord will not renew.
Any subsequent tenancy will be an entirely new tenants at current market rates, and unrelated to the previous one.
Nobody wins from this sort of woke green party / Labour party bullshit.
The landlord cannot not renew a tenancy, they are stuck with the tenants until such time the tenant chooses to leave. The only way to get rid of a tenant now is to sell the property, demolish it, or move back into it yourself. It makes no difference if the tenant is on a fixed or periodic lease - you still cant end the lease.
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