National and Greens grill Government on rising rent

Wellington earned the unfortunate distinction, with Auckland not far behind.

The Government faced questioning over rising rents by both National and the Green Party, as renters continue to struggle with increasing costs to keep a roof over their heads.

However, the Government insisted incentives put in place to increase housing supply contributed to efforts to keep rent hikes down.

National’s housing spokesperson Nicola Willis questioned Housing Minister Megan Woods in the House on Wednesday about median rent increases since the Government’s $3.8 billion housing package.

The housing package, which was announced in March 2021, aimed to speed up the pace and scale of house building in New Zealand. The Government also committed to building more social housing units, although construction has been hampered by ongoing supply chain disruptions and labour shortages.

Other changes in the package included the doubling of the bright-line test, the removal of the interest deductibility loophole, and increasing the caps for the first home loan grant.

Woods said median rents had increased by 4.7 per cent nationwide between March and December 2021, according to Stats NZ. In the same time period, the number of people on the waitlist for public housing has increased by 1838.

She said it was important to note there were regional variations in rent increases.

For example, Stats NZ data showed median Auckland rents went up 2.4 per cent between March and December last year while there was a strong increase in supply, Woods said.

“This shows that where we increase supply, there will be more moderate rent increases.”

Willis pointed out that December 2021 data from MBIE showed median rents nationwide reached $540 per week, an increase of $50 from last year. That represented the highest yearly increase on record.

Meanwhile, a November 2021 report by the Ministry of Social Development found more than 60 per cent of low-income renters in New Zealand in 2018 were spending more than 40 per cent of their income just covering the rent - the worst ratio in the OECD.

Woods reiterated that it was important to take into account regional variations of rental increases, such as in Auckland.

However, Trade Me data showed the median rent in Auckland topped $600 a week for the first time in November as a result of pent-up demand after last year’s lockdown.

Willis then accused the Government of ignoring recommendations it received before making its housing announcement. Last year, Treasury advised against the removal of the interest deductibility loophole, which stopped landlords from being able to write off interest costs from their rental income, as officials hadn’t yet fully analysed its consequences.

“Officials warned the Government that removing interest deductibility for landlords and extending the bright-line test would likely put pressure on rental costs, increase churn for renters and add to the number of people in need of state and emergency housing,” Willis said.

Woods said Treasury’s advice came “in the initial stages of policy development” and the Government had made changes to its policy to help combat against rent price increases, such as by incentivising new builds.

“We are beginning to see the green shoots of the Government’s action in the area of housing,” she said of the package.

“I encourage the member [Willis] to look at the evidence rather than the soundbites.”

Willis then criticised the Government for its inconsistency. Last week, Associate Minister of Housing Poto Williams told Breakfast that Cabinet was floating proposals to support struggling renters. She said these included rent control and indexation.

The Associate Housing Minister was questioned about rents and housing affordability on Breakfast.

By Monday, Prime Minister Jacinda Ardern told Newshub’s AM the Government was not planning to use rent controls.

Woods said the Government was making decisions based on evidence.

“Our Cabinet consistently looks at what we can do to help people who are renting, whether that be by incentivising the bringing on of new supply of housing because we don’t want mum and dad property investors competing with the kids in the suburbs.”

She said the Government wanted to work with property developers and investors to help solve the housing crisis.

Green MP Chlöe Swarbrick questioned how the Government could say it was "pulling all the levers on housing affordability" if it wasn't considering rent controls.

Ardern said the Government was pulling levers, like reforming interest deductibility rules and extending the brightline test. She said this increased the number of first home buyers in the market.

"At the same time, we have to make sure that rental properties are available. We are doing all we can, though, to make sure that we have a rental sector that is affordable and where we have more long-term stable tenancy for our renters."

Last month, economic and political commentator Bernard Hickey accused the Government of allowing inequality to grow.

The commentator has made the claim after analysing data from the last 21 months.

Hickey said the Government’s policies, along with Covid-19, had seen those with assets have a “fantastic time” over the last 21 months, while renters and beneficiaries had “struggled”.

“The Government's policies have made it much, much worse by firstly increasing asset values but also not increasing incomes at the bottom enough, particularly to deal with the massive increase in rents,” he said.

National leader Christopher Luxon also criticised the Government on Wednesday for the increasing cost of living, off the back of inflation hitting 5.9 per cent — the largest increase in three decades — in the December 2020 quarter to the December 2021 quarter.

"Does she accept that, when prices grow twice as fast as wages for an entire year, real incomes are going backwards, meaning average Kiwi families are getting poorer under her Government?" Luxon asked the Prime Minister.

Ardern said she rejected the premise of the question.

"if we track back from 2018, the average annual rate of people's wages, we were looking more at 3.5 per cent relative to inflation, which has been sitting on average at 2.2 per cent," she said.

"What we have now is not something New Zealand is experiencing alone: there is an international phenomenon of countries experiencing high rates of inflation."

Luxon said the Government’s spending habits had contributed to the “cost of living crisis”.

Ardern said there were a number of factors to inflation, as seen overseas, including fuel prices and supply constraints.

“I reflect on what we are seeing globally — we’re seeing the same trends overseas — than we are seeing here in New Zealand.”

Stats NZ attributed the "main driver" for annual inflation to housing and household utilities because prices for construction and rental properties saw steep increases.

The inflation figures came after the Reserve Bank increased the official cash rate to 0.75 in November amid “sustained inflation pressures”.

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