Rental Caps?

Research by Building Better Homes Towns and Cities National Science Challenge (BBHTC) between 1986 and 2018 shows there was an increase of around 191% of properties owned by investors, approximately a quarter of the occupied housing stock in NZ and concluded that the increased ownership of property by investors has changed the market from a housing market into a property market and has added fuel to the NZ housing crisis.

A housing market is a market in which homes are bought and sold either for owner occupation or through rent,” researcher Kay Saville-Smith said.

“A property market is around housing being a commodity that is not necessarily coupled with the consumption of housing services – it may be used to cross-collaterise, or a speculative investment, or a future, or realising financial returns on investment – exactly the same function as the stock/share market.”

Until this year property speculation remained largely untaxed in NZ, landlords have been able to claim repair and maintenance costs, expenses related to the property and mortgage interest.  Properties purchased after 31 March 2021 can no longer claim mortgage interest and for purchases prior to this the ability to claim is being phased out over a 4 year period.  Inevitably landlords will increase rents and this could take rents to levels that are unaffordable for many people. 

If rents continue to rise the result is less disposable income to be spent in the economy, more demand for social housing (demand has increased by 548% since December 2015) and hardship.

During Covid Level 4 lockdown a six month freeze on rents was introduced. What may happen given the latest arrival of the Delta variant now in New Zealand.  Post lockdown, rents have continued to rise.  There is some talk of rent control and the Associate Housing Minister didn’t rule out the possibility of rent controls when asked earlier this year. 

Is it inevitable that rents will be capped?

Jane Adams

Property Management

propertymanagement@proppy.co.nz