Themes and Issues
Housing is becoming less affordable
Housing has generally become less affordable since 1986. This is the case for both owner-occupied and rental houses and is particularly the case in the main urban centres (especially Auckland ), although it is also a problem in some rural and provincial centres where quality housing is in short supply. It may also be a problem in areas such as Nelson and the Hawke’s Bay where large seasonal influxes of labour put pressure on housing supply.
Those people unable to save the deposit necessary to purchase a home will have little choice other than to rent. Most renters (apart from the lowest income earners) will need to find housing in the private rental sector.
While people who rent tend to spend less of their household income (21.7%) on housing costs than home owners with mortgages, who on average spend 24.2%, the gap is narrowing. Over the last 15 years the gap between housing costs for mortgaged home owners and renters narrowed steadily, and housing costs faced by renters grew at nearly three times the rate of growth of their household incomes.
While rental housing affordability is largely related to property values and market conditions of supply and demand for rental housing, the RTA does also impact on housing affordability in two main ways.
Firstly, the rights and obligations that it imposes on landlords and tenants affect decisions to invest in rental housing and the rents that landlords charge. Being a landlord involves both risk and costs. These costs may deter some people from becoming landlords and providing affordable housing for low-income earners. Changes have been made to help landlords trace ex-tenants who owe them money but there are still concerns about how payment orders from the Tenancy Tribunal can be enforced against tenants. Many landlord/tenant disputes and evictions occur over unpaid rent.
Secondly, the RTA controls how rents are adjusted. It:
- requires landlords to give at least 60 days’ notice of rent increases
- prohibits landlords from increasing rents for 180 days from the start of a tenancy and to no more than once every 180 days thereafter
- prohibits landlords from increasing rents if there is a provision t o the contrary in a tenancy agreement
- provides for tenants to apply to the Tenancy Tribunal for an order to reduce a rent increase to an amount in line with market rents.
We know from the 2003 National Landlord Survey that many landlords prefer not to rent to people and families that are likely to be low-income earners. We also know that some landlords have expressed concerns regarding the balance of rights and obligations in the RTA and the extent to which they perceive these to favour tenants. In particular, landlords have raised concerns regarding their ability to identify and manage ‘bad’ tenants and the:
- different notice periods for landlords and tenants;
- emergency procedures for rapid eviction; and
- access to Tenancy Tribunal findings.
An important focus for the Review is to ensure that the RTA, through its provision of clear and balanced rights and obligations and effective dispute resolution measures continues to facilitate the efficient operation of the rental housing market. To this end there is a need to consider the factors that influence the decisions of landlords to provide affordable accommodation, especially to low income earners. These factors are likely to include both the personal preferences and biases of landlords, and also the extent to which the provisions of the RTA provide for effective management of properties in what some landlords consider a ‘difficult’ market.
Other options for consideration include the extent to which Government, through funding or other policy initiatives can encourage the supply of affordable quality rental houses for low-income earners.
For instance, could a government agency manage tenancies directly with private landlords on behalf of tenants? Could rents be paid directly by a government agency into a landlord’s account if a beneficiary tenant chose to do this? If such policies were considered, should landlords have to meet specific requirements? These could include, for instance, requirements around property management, affordability and quality of their rental properties.
Questions
- Does the RTA impact on the supply of affordable housing?
- Are the rent control provisions of the RTA appropriate?
- How can we reduce the costs faced by landlords?
- What can be done to encourage private landlords to provide affordable rental housing for low-income earners?