APIA Blog

RSS Feed

Rent (un)affordability: It is not how much landlords spend, it is how much tenants make

Friday, April 30, 2021

IMG SOURCE: PIXABAYGiven the drastic nature of the government’s Housing Package, it is hardly a surprise to see rental (un)affordability being thrust into the forefront of our national psyche.

In the immediate aftermath of the 23rd March announcement, social media was ablaze with talks of a wholesale rent spike. Uncertainty and fear dominated the moment. And trigger-happy-finger-tapping housing market stakeholders (landlords, tenants, first home buyers, homeowners, industry professional) simply reacted. Should they have right there and right then? Maybe, maybe not. Was it human to though? Absolutely. Are these comments precursors to what is to come? No, not if history is anything to go by. 

The media, not content with sitting idly by, took a big bite out of that juicy sensationalism pie, cherry-picked and held up the most inflammatory rent increase posts as some kind of landlord manifesto. A real modern-day Nostradamus it is. Sure, Facebook is where we all go for unfiltered truth. Jacinda seemed unperturbed. Grant shrugged and told tenants to look elsewhere. Opinion columnists eager to position themselves as ‘one of the good ones’ went full #HolierThanThou by decrying the moral decrepitude of any landlord who dares to even contemplate a rent hike as if economic imperative is never a factor of rental ownership. All the ingredients are in place to ignite talks of rent control, someone just needs to light a match.

And light it Renters United definitely will come Sunday when it launches its poster campaign:

IMG SOURCE: RENTERS UNITED

The visual is, without a doubt, a powerful indictment of the state of renting in New Zealand. Anyone with half a heart would find it an outrage to see rents outpacing wages by nearly two-fold. But the further we look, the less compelling RU's narrative is. A comb-through of RU's Fair Rent Now campaign website yields no source citation of the campaigner's wage growth and rent growth figures. Are they sourced from a government department? Are these year-on-year growth or cumulative? Why wages? Why not household income given it is not uncommon for there to be more than one income earner in a rented household? Why a 2010 start date? Has RU simply created its own index? Why has RU chosen to be coy? With numbers this powerful, surely RU would not allow the integrity of its position to be impugned by being less than transparent about its methodologies. 

Juxtaposing this very emotive narrative against CoreLogic New Zealand's latest Housing Affordability Report (February 2021 dated Q4 2020) leads to even more questions about exactly how affordable it is to rent. After interlacing its own data with that of figures sourced from Infometrics, the Reserve Bank of NZ and MBIE, CoreLogic's observation is that housing affordability for renters is 'about normal at present' tracking at the usual 20% of household income since at least as far back as 2004. 

IMG SOURCE: CORELOGIC NZ THE NZ HOUSING AFFORDABILITY REPORT FEB 2021

The data giant goes on to state in the report that 'over the long run, landlords can’t always pass on higher costs to tenants in the form of rent increases – in turn, because tenants’ affordability is anchored by the pace of their wage increases (which has recently been fairly low).' These observations are very much in line with the acute awareness long-term landlords have of the market's affordability ceiling. Simply put, renting is not a linear extraction economy where every time the landlord spends a cent he could rightly expect to receive at least an extra cent in return from his tenant. Landlords who have successfully held properties for the long term understand that to flirt with a tenant's accommodation budget is to court vacancy and overcrowding at the rental property. Neither are terribly palatable.

We are not suggesting that any talks of rental unaffordability are nothing but smoke and mirrors. God knows the disparate information out there creates nothing but absolute confusion. What we are saying is that since affordability goes to the heart of renting as a lifestyle (tenant's) and a business (landlord's) surely the right approach is for renters and rental providers to work together. APIA members have repeatedly expressed a preference for investing in residential rental properties that is borne out of a genuine desire to provide housing in the community as well as an acceptance that property (above all else) gives their families a viable pathway towards financial freedom. This perspective leads to the inevitable but not unwelcomed conclusion that landlords and tenants coexist in symbiosis. When renting is more affordable for tenants, owning the rental becomes more affordable for the landlord. Housing affordability is pivotal to social outcomes. Landlords and tenants can do a great deal of good if we work together to address the big systematic challenges of renting. And that has to start with casting aside political motivation in order to study and tackle affordability through the lens of unassailable facts. 


Recent Posts


Tags

house prices cat housing affordability commerce commission cash-flow ventilation Keith Hay Homes beginner investor rental wof legal cost structure Must know Landlording anti-social behaviour Must knows rta tenancy tribunal Zodiak Management bond form investor personal growth Property (Relationships) Act Investment tip will CoreLogic ring-fencing daikin winz nzpif covid-19 market travel bubble property early termination retaliatory notice unitary plan damage off the plan boarding house mortgage inspection parry v inglis first home buying trademe reserve bank Standards New Zealand market rent quiet enjoyment television interest only DTI robert kiyosaki tax bankruptcy interest deductibility property cycle building barfoot and thompson wins interest limitation clnz kiwibuild insurance sale and purchas maintenance HHGA water bill HSWA debt to income return Question and answer scotney williams watercare wealth creation tenancy issues housing package heat pump rental market buyer's agent landlord letting fee housing bubble election 2017 negotiation bond Case study How to ocr re agent bad tenant RTAA 2019 Holler Q&A shortland chartered accountants subdivision initio rent arrears education auckland council property management government short term rental skill shortage asbestos interest rates Sponsored post principal and interest LIM short-term rental property maintenance Tribunal case study management heater CCC advice meth rent increase Editor's Choice Guest blog income auckland lvr ask an expert development tenant Market report privacy shower dome insulation yield khh finance fixed-term tenancy Gluckman inflation warren buffett Kris Pedersen Mortgages and Insurance extractor fan ird relationship meth contamination trust p lab mindset lockdown apia legal HHS heating warm up new zealand capital gain rent control partners cgt investment strategy speculator buying TCIT letting rtaa2020 minor dwelling Investor story tenancy services Level 4 rent data security rta reform opes partners financial advisers act twg report termination gluckman report airbnb worksafe property apprentice trespass RBNZ banking anz brightline Jeff Bezos property value business renovation smoke alarm sale and purchase sublease equity productivity positive cash flow recycling equity election2020 buying rules holiday house debt enforcement

Archive

Introducing Our Partners
Principal Sponsor - Kris Pedersen Mortgages & Insurance logo Gold Sponsor - Barfoot & Thompson logo Gold Sponsor - CoreLogic logo Property Apprentice logo The Insulation Warehouse logo The Renovation Team logo The New Zealand Property Investors' Federation logo