New Zealand needs to get serious about reform in the rental market if we don’t want the next generation shut out of the housing market, writes the University of Auckland’s Bill McKay
We think of ourselves as a nation of home-owners (or we want to) but many more people rent than we think. With the continuing drift to the big cities and with housing affordability getting worse, very soon we could be a nation of renters. Serious thought about this issue is needed to bring rental policy into the 21st Century.
More people than we think rent already: 450,000 households according to Statistics New Zealand. That’s nearly a third of our 1.5 million households. In terms of population, it’s close to half: ‘The Forgotten 50%’ as Robert Whitaker puts it in a recent article for the PSA. With increasing house prices and decreasing availability of homes, the next generation, ‘Generation Rent’, will be shut out of housing ownership. This means we need to get serious about reform in the rental market. Baby boomers still think of it as a short-term option, but for a big chunk of New Zealand it’s the long-term reality and there are two major problems with the current system: tenure and quality.
To start with tenure, there is a stigma about being a renter in a society fixated on ownership. Kids and pets are a problem; you can’t paint walls or even put up pictures or shelves without permission. This is a vague area in the Tenancy Act; you have the right to ‘quiet enjoyment of the premises’ but can’t ‘alter or attach anything to the premises without the landlord’s written consent’. You are subject to inspections that can involve filming every room in your home. You don’t complain to the landlord about anything due to fear of rent rises or termination of the lease. The landlord can give you 90 days’ notice without reason, or 42 days if a member of their family wants to move in or they want to sell. The average tenancy in Auckland is just over two years, and a high turnover of tenants can mean children are constantly moving schools.
We need more than the minor reforms this Government has initiated over the past few years. We need a paradigm shift for the new century to align ourselves with OECD nations where renting is a common and life-long option.
All this breeds, among tenants, a sense of insecurity and a reduced sense of belonging to a community. It reduces involvement, neighbourliness and engagement. And high rents mean people can’t save, and many can’t afford to run heating in winter.
In terms of quality, the standard of housing in New Zealand is worse than we imagine. About 40,000 kids are hospitalised each year for respiratory illnesses directly related to their homes. This peaks in winter and most are from rented accommodation, including from properties owned by Housing New Zealand. On discharge, they return to the same environment – and then 50 percent are re-admitted. Many of our houses lack insulation, efficient heating and moisture control; they are damp, cold and condensation is a big problem. The rheumatic fever rate, again directly related to housing and overcrowding, is 14 times any other OECD country: this is a national disgrace.
Landlords have horror stories about tenants too, but the adversarial relationship between the two groups is quite unlike other sectors of society, particularly the service industries where tenants would be seen as customers rather than potential problems. We need more than the minor reforms this Government has initiated over the past few years. We need a paradigm shift for the new century to align ourselves with OECD nations where renting is a common and life-long option.
Even in some of the most densely-inhabited cities on earth, governments have instituted controls that enable people to live relatively cheaply and for long terms. And the cities benefit hugely from enabling a range of the population to live close to work and play, at rents low enough that they also contribute to the urban environment through local expenditure, diverse neighbourhoods, and social and civic engagement.
Better housing and rentals will create a healthier workforce, improve productivity through less sick days, free up the health system, get better education outcomes for kids, allow young and old to save more, and create happier, healthier neighbourhoods and more engaged and caring communities.
In this country, your house can injure you just as effectively as a car. It’s a matter of public safety for the vulnerable demographics so, as we do for drivers and cars, why don’t we license landlords and register dwellings, require Warrants of Fitness, and set up an independent inspection service that also handles the bond?
We need to make more allowance for long-term tenancies and provide more freedom for tenants to paint and alter their premises, just as in the commercial rental sector. And we need stabilisation of rents. On the supply side, more rentals in the market would help with the latter, so we need large-scale rental dwellings provided by long-term investors (such as superannuation funds or iwi) or central and local government. Importantly, we must allow renters to buy. The latter means tenants have an investment in the premises as well, improving their treatment of the place, allowing them to put down roots in their local community and alleviating their need to save for a house when they should be saving for retirement.
The good news is that new approaches to rentals are starting to happen. ‘New Ground Living’ is a partnership at Auckland’s Hobsonville Point where 47 of 208 houses will have leases up to seven years long with pegged rent rises. It’s a partnership between a developer, the New Zealand Super Fund and Ngāi Tahu.
This is what we need: long-term investors so we can get renting away from short-term, private profit-focused operators. Better housing and rentals will create a healthier workforce, improve productivity through less sick days, free up the health system, get better education outcomes for kids, allow young and old to save more, and create happier, healthier neighbourhoods and more engaged and caring communities. In the next few decades the majority of our population is going to need this. We need to be bold now.