When a house is not your home | The Jackal

23 Jan 2012

When a house is not your home

On Wednesday, Voxy News reported Housing rental demand stays strong:

There is good news for landlords across much of the country with rental demand from tenants up 13% on a year ago, according to the latest analysis of Trade Me Property's house rental listings in the three months from October to December.

Head of Trade Me Property, Brendon Skipper, said the trend of strong tenant demand had continued.

"In the September quarter, we saw the number of enquiries from tenants was up 10% on 2010. This quarter it's up to 13% with Christchurch and three corners of the Auckland super city driving the growth."

In the Auckland region, demand from prospective tenants increased significantly in Manukau (+25%), Waitakere (+20%) and North Shore (+19%), while the central city (+9%) lagged the national average.

This might be good news for landlords, but it's most definitely bad news for tenants and in a wider context; the entire social fabric of New Zealand. It's also bad for the government, because an increase in rental demand puts more pressure on the accommodation supplement, which is already costing $1.2 billion per year and growing at an annual rate of 7%.

An increase in rental demand is partly due to our declining level of home ownership.... that is directly attributable to our low waged economy, which ensures a growing number of New Zealander's are no longer able to afford the Kiwi dream of owning a home.

One of the by-products is rental churn through a lack of security of tenure, which can affect children’s learning ability, reduce older people’s saving potential for retirement and negatively exacerbate many existing social conditions. Not only does this mean 59% of houses are not maintained properly, it also leads to increased transience and ensures many more people leave to find a brighter future overseas.

A favourite destination is Australia, with more governmental housing developments, better overall property management, special rules to ensure housing maintenance and 55% cheaper building materials... the lucky country definitely has its advantages.

Although Australia also experienced a housing boom, it was mainly driven by a huge demand for expansion, whereas New Zealand's rental boom is driven by property speculation and capital gain on investment... both of which have little regard for the wider social implications of falling home ownership and its associated social dysfunctions.

A recently released draft report on housing affordability (PDF) from the Productivity Commission, paints a somewhat gloomy picture of the current housing situation in New Zealand:

Stability of the home environment is widely considered to be important for social cohesion and family stability. Real house prices in New Zealand are markedly higher than they were a decade ago. The rise in real house prices has been associated with general declines in housing affordability, as indicated by a number of different measures, and in the rate of home ownership. These declines have contributed to increased demand for rental accommodation and additional pressure on the social housing sector.
The debt accumulation and wealth effects associated with the rise in house prices may have also exacerbated New Zealand’s last economic cycle. Interest rates and exchange rates were arguably higher than they otherwise would have been during the upturn and there has been greater contraction in demand during the recession. Debt accumulation may also be a factor in ongoing economic risks.


The available evidence suggests that greater numbers of households are coming to rely on the private rental market for long-term accommodation. A range of issues including poor quality, insecure tenure and inadequate income in retirement all indicate that the market is not currently equipped to deliver housing necessary for well-being in the long term. These issues appear to have been exacerbated by the dominance of small-scale investors, who are motivated by expectations of longer-term returns as opposed to growing a loyal client base by providing high-quality tenancy services.

That's the hardest hitting bits from the report, which essentially recommends the government sits on its hands. This is most likely because they're not directly affected by what should be considered a nationwide crisis, and in some cases will even personally benefit from investments (PDF), that rely on a continuation of the dysfunctional system.

Solutions to the crisis include increasing the minimum wage so people can more easily service their mortgages and implementing a Capital Gains Tax, which would drive down the incentive for property speculation.

However a CGT was Labours idea and the Productivity Commission (which directly quotes Roger Douglas); was set up by John Banks. It's therefore no wonder that they came out in favour of a predefined outcome, which appears to be designed to make Banks look good.

ACT is glad to have secured National’s support last term for the establishment of the Productivity Commission, which is tasked with improving productivity and therefore the standard of living for all New Zealanders.

Blah blah blah! It's worth noting that over reliance on the free market system, something the Act party often promotes, is what got us into the mess in the first place.

I would be surprised if Banks et al does anything to change the current dysfunctional system until it really starts to bite their bottom lines. By then, I wonder if there will be any Kiwi's left in New Zealand at all?