1 Feb 2018

Wellington rental crisis 'a perfect storm'

2:00 pm on 1 February 2018

A mother in Wellington is "struggling" to find a new place to live with her daughter after her rent went up by $100 a week.

no caption

Wellington rents have gone up, while listings have gone down. Photo: 123rf.com

Muskaan Arora is looking at a tiny but beautifully kept flat in Johnsonville, just north of Wellington after her rent went up "enormously".

But she's been told many times what's on offer isn't suitable for children.

Muskaan Arora says she is struggling to find a good place to live.

Muskaan Arora says she is struggling to find a good place to live. Photo: Supplied to RNZ

Chris Arcus, the landlord of the Johnsonville flat, says that shortage was reflected in the number of messages they got within minutes of the ad going up.

"You feel for them, and their needs, there are people with kids in tow, and I haven't got a block of flats to put them all in.

"It's really quite sad that people are having difficulty finding somewhere to live."

The rent on the Johnsonville flat that Ms Arora is looking at had gone up $25 per week to $300, after staying static for five years.

Earlier this month TradeMe head of property Nigel Jeffries said Wellington was bearing the brunt of a nationwide rental shortage, and it was expected to get worse.

In January rents were expected to reach record highs.

Available rentals are down 70 per cent on December 2016 in the capital, and prices have gone up 6.7 per cent.

Nationally, since the end of 2016 the number of flats available has been halved, and rents have gone up 2.2 per cent.

Stats from Realestate.co.nz paint a less extreme picture, still illustrating a tougher market. Typically, January is the month when the most rentals are listed - in Wellington city in January 2017 they had 247 listings; in January this year, 195.

The average price had climbed from $555 to $573.

no caption

Chris Arcus, a Wellington landlord. Photo: RNZ / Richard Tindiller

The 'perfect storm'

Manage My Property has offices in Wellington, the Kāpiti Coast, and the Hutt Valley and its director Richard Horne said the shortage was the result of the 'perfect storm'.

"Tenants are not moving as frequently as they used to, they're tending to stay longer in their tenancies. Property sale prices are quite high at the moment, and that's affecting us as a property management company because a lot of owners are just selling their properties."

Investors were being scared off; the Reserve Bank changing the loan to value ratio to 40 per cent meant they couldn't afford to invest in rentals.

Baby boomers were "cashing up and getting out" and ex-rentals were being snapped up by first-time buyers.

"The market is unusually tight, when I last looked on TradeMe there were 9300 properties available on TradeMe nationwide, that's just ridiculously low," Mr Horne said.

Grant Robertson Wellington Rental Crisis

Grant Robertson's constituency office. Photo: RNZ / Richard Tindiller

Wellington central MP Grant Robertson agreed it was a perfect storm causing the problem.

Claims that landlords were putting rents up $50 to match an increase in student allowances and living costs payments prompted him to put out a call on Facebook for stories of landlord exploitation.

He got a "tidal wave" of responses.

The brackish tales included renters whose room had gone up $90 each, and "numerous examples" of landlords putting rent up, but failing to maintain the property.

Mr Roberston acknowledges landlords have to raise rent, but his team will check the increases are legal.

"Within the law there is the capacity to challenge a rent increase that's well beyond the market rate, and so we are certainly looking at all the cases in that light."

The government was looking at the Residential Tenancy Act to see if there is space for improvements in tenant rights, landlord obligations, helping ease price increases, and getting rid of letting fees.

But Mr Horne said recent rent rises were a "catch up".

"Wellington has been static for four years until about October 2016 ... so when people like Grant Robertson say 'Hey you can't put the rent up by $50 suddenly', well, yes you can if rents haven't moved."

He said getting rid of letting fees could cause rents to go up.

"The letting fee is seen as money for jam really, by a lot of people, they think it's just money property management companies get for doing nothing, but it's not really the case.

"There's a lot of work we do to put a tenancy into place and that work is unpaid because there's no rent coming in for that property while it's vacant."

That included taking photos, writing copy, putting up signage, arranging viewings, and running background checks on potential tenants.

Giving up on Wellington

Wellington's situation has forced one couple defeated by the house hunt to head back to Hawke's Bay.

William Potts and his partner searched for a two-bedroom house for more than two months.

They were willing to pay $550 a week, possibly with a flatmate in the second bedroom, and extended his search from the central city to the northern suburbs, and the Hutt Valley.

"I want to be able to buy a property myself and I'm not finding that opportunity down here, even if you're in a good position," Mr Potts said.

University students, typically the most transient when it comes to flatting, are feeling the pinch.

Natasha Tziakis is a third-year student looking for a three-bedroom house with her boyfriend and another couple.

"We've been looking nearly every day, scheduling viewings, applying, filling in forms, because every company likes it done differently."

A house in Mt Victoria the group looked at, a three-bedroom downstairs flat costing $735, was damp, and had mould, while a house in Newtown in much better condition cost $650.

There were a number of things the government could do to try and ease a nationwide problem, Mr Robertson said.

KiwiBuild plans 16,000 homes built in the next three years, with a chunk in Wellington, alongside Wellington City Council's plan to build more social housing, and the government's plan to build more state houses that would, eventually, help.

For rent sign in front of two-storey houses.

Photo: 123RF

Too hard for investors

The Labour-led government also passed the Healthy Homes Guarantee Act, bringing in higher minimum standards for rental properties.

That sort of legislation is what's putting property investors off, investor Matthew Wright said.

The Healthy Homes act was good, but would add to the expense landlords faced, expenses tenants would ultimately pay.

Mr Wright believed the rental shortage in Wellington was normal for this time of year. He said there had been a shortage for years, but now it was getting more attention.

"I think there's dozens of reasons all compounding together to create the situation that we have.

"The costs are increasing, there's also regulatory change that's discouraging people from getting into it ... the expenses are going up."

Insurance, fire levies and rates were going up, Mr Wright said, and rents had to go up to match the value of a property.

This year, he only had two properties to list for rent, as people were holding on to rentals, rather than move out.

He says in the early 2000s, when the country opened up to foreign students, it was worse.

"I think there were more people looking back then than there are now, so it's history repeating every itself really, each January, each February."

That's little comfort for someone like Ms Arora, who's still looking for a place to live for herself and her daughter.

"It's becoming very hard for me, coming from work and then hunting for place to live.

"I'm very sad from the experience I'm having."