PHOTO: NZ rents continue to climb. GETTY
This year, there have been calls for the Government to implement an immediate rent freeze – as New Zealand continues to bare the brunt of a cost of living crisis.
Some have said a rent freeze is badly needed to help lower-income families see out the crisis. Others, including property investors, believe it will just make matters worse.
The Human Rights Commission (HRC) released details earlier this year about how it would go about implementing a rent freeze.
For the HRC, too many New Zealanders are “sacrificing their fundamental human rights to pay the rent”.
The argument for a rent freeze
Advocates’ main argument for implementing a freeze is due to rent prices they say are “out of control”.
Ashok Jacob, a spokesperson for Renters United, told Newshub New Zealand’s rental market was one of the most unregulated in the OECD.
“Renters United is advocating for an immediate freeze on rents as a short-term solution to deal with out-of-control rental prices, as well as longer-term controls on rent prices to ensure rent increases are justified, such as when the property has been improved beyond bringing it up to minimum standards,” Jacob said.
The New Zealand Government implemented a rent freeze in 2020 when the COVID-19 pandemic first unfolded. “Unfortunately, the Government chose not to extend it post-lockdown or to implement it in subsequent lockdowns,” Jacob added.
Jacob pointed to the current cost of living crisis as one reason to freeze rent prices but added “the price of rent has been increasing beyond incomes since at least 2002”.
Figures released last month by Trade Me showed the national median rent price was $580 in August – an equal all-time high.
“Going into the next few months, we would usually expect to see rental market activity pick up during the warmer period,” Trade Me Property sales director Gavin Lloyd said. “Given the activity we have seen over the past few months, it will be interesting to see whether this Summer rents remain stagnant or if they head north again.”
But teal estate firm Barfoot and Thompson predicts rent increases could ease in the coming months.
In Barfoot and Thompson’s quarterly rental update in August, company director Kiri Barfoot said properties were needing a reduction in price to meet the market or taking longer to rent.
Barfoot said the cost of living was most likely driving this trend.
“People are grappling with very tight budgets and property owners will be recognising the importance of a shorter vacancy and a sustainable tenancy over [a] higher yield.”
The argument against a rent freeze
However, property investors believe implementing a rent freeze could hamper the ability to provide homes for tenants.
Property Investors Federation president Andrew King told Newshub while New Zealanders didn’t want to see prices going up, rent freezes weren’t the answer.
“First of all, why just rent? Rents only went up by around 4 percent last year when general inflation was 7.3 percent,” he said. “So rental price increases are not the main cause of price increases.
“If rent freezes are a good idea, then why not petrol or food price freezes?
“Many have the impression rental property owners are high-income people who don’t need to receive income from their rentals and can somehow afford to have their income capped… But the vast majority of rental property in NZ is provided by ordinary Kiwis owning one or perhaps two rentals who are trying to provide financial security for their retirement years.”
King stressed his belief rent freezes could worsen the supply situation.
“The best solution for tenants would be to reverse the three tax increases that have been applied to rental property,” he said. “This would reduce pressure on rental prices having to increase and may in fact see them come down.”
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