It’s election year, the time minor parties go mad for making big promises. The Green Party’s proposal to cap annual rent rises at 3% is right up there with their other policies, including delivering free lunches to every school.
In a shameless play for renters’ votes, the Green Party wants to cap annual rent rises at no more than 3%.
The proposal headlines the Green Party’s pre-election housing policy announcement, the cornerstone of which is a renters’ Rights Bill.
Provisions in the Bill include a guarantee of ‘fair’ rent, a warrant of fitness for housing safety and warmth, and a national register of landlords and property managers to track properties rented, ownership, and rents.
Do landlords have anything to worry about, really?
A National-Act coalition won’t have a bar of the Greens.
Labour’s decision to rule out capital gains or wealth taxes prompted Greens co-leader James Shaw to say that there was a “very real possibility” the Greens would not work with Labour as a result.
But anything can happen once votes have been counted and minor parties wrestle with their principles in a bid for power.
In the unlikely event of an emergency – I mean Greens forming part of the next Government – what could we expect if rent controls become a thing?
Landlords are already under the pump
Rising rates, insurance price hikes, and the staggered removal of tax deductibility – suddenly the economics of residential property investment aren’t as rosy as they used to be.
Throw in rent controls and I imagine more than a few landlords will find other places for their capital.
The Greens might be better advised to push for price controls on most grocery items – food price inflation is around 12% compared to annual rent increases of 4.3%.
So, are rent controls even a good idea?
One analysis of San Francisco found an expansion of rent control in 1994 led to a 25% decline in available rental units among the newly rent-controlled apartments.
A survey by the NZ Association of Economists last year found that 80% of economists on an expert panel said rent controls had not improved the amount and quality of affordable rental housing in places with rent control. Less than 6% believed rent controls had a positive impact.
NZ Initiative chief economist Eric Crampton said New Zealand already had a rental shortage and price controls would make it worse.
He said people who would benefit from investment properties being sold were probably not those who were most vulnerable in the rental market.
People who were marginal tenants would find it harder to find somewhere to rent, he said.
“The best protection for tenants we can possibly have is a very thick market of rental properties so it’s easy for people to put up more housing for rent, so all existing landlords face competition.
Economist and famously reluctant homeowner Shamubeel Eaqub weighs in
Eaqub argues that rent controls work in places with a good supply of new houses. Many regions in New Zealand face an acute housing shortage.
“Unless rent controls work in a place with a good supply of new houses, the benefits accrue to existing renters but mount costs on renters who missed out and landlords,” he said. “Society is likely to be worse off unless the housing supply is increased alongside rent controls.”
A rental cap would serve only to decrease rental housing supply as residential property investors exit, or new landlords failed to enter the market, he said.
Meanwhile, consents for new residential buildings continue to plunge, down 11% annually in the year to May.
So much for supply.
The economics of residential property investment are changing. Talk to a Goodwins property manager before taking the leap. Call 0800 GOODWINS.