Is Labour in denial about the housing crisis? | The Jackal

5 Jul 2021

Is Labour in denial about the housing crisis?

There’s no escaping the fact that New Zealand has the least affordable housing in the world. Not only are young Kiwi families being locked out of home ownership, because wages are low in comparison to our white hot housing market, but renters are also feeling the pinch as speculators increase rents to invest in even more properties and offset future costs.

It’s a dire scenario that’s resulting in not just housing unaffordability, but also increased homelessness, which will ensure New Zealand continues to rank as one of the most unequal countries in the world. The end result of course is a decrease in owner occupied buildings, which studies have shown is the bedrock of any functioning society.

So what’s the Government doing about it? Well not a hell of a lot if the numbers are anything to go by. Sure, Labour extended the bright-line test and made some changes to investor tax rules. They've also built around 8645 houses since June 2018. But this has had little to no effect on housing affordability and, it appears, a detrimental effect on the rental housing market.

On March 23, Stuff reported:

Rents hit new highs in the provinces as Covid-19 increases popularity of remote working

Rents surged to new highs in the provinces in February as more people turned to remote working since Covid-19.

The national median weekly rent increased 1.9 per cent to $530 from February last year, with gains in all regions, according to the latest Trade Me Rental Price Index. The biggest gains were in Manawatu/Whanganui, up 16 per cent, Hawke’s Bay, up 15 per cent, and Taranaki, up 13 per cent.

Meanwhile the accommodation supplement hasn’t increased at all.

A shortage of housing has pushed up house prices and increased demand for rental properties, which has pushed up prices in that market. Increases in rents have outstripped gains in income, prompting concern about what level of increase is reasonable, and spurred demand for rent controls.

It's pretty evident that realtors and speculators have by and large made good on their threat to evict tenants en masse because the Government implemented its healthy homes standards. The net result of course is an increase in homeless people right across New Zealand.

On Saturday, the NZ Herald reported:

Housing crisis: Whangārei pair living in park trespassed as homelessness skyrockets

Whangārei rough sleepers are facing trespass notices amid a rapid rise in homelessness.

This week, RNZ revealed new figures showing the city's homeless population had increased from 21 people in 2018 to 293 in 2020.

The figures were part of a Northland District Health Board report released this week.

It said "a very high proportion" of homeless were Māori and that was "reinforcing and extending existing inequities" but it was "unlikely there is sufficient transitional housing in Northland to meet the need".

It was obvious to everyone but the Government that if realtors and investors were given any leeway to squeeze more money out of housing, they would. An increase in homelessness likely wasn’t a concern to them at all. In fact this works in their favour because people who’re caught in the rental poverty trap are less likely to come forward about their substandard rentals or abusive landlords for fear of becoming homeless.

It’s a catch twenty-two situation being that the Government is relying on tenants to inform them about any failure to comply with the healthy homes standards as well, which basically renders the policy toothless! Obviously there needs to be inspectors to ensure compliance, because the industry simply won’t regulate itself to any degree that's required.

So not only are rental properties going to be left vacant or dilapidated, which will cause an increase in poverty related crime and ill-health, the Government also loses out because tenants are effectively investing more money into non-productive assets on behalf of their landlords. This is the exact opposite of what the Labour Party apparently intended before it came to power, and despite the facts piling up, they’re still only willing to tinker around the edges.

Last week, Stuff reported:

Investor tax rule changes: Government 'will take action' if rents spike, Grant Robertson says

The Government “will take action if necessary” should investors hike rents to offset the effect of tax rule changes.

Finance Minister Grant Robertson issued the warning after introducing interest deductibility rule changes on March 23, which take away investors’ ability to offset home loan interest costs against rental income.

Robertson would not comment on whether he would consider national or targetted rental increase caps if landlords did hike prices.

He said for the year to February 2021, Stats NZ recorded rental price increases of 3 percent.

“We will be monitoring the impact on the rental market closely and we will take action if necessary.

“Tenants can also go to the Tenancy Tribunal if they think their rent is too expensive and not in line with the market to request a rent reduction.

So we’re back to the Government expecting tenants to piss their landlords off and potentially end up on the street. I mean doesn’t Robertson know that all the real estate agencies now keep a database of personal information on renters, which is likely being used to penalise anybody who tries to stand up for their rights?

“It is also worth noting that the changes to interest deductibility rules for current landlords are being phased in over a four-year period so any substantial price increases would not be justifiable in any event.”

It might not be justified, but it is happening. Grant Robertson’s language here clearly shows that he’s in denial about what's occurring in the rental housing market. It’s not a question of “if landlords hike prices” because they already have and will continue to do so well above anything that is justifiable.

We saw a similar blasé approach from the Prime Minister when she claimed that the banks were just speculating about rents increasing substantially due to a backlash because of the changes to investor tax rules.

Jacinda Ardern might claim to be watching the numbers closely in terms of rents compared to wage growth, but it’s clear that her eye has gone off the ball. With rents increasing in some areas by a whopping 16 percent, while wage growth is at 2.6 percent, the only recourse the Government logically has is a cap on rental increases. The longer they delay, the worse things will get not just in terms of quality of life for tenants, but also in terms of homelessness and the housing crisis in general.

Labour can simply kiss any benefits from their poverty reduction policies goodbye if they don't get housing right.

The Government should go even further to implement an Empty House Levy to penalise those speculators who've made their tenants homeless instead of fixing their substandard properties. This would also likely reduce the some 200,000 empty houses that are gathering dust in New Zealand at the moment. Otherwise Labour risks the housing crisis becoming its Achilles heel at the next election, even though they’re slowly inching forward in the right direction.