Rising rents are not just a New Zealand problem, it’s something much of Western world is experiencing.
Rents are rising across Europe, Australia, Canada and the US. The list of countries goes on and on. As the number of people renting rises, the demand for rental property rises and so too the rents.
The article I’ve referred to here is from the Urban Land Magazine and is entitled “More of Middle America faces the rising cost of Rental Housing”. They talk about the rising cost burden for rental housing and how it is expanding and pushing higher up the income ladder to affect middle-income households more significantly.
“Fundamentally, there is lots of high demand and not enough supply, and that is resulting in higher rents for everybody,” said Christopher Herbert, managing director of the Joint Center for Housing Studies.
One out of every four renter households is considered severely cost burdened, paying more than 50% of their income for housing and utilities.
So in a nutshell, house prices have become much more expensive, meaning less people can afford to buy. If they can’t buy, they rent. There is more demand for rentals – so the rents go up. Seems pretty simple to me. What we need is more affordable housing, so more people can afford to buy, which means less demand for rentals, so rental growth slows. Is this likely to happen?
We have been building affordable housing at Assured Property for 16 years. Good quality, low maintenance, compact, affordable rental property. Do we get any assistance with this, does anyone say well done keep it up? Hell no. Every development costs more, takes longer and comes with more hassles.
Back to the article. It states that many, including the CEO of The Federal Reserve Bank of Minneapolis, believe that “growing the supply of affordable housing options will require both public and private sector participation”.
That makes sense. Cooperation between the public and private sectors to build more affordable housing. Great. Except it’s not going to happen in New Zealand under this government. Why, because any housing that is is built they will want to claim the credit for. And more importantly, the property sector has a strong lack of trust in the government who view them as evil landlords out to plunder tenants. The government is right, the property industry is wrong. That attitude is not how you get property sector participants to work together with government to solve the housing crises for the poor buggers at the bottom of the ladder who have to fork out a huge chunk of their already small salaries to pay the rent. The landlords didn’t cause this rental shortage, but much of the government and media rhetoric makes out they did.
The system is broken and until we get a change of government it’s not going to be fixed. Even then, will the new government have the motivation and courage to make the major changes that are needed in multiple areas to make a real difference?
Changes needed include:
– changes to the RMA to make it easier and faster to develop within city limits. Ease height restrictions, give neighbours much less say (NIMBYs)
– make it harder to develop greenfield land. The infrastructure cost to councils is huge, the density of housing provided is too low, too much productive land is wasted, too much urban sprawl.
– reduce the power councils have and make them consent more quickly
– remove the ridiculously expensive liquefaction foundation requirements
– remove the ability for individual planners in council to hold up or even stop your consent processing because of person taste
– change the development contribution model to remove the huge upfront cost
These are only a couple of the things that need to change if we really want to develop more new affordable housing at scale. The list of changes needed is long.
What isn’t changing now is the direction of house prices. The cost of housing will continue to rise for some time yet, bringing rent increases with it. Investing in residential property long-term still makes sense, and by buying a property off-the-plans you enable developers like us to build more affordable rental housing. Your off-the-plans purchase helps us solve the housing crisis, one house at a time.
#assuredproperty #housing #rentals #propertyinvestment