9 Aug 2023

Landlords benefiting from lack of housing supply - Renters United

2:30 pm on 9 August 2023
Christchurch houses

Renters United president Geordie Rogers says the cost of renting a property is increasing faster than the cost put on to landlords (file image). Photo: RNZ / Nate McKinnon

New research shows an urgent need for more housing, as landlords take advantage of the low supply, housing and poverty advocates say.

A report by the Treasury, the Reserve Bank and the Ministry of Housing and Urban Development highlighted the link between tenants' wages and rental costs.

Renters United president Geordie Rogers says low supply and high demand allow landlords to charge as much as their tenants can pay.

"We don't have enough houses," Rogers said.

"Every single time we get a pay rise it's immediately eaten up by the increased cost of rent, going straight to our landlords."

The report also noted that mortgage rates only had a marginal impact on rents.

"We consistently hear landlords saying the reason they're putting rent prices up is due to the increased costs they're taking on," he said.

"A lot of the forecasting done by the Treasury shows that actually isn't the case, and rather landlords are setting rent prices at the maximum amount they can get."

The report found rent prices were increasing at a faster rate than inflation. Rogers said it was clear landlords were benefiting from the lack of housing supply.

"We know that the cost of renting a property is increasing faster than the cost put on to landlords," he said.

"It clearly shows that landlords are setting rent prices as high as possible, and a lot of that comes down to the fact that we do not have enough houses."

Landlords have to recover cost increases - federation

The New Zealand Property Investors Federation vice president Peter Lewis said landlords were not immune from rising costs and should not be blamed for increasing rents.

Many landlords were working class people struggling with costs themselves, he said.

"Like anybody else, property owners are being affected by all sorts of rising prices... council rates are going up, insurance costs are going up, any maintenance costs are going up, water bills are going up, and like any business, in order to remain viable, we have to recover those costs from our customers who happen to be our tenants, we are not immune to that," he said.

The government's phasing out of interest deductability on residential investment properties was an additional pressure on landlords and a major factor in increasing rents, he said.

Lewis called this a "tenant tax" and said it was forcing landlords to either transfer the cost to tenants or sell up.

"If a landlord finds their tax bill on their property going up by $100 a week, which in many cases it is, they have to recover that. They would need to put up the rent by $150 a week because that increase is in itself taxable.

"So a lot of this extra money that tenants are now having to pay to the landlord goes directly from the landlord to the government," he said.

Lewis called for the government to reverse the change.

Choice for some between decent food for kids or rent

The Child Poverty Action Group said parents were spending a bigger portion of their income on rent than ever before. Housing spokesperson Alan Johnson said that was not fair to kids.

"People have to choose between having decent food for their children or being able to pay the rent, having enough income at the end of the week to provide for their children," he said.

"Clearly the rent is a significant contribution to the poverty and hardship those families experience."

If landlords could not provide affordable rentals, he said it might be time for the government to step in.

"For too long we've relied on mum and dad landlords to provide so-called affordable rental housing to tenants," he said.

"Perhaps those days are over and we need to move to expecting the state to do a lot more."

Johnson said tenancy laws had to be tightened to address the inequalities between renters and landlords.

"We need a radical review of our tenancy policies to ensure that the balance of power between landlords and tenants is shifted towards tenants."

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