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No obvious remedy to rent rise

A lack of housing supply is the cause of high rents, but disagreement on how to solve the problem abounds.

Tim Horsburgh, President of Wairarapa Property Investors, said that increasing rent prices come down simply to supply and demand.

“We need to increase the supply of properties that are available for rent,” he said.

“When supply outstrips demand property owners will reduce rents to fill vacancies.

“All efforts need to focus on the supply side, and less so on the demand side.”

Wairarapa MP Kieran McAnulty said he was actively working to bring back Kainga Ora to Wairarapa and Tararua, the only two districts in New Zealand without any state housing.

“This is exactly why I’m pushing so hard for Kainga Ora to come back to Wairarapa,” he said.

“They would be able to house a large number of people which would make a huge difference.”

Government rules were designed to encourage property investors to build new houses to add to the stock, rather than buy up existing stock which takes away from first home buyers, however, Horsburgh said the laws were having the opposite effect.

“Rising interest rates will bring property values down, and as the market cools those properties that don’t sell quickly will soon become rental properties. This will start happening soon, which will help increase supply.

“To get more long-term rentals to the market we need property prices, and land values to come down and stabilise, and we need to encourage more investors to invest into long-term housing, so they are making an adequate return on investment based on cashflow. To do this the numbers must work, and property investing must be attractive.

“For existing rental property, taxing rental income and not profit is the way to encourage more investment into housing for the private sector, in fact this tax law change is having the opposite effect which will only reduce the supply of rental property and push up rents.”

When asked about bringing Kainga Ora state houses back to Wairarapa, Horsburgh said he supported the idea but disagreed about how it could be done.

“Perhaps a better option would be for the government to work closer with Trust House, so Trust House can build another 200-300 new homes and the government can offer the same rent subsidies as they offer to Kainga Ora.

The government’s Public Housing Plan for 2021-2024 allocated 8000 new homes but did not include any public housing for Wairarapa. All public houses in the region were sold to Trust House by the National government in 1999, which still owned and managed almost 500 rental homes in Masterton, Martinborough, Featherston, Pahiatua and Dannevirke.

The Greens were calling for rental control measures.

“Over the past year, landlords have hiked up rental prices like never before, making it harder for people to afford other essentials such as healthy food and heating in winter,” Green Party Co-leaders Marama Davidson and James Shaw said in a letter to Prime Minister Jacinda Ardern.

“We urge you to immediately freeze rents as an interim measure while we work together on a permanent plan to strengthen rent controls – including limits on annual rent increases and linking rents to what previous tenants paid.”

McAnulty said that rent controls had not been proven to work overseas and could scare off potential investors who could bring new rentals to the market. Horsbrugh also disagreed with the introduction of rental controls, saying they could not be applied fairly.

“They haven’t worked in other countries, as soon as the rent control comes off, things catch up. Rent indexation is almost impossible to implement fairly, especially when properties go through major renovations.

“Should rent controls be introduced to help tenants there will need to be something to offset increasing costs for landlords such as delaying the introduction of the new interest deductibility law.”
Horsbrugh said landlords had no choice but to raise rents or face making a weekly loss.

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