A Green Party proposal to cap annual rent rises at no more than 3% would worsen a shortage in rental properties by prompting more landlords to sell-up, an association representing landlords has warned.
Peter Lewis, vice president of the Property Investors Federation, said the Greens’ election policy announced on Sunday would also result in more rental deals being done on the black market where tenants had fewer protections, were it to be implemented.
Green Party co-leader Marama Davidson said rent controls were needed because the unaffordability of rents was causing “so much harm” and tenants were struggling.
Its policy would cap rent rises at 3%, the rate of inflation, or 1% less than annual wage growth – whichever of those three figures was the lowest.
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Davidson said the Greens had settled on a 3% cap as the maximum limit because that was the upper end of the band within which the Reserve Bank tried to contain inflation.
“For far too long, inaction by successive governments has forced thousands of people to pay through the roof to live in cold, damp, and unhealthy homes that are making them sick,” she said.
“The rental market more closely resembles a game of monopoly than a public good and it is landlords who hold all the cards.”
But Lewis questioned the logic of singling out rents for price controls, given that rents had been rising at less than the rate of inflation.
Inflation was last measured at 6.7% and food price inflation at just over 12% by Stats NZ, while annual rent increases were last recorded at 4.3%.
“Why aren’t they pushing for controls on, say, kumara or cabbages, rather than picking on rents, which are going up less than the rate of inflation?” he queried.
Some of the costs faced by landlords, including rates and insurance, were rising at a much faster pace, he also noted, with further steep rises expected to be in the pipeline.
Lewis, who owns 13 tenancies, said he was making a profit from being a landlord, but feared that might not be the case for a new generation of investors who would need to pick up the slack once the current generation of more elderly investors “shuffled off”.
“If that is impossible, then obviously that will decrease the supply as people fail to enter, or drop out of, the market.
“We already have situations right now in Waiheke Island and Queenstown where there are essentially no rentals available at all.”
It was not possible to get rid of price rises “simply by making a law”, he said.
“They will come out somewhere. Otherwise, it’s like trying to wear a corset for the fact that you are getting fat; it just doesn’t work.”
Lewis said he was also a consultant to the Citizens’ Advice Bureau and was aware of cases where tenants were paying landlords in cash, to keep their tenancies off the books.
“I can see that if these kinds of controls are brought in, then there are going to be more landlord-tenant deals that go into the black market.”
A better way to assist renters would be to restore the right of landlords to offset their own mortgage interest costs against their taxable income, as the benefit of that would flow through to tenants, he said.
Labor has yet to release its election policy on housing, but responding to the Greens’ statement, Housing Minister Megan Woods said the Government had begun making substantial improvements for renters, with rental standards and limits on rent rises, as well as a massive public house building programme.
The Greens also wanted to introduce a ‘rental warrant of fitness’ to ensure rentals were not breaching the Healthy Homes Standards.
Davidson, as part of the small number of MPs who did not own their homes, said renting should “still be a way of living a good life”.
“But what we have in the house of apparent representatives are far too many politicians who keep it in their best interests not to give renters a fair go.
“So we have politicians who are voting and choosing to keep their own personal interests as the status quo here.”
According to the 2023 list of MPs’ interests, property owned, Davidson, Tourism Minister Peeni Henare, Labor MP Ibrahim Omer and ACT MP Damien Smith did not own or have any interests in property.
Davidson promised in the first 100 days of a new government the Greens were part of, “we will introduce a new Renters’ Rights Bill to give effect to these changes”.
The party would require landlords to tell new tenants what they charged previously tenants. Rent controls would also extend across different tenancies – meaning the new tenants would not be charged more than the rent cap.
Landlords and some economists have previously warned that rent controls could act to reduce the supply of rental properties.