GUEST BLOG: Bryan Bruce – Rents are going up, what should Jacinda do?

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In trying to slow down a runaway housing market the government has unquestionably created a situation where rents will go up as landlords try to offset the costs of last week’s housing related decisions.
If the government intention is for renters to be able to save to become owners one day, then clearly creating a situation where rents will go up isn’t the best idea they have ever had.
If however , as I said in a previous post, the government changed their question from
‘How can everyone get to own a place of their own?’ to ‘How can everyone have stability of tenure in a warm , dry , affordable home?” then a whole raft of alternative solutions could become available – including making renting very attractive for both investors and occupiers.
Imagine if it was much cheaper to rent on long term leases than to buy- through a government controlled investment corporation that provided incentives for large financial institutions to take part as well as share holdings for smaller investors – wouldn’t that be a good thing?
You’d have much most stable communities where kids can get to go to the same schools and not chop and change when the the rent goes up and your family has to find somewhere cheaper to live.
Maybe you’d even get to know your neighbours.

Bryan Bruce is one of NZs most respected documentary makers and public intellectuals who has tirelessly exposed NZs neoliberal economic settings as the main cause for social issues.

26 COMMENTS

  1. ‘Rents are going up, what should Jacinda do?’

    Buy property at an historically low interest rate and let it out, gaining both increased weekly income and long term capital gain.

    Probably already has, as per double-dip Bill English.

    “Greed is Good.”

    • But who would take her place? From what we know today, someone a LOT worse.
      But I agree with your criticism of Jacinda Blair. All talk and way too little real action for the 60+% of Kiwi’s (citizens) ‘struggling’

  2. I feel sad for renters, the government has become encapsulated by the construction lobby and the financial industry and everything they bring in, is a disaster for most renters.

    How can you increase rental supply and thus lower rents when you keep doing everything to stop people buying rental properties and renting them out? Whether you think landlords are the devil it still doesn’t really seem like a well thought through plan – aka making landlords sell or stop renting rental properties to create a shortage of rentals, and assuming that their preferred first home buyer will pick up the vacant rental property and the 3 billion in construction subsidies to the construction industry will somehow magic up housing over the past decade and that even less likely, people will rent out the new houses.

    The poorly thought out idea is that the first home buyers can then pick them up the rental properties becoming available, however this relies on many assumptions such as first home buyers under Rogernomics often with financial income instability can afford to buy a property even if there was enough supply, that they can afford the new houses (which are often more expensive than the old houses), that more people will be housed by buyers than when renting (apparently not true), that we solved our leaky and other defect building issues, and a complete refusal to acknowledge that current residents are competing against hundreds of thousands of new residents into NZ who arrive daily, often with a lot more money than current residents. Even with Covid 120.000 new residents came into NZ in that time.

    When the Neolibs work out NZ immigration numbers they do simple calculations by minusing off the people leaving NZ vs the people arriving in NZ. However there is nothing stopping all he people leaving NZ coming back when they feel like it once they have permanent residency or citizenship, and bringing with them more family members as they arrive back. There is nothing stopping visitors to NZ refusing to leave and becoming overstayers while expanding their families and working for cash.

    Added to the burgeoning numbers in NZ, we have countries like OZ who are throwing out all the criminals they find who have dual residency and NZ seems to be picking them up, while our government nothing to stop overseas criminals taking up NZ residency and citizenship, the social costs of this and they of course need a house to live in too.

    NZ immigration policy and numbers should be based on the worst case scenario aka the amount of people who at any given time are capable of coming back to NZ and the projected amounts of additional people they can bring with them (new spouses, new children, parents, relatives). If they worked this out (which should be very simple using births, permanent residency and citizenship data and looking at trends like spouses (people no longer marry for life in most cases, and the effect of this when a spouse remarries and brings in another spouse/family into NZ). Once they do this they would instantly see there are huge problems looking into the future – especially because NZ Neoliberals preferred migrants had low level skills or were already income less people (kids, elderly) or running sunset businesses in tourism and hospitality.

    Once getting a student or work visa migrants can bring their entire families over, and whether rich or poor often can apply for extensive government top ups, aka WFF, superannuation, income subsidies, wage subsidies and health care as well as NZ needing massive changes to all the infrastructure like housing and transport, schools and hospitals, water, waste water, sewerage, justice, police etc… (all very beneficial to the construction industry….. )

    Dhaka which prides itself as an economic miracle went from a few million of population to 40 million in only 50 years. NZ might get their quicker as there does not seem much desire to stop uncontrolled population growth into NZ and the effects of that on the existing population and housing.

    Simply NZ has a demand based problem with a refusal to acknowledge that.

    Somehow government have now made it a potential 10 year capital gain for anybody to rent out their house for any part of the year….. so the baches, short term rentals and so forth, people relocating and many other reasons to potentially rent out property, are not going to be encouraged to rent out their houses either….

    If the government was purposely trying to create a tsunami of rental crisis they achieved their goal!

    It is not so much about the rent price, there simply is not going to be any rental properties available soon to thousands of renters and when the borders open hundreds of thousands will flood into NZ….

    • ‘there does not seem much desire to stop uncontrolled population growth into NZ’

      Why would there be when the system is controlled by banks, corporations and opportunists who have no absolutely regard for the future and are only concerned with maximising profits or personal gain in the short term?

    • “Investors’ (I’d call them speculators) don’t create rental by buying in the market. They and any one else, ONLY produce more rentals if they BUILD NEW ONES.
      This illogical and propaganda mantra, that they’ll be less rentals available if speculators sell up is pure B.S. UNLESS of course they blow up the house rather than sell it to another speculator or person wanting to live in their/a home; and someone would invariable (somewhere in the chain) be an ex-renter). So NETT no effect when a speculator sells a rental.

      • Kevin – when a rental property is sold and not re-rented then there are less rentals – especially when 120,000 new residents arrive who need somewhere to live and buy up the house….

        don’t have to worry, because I don’t rent a house, but do get fed up with pointing out the entirely obvious outcomes that will be proven with a few months of what the government housing policy will bring.

        I pointed out that Kiwibuild was going to be a disaster, while the lefties danced in the street thinking that it was going to solve the rental crisis, nope made it much worse! Anybody with a brain should have seen it was privatising state house land and not helping renters at all!

        This will be the same but probably worse.

        Much of the source of the rental problems are the woke and right wing logic that seems to have converged into the same discourses.

    • People buying properties to rent create a demand for houses that increases the price (economics 101). When house prices increase landlords want increased rent for the opportunity cost of the increased value. Unfortunately the rent is not so quick to decrease when conditions change so things will take time to adjust but fewer house sales to landlords will allow more people to purchase their own home so the reduced supply of rental houses will be faced with fewer people wanting to rent so there is some prospect that house prices & rent required could reduce over time, believing in the tooth fairy might be just as likely to work so give it 6 months to see what happens.

  3. When the same laws were passed in europe landlords threatened the same thing and rents didn’t go up though.

    Nz landlords can also only put rent up once a year so they’ll have to do it in one go as well and they are worried about looking like scum by the majority of the population and a govt push back if they do ie rent freezes. We’ll see I hope they do try go to war with the govt and the people and get their butts handed to them

  4. This policy of Labor is a copy of what was done in the UK with great success to stem house price inflation and tempered rents. Dont fall for the fake news from the “Scumlords” they will wage a psychological war. Some info on the UK experience.

    The UK’s policy was introduced six years ago by then-Chancellor of the Exchequer George Osborne (the UK’s equivalent of our Finance Minister). It kicked in 2017, after he left office. That year, investors could only deduct 75 percent of their interest; from 2018, half; 2019, a quarter; and from last year, none at all.

    The effect on house prices was almost instantaneous. In the previous four years, the average price of a house in the UK had gone up an average 6.5 percent annually, according to propertydata.co.uk – from £174,592 to £224,719. The annual price change in mid-2016 was 8.2 percent; by June 2017 it was 4.9 percent, and in mid-2019 it had fallen to 0.6 percent – below inflation.
    The policy didn’t have the same effect on rents – but nor did they spike upwards, as landlords here have threatened. Similar fearmongering in the UK turned out to be unfounded.

    “There are the usual suspects who bleated about how rents would surge higher and so on, that didn’t really happen,” said Gordon.

    “There were some rent increases, but not really worth writing home about. In fact, rent inflation probably had already peaked by the time this policy was announced.”

    • I think you will find that Brexit and immigration, and foreign buyers are effecting housing and rents the most….
      How will Brexit affect the property market and impact prices
      https://www.halofinancial.com/brexit/how-will-brexit-affect-the-property-market-and-impact-prices

      “Chancellor Rishi Sunak’s stamp duty holiday, which will run into March-end 2021 and is valid on UK property worth up to GBP 500,000 has acted like rocket fuel for the housing market.

      According to property portal Zoopla, an additional 100,000 house sales are expected to be completed in the first quarter of 2021 as buyers rush to complete deals before the stamp duty holiday terminates.

      Zoopla also noted that the number of new sales being registered in the UK is 38% higher than they were during the same period the previous year, with London and Southern England noticing a significant boom.

      However, with more than 140,000 sales than usual in the pipeline, Zoopla warns that it is likely that only half of the purchases agreed in January will be completed by the stamp duty deadline.

      With the Brexit transition period fast approaching and uncertainty over the outlook of the property market remaining elevated, many real estate agents and property professionals are pressuring the UK government to extend the stamp duty holiday.

      That being said, it remains unclear whether Rishi Sunak’s stamp duty cut has been beneficial. Several experts have noted that buyers purchasing a property outside of London and the South West could have gains generated from the stamp duty cut negated by the increase in house prices.

      Aside from the conclusion of the stamp duty holiday, 2021 will also see the introduction of a 2% surcharge on UK property purchased by foreign buyers due to Brexit.

      Currently, foreign buyers share the same benefit as domestic buyers in the UK, in the sense that they too can benefit from the stamp duty cut. As a result, activity in the UK’s second housing market has seen a significant increase over the last few months.

      So, could the new 2% surcharge on property bought by foreign buyers result in a pullback?

      Owner of Mansons Property Consultants, Nick Manson, believes it won’t. Mr Manson said that the UK would remain an attractive destination for foreign investors and “the weaker British pound (GBP) will likely soak up a significant amount of the 2% surcharge.”

      He added: “There is no doubt that there will have been an increase in the number of transactions before the 2% surcharge on property purchases by overseas buyers coming into force from April 1st 2021.”

  5. Rents are going up, what should Jacinda do? Sell more stuff off to overseas interests while our MSM advocate more charity to corporate welfare.

    Local developer caught under overseas investor fee hike
    https://www.nzherald.co.nz/business/overseas-investor-fee-hike-could-cool-foreign-property-investment/T5VIIT72BKLFGNSUFQN7ADQB2Q/

    (Worth looking at just to see the ‘leaky’ looking building in the graphic. )

    Poor overseas people have their fees put up. Don’t worry it is only $56,000 to buy up NZ forests.

    Love how Fletchers and most of our assets are becoming more likely to be majority overseas owned and controlled.

    Then the government neoliberal advisors can’t work out why we can’t afford or control our wood and construction prices anymore but due to our public stake holding are also not keen to do anything against any monopoly interests operating here.

  6. I have long thought that corporate involvement in the rental market was something to be desired; but I have tended to assume they have been kept out by a plethora of small players dominating the market. a sort of instance of Gresham’s law.

    • I’d go co-operative rather than corporate, but definitely this business of a few people holding the lives of so many people in their hands, bleeding them dry then having the temerity to tell them how to live their lives must either go altogether or change radically.
      I think the whole system needs tearing down and starting over, and only a government can do that.
      Essentially long term renters must be able to have security of tenure and the ability to make a home of where they live.
      Massive state house build, start at the bottom and work up to long term leases, at reasonable rates, and essentially squeeze the “people farmers” out of the picture, they can remain renting out houses on a more short term basis.
      It is my view that the way houses are rented in this country has been a huge contributor to the breakdown in society we are seeing, people are essentially traumatized by a lifetime of never knowing when they will be on the move again, kids losing friends, changing schools. It is a constant stress and HAS had bad effects and will continue as long as we continue with the model we have.

  7. Here’s a solution? Make all Priperty freehold & totally ban all Housing Investment & Speculation, excluding the Family Home? Legislate that you can’t own Rental property & can only buy a real Business that generates actual growth & jobs not a non-productive extractive industry like Housing speculation! Habitation is a human right & Houses shouldn’t be used as a ATM machine for greedy Landlords to profit from human misery? The Govt could then buy up the Housing stock that this ban would enable & the Govt could use the Reserve Bank to print money & issue Bonds to fund additional Social Housing builds! It’s been done in the past & should be done again!

  8. I have been told repeatedly that property speculators, investors/ landlords need to raise rents to cover these changes and maintain their profits. Can anyone actually see the problem here. Property is too good of an investment in regards returns. We can attack it in two ways. Disincentivise property investment as Labour are trying to do or put a complete stop to property investment unless you are the owner occupier. Drastic, yes, but given the many multiple comments on housing it appears greed is rising to the forefront in most cases. If landlords who have been creaming it for so long are finding it tough, do the right thing, sell up and invest in the share market, taking property off the market is the only way.

    • The words “housing” and “market” should never appear in the same sentence, as far as I am concerned

  9. one woman on Facebook has said in a post her landlord has already indicated her rent will go up $87 a week to replace the interest claim he has lost.

    • After they were soooo generous as interest rates tanked and dropped rents accordingly. Oh, wait….

  10. Folks read this article!!!! It certainly put everything in perspective for me because, to answer your question Bryan, this is shows just how under-qualified Jacinda and her team are at handling this problem. This is their strategy now:
    https://www.nzherald.co.nz/nz/politics/graham-adams-housing-jacinda-arderns-divide-and-rule-tactics/PY5M2M5LOCCJYOY24QKRF3G7MU/
    To quote from the opening lines – “The Government has cleverly shifted blame for its own failings onto landlords. The demonising of landlords is simply about political management rather than actually fixing the housing crisis.”

    • The whole rentier culture that has grown in this country over the last 3 or 4 decades has contributed greatly to a breakdown in our society, too many people living the unstable lives of tenants under our tenancy laws and too many greedy landlords willing to take advantage of them.
      The sooner this country gets rid of this culture the better, imho

      • I don’t think that rents are the same as sale price. Happy to be corrected. Ideally the range of rents would be roughly equal to 1/5 of a renters income and landlords can keep there capital gains with some interest rate manipulation. Id hate to do the calc on that but glory to the person who does.

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