In 2017, one of Labour’s election promises was to make life better for renters. We look at the last three years and see whether they have delivered.

As we approach the end of the first term of this Labour-led Government, we have decided to look back at the last three years to see if they have really lived up to their 2017 election promise in regards to making life better for renters. To be fair to them, they have just about delivered on all of their promises, but have they really made life better for renters or have they only been successful in driving up rents through a barrage of forced changes that landlords are having to make?

In their 2017 election campaign, housing was their major priority but it has hardly been mentioned so far in 2020. The Kiwibuild fiasco along with a focus on the COVID response has probably led to Labour being a little more reserved in regards to housing this time around. Four years ago, Phil Twyford was calling on Government to declare a state of emergency over the nation’s housing crisis. However, since the Coalition Government came to power, the public housing waitlist has more than trebled with over 18,000 now on the waitlist. Five years ago in September 2015, there were only 3,399. Want to declare an emergency now?

This situation for many renters in New Zealand has become more desperate as families on the poverty line struggle to make ends meet. However, have rents skyrocketed due to this Government?

We have broken down the data that is available to us from the Ministry of Business, Innovation & Employment. The numbers are really compelling. Since this Government has been in power, the mean nationwide rent has increased by 13.35% or $57. The previous term under the National government, rents increased by 14.78% or $55. The change of Government did nothing to slow down rents but on the flip side, many may have thought that rents would have increased further due to the number of extra costs landlords have faced over the past three years.

Some regions fair better than others.

Auckland mean rents have only increased by 2.37%, Christchurch only 5.23%. However, Wellington has seen consistent growth in rent which has increased by 17.22% over the last three years. What makes this number so much more significant is that in the last 12 months according to data provided by Trade Me, rents have not increased in the last 12 months. This is the first time this has happened in five years.

Rents sore in provincial New Zealand

Across the country, provincial regions have seen significant growth as well. The only region which has seen a decrease in rents is Queenstown and this can be solely attributed to COVID and the lack of international tourists.

  • Palmerston North: $65 or 21.31%
  • Masterton: $58 or 21.09%
  • Buller: $62 or 30.54%
  • Gisborne: $92 or 30.77%
  • Dunedin $103 or 27.39%
  • Whanganui $86 or 34.13%
  • Horowhenua $101 or 38.4%

Provincial New Zealand has seen significant growth in mean rents but compared to sales, it does not come close. Gisborne, for example, has seen median houses prices increase by $245,000 or 95.7% over the first term of this Coalition government. Between 2017 and 2014 median prices dropped by -4%. 9 of the 16 regions have all seen median house prices grow faster under the Coalition compared to the previous Government so promises to make housing more affordable appear to have failed so far.

This table shows median rents prior to the last five election campaigns and compares what has happened to rents under each Government. We also look at Average Household Income compared to estimated median rents per annum and calculate what rent is as a percentage of total household income. (Information obtained from the Ministry of Business, Innovation and Employment)

Also, with the increase in prices, the pressure is subsequently placed on rents. There appears to be no slow down of investor activity, if anything, this has increased substantially as record low-interest rates have seen investors with plenty of equity buying up aggressively. Government changes in legislation have done little to dampen enthusiasm for investment properties. As yields on rent get smaller and smaller due to increases in median prices, investors push for higher rents in an attempt to cover as much of the operational costs as possible. This makes life much harder for people on low-income jobs as well as beneficiaries, as people who fall into this category would not have seen incomes increase by such margins.

The evidence that we have looked at shows that Government intervention rarely influences the market the way it intends to. The only example of a Government getting it right was in Christchurch post-earthquake. Gerry Brownlee took the radical decision to immediately release land that was to be progressively released over a 30 year period. What happened next was that housing met supply and this kept prices, as well as rents in check. The difference between a three-bedroom house in Wellington and Christchurch is around $150 a week. Build it and they will come!

A raft of changes over the last three years with potentially more to come

What has been radical as well as continuous is the change in legislation and tax policy. Since 2017, we have seen the following changes.

  • The passing of the Healthy Homes Standards
  • The removal of the letting fee
  • The passing of the Residential Tenancies Act 2019 (admittedly this was well on its way when National was in Government).
  • Removing the ability of investors to offset losses against their own personal income. A practice that is known as negative gearing.
  • And finally, the passing of the Residential Tenancies Amendment Act 2020 which has seen a significant increase in the rights of tenants.

Ironically, the only policy Labour failed to implement from their 2017 election promises was their only landlord-friendly policy of giving access to grants of up to $2,000 for upgrading insulation and heating. Each of these policies is aimed at helping tenants. The only one which would have made a material difference to tenants was the removal of the letting fee which the landlord now has to front up with.

Ms Ardern promised to make life better for renters back in 2017. Has she delivered?

Yes, healthy homes standards and the pending amendments will make a difference and as I wrote back in July, tenants have never had it so good. Will the changes stop or will there be more changes if we get a Labour-led Government?

My view is yes, there will be more changes to come. Some will be planned and others will be forced. 

Expect to see tenants allowed pets within the next three years. Documents from the Ministry of Housing and Urban Development indicated that the Government have yet to come to a decision on this based on a large amount of submission made with split opinions on both sides of the debate. The Government will be forced to set guidelines as to what are acceptable levels of Methamphetamine before a property is deemed to be contaminated. This has to be enforced by the end of February 2021. In fairness to the Government and in particular Phil Twyford, it was a huge relief to see the Gluckman report back in May 2018.

Our bond system is antiquated and extremely expensive for tenants wanting to move into a property. A state-run tenant insurance scheme would be much fairer to tenants rather than having to front up with four weeks rent. I would not be surprised to see reforms made around bonds. Finally, Tenancy Tribunal will also come under the spotlight, especially if we see an increase in the number of cases due to tenants having nothing to fear or lose as well as landlords forced to going to the Tribunal to remove antisocial tenants. Wait times could become considerably lengthier.

Rent controls unlikely to emerge

There is also a call for fair rent by groups such as Renters United which means that rents can only increase in line with inflation. This is currently at 1.5% and this I am sure would be greatly supported by many renters.  Rent controls, however, seem highly unlikely during the next term. As a policy, it is highly controversial and there are strong arguments against them. Rent controls have had limited success in different countries around the world. A step down this path may be as politically as popular as the Capital Gains Tax.

For the majority of tenants, life may not appear to be better yet. There are still way too many properties in poor condition and rents have certainly not slowed down yet. However, over time life will improve as landlords are forced to make improvements to their investments. The evidence is clear that for any landlord who is whinging about the changes in legislation and making noises about selling, there are plenty of other investors out there who are more than willing to replace them.

The key issue though is housing affordability as well as keeping rent increases at a sustainable rate. As we keep arguing, that will only happen if we ensure supply meets demand. Equally importantly, we have to ensure that we build the right type of housing. High density, three-bedroom housing is always the most sought after housing in New Zealand.

Let’s see what the next three years bring.