The current rental situation in Auckland is becoming increasingly dire, with the city now reported as one of the most expensive places in the world to rent.
Brad Olsen, Infometrics' principal economist and CEO, highlights an 8.5% increase in Auckland rents between November 2022 and October 2023. This spike is partly attributed to the country's record net migration gain of 118,900 for the year ended September 2023, with a significant proportion of these immigrants settling in Auckland and increasing the demand for available rental properties. Logically, any increase in demand without a matching increase in supply will lead to price increases.
This issue is not confined to Auckland alone; regions like Manawat?/Whanganui are also experiencing rental hikes, with Palmerston North reaching a record $580 median weekly rent.
A very concerning trend is the consistent decrease in new rental bonds deposited with Tenancy Services since 2013, particularly after 2019, indicating a shrinking rental market. This situation has been largely influenced by political decisions and narratives over the years. The Labour government's first term saw property investors being blamed for house price inflation and wealth gaps, driven by a narrative of envy and demonization of landlords. This led to stringent anti-landlord tenancy laws by Associate Housing Minister Kris Faafoi and targeted tax changes by Finance Minister Grant Robertson, aimed solely at landlords but which have inevitably become a tenant tax.
Treasury, IRD, the Government’s own housing beurocracy and Renters United all warned the Labour Government that implementing these anti-landlord policies would lead to higher rents. This has proven correct.
These policies have also driven a number of private landlords, who provide over 80% of rental housing, out of the market. This exit has increased reliance on government housing, which is often inefficient and costly. K?inga Ora, for instance, is forecasted to accumulate a peak debt of $28.9 billion by 2033, with $8.9 billion still unpaid by 2081. This is all taxpayer-funded debt.
Private landlords of course invest in rental properties for profit, akin to any business venture such as a retail shop. However, current government policies, including bank lending regulations, interest rate increases, and tax penalties specifically targeting residential landlords, have made it almost impossible to make any money from rental housing investments. The annual expenses for buying a median New Zealand home now surpass the costs of renting by about $38,000 (which is $730 per week), a gap far too wide for most new landlords to bridge from other income sources.
To remedy this rental crisis, the government needs to shift its approach. Rather than vilifying and penalizing residential rental property investments, there must be a move to encourage and reward them. Recognizing landlords as valuable contributors to society who actually supply an essential need could, over time, alleviate the rental shortage.
This change in attitude and policy is essential for stabilizing and improving the rental market in New Zealand.