Prime Minister Christopher Luxon cares about renters. We know this, because he has just given landlords a golden Easter egg of $2.1 billion – oh, sorry, $2.9 billion, I was looking at his pre-election maths by mistake.
In case you are a landlord and you didn’t know, congratulations – from 1 April you will be able to claim, in your taxes, 80 percent of the interest on your mortgage as an expense, and 100 percent from next year.
Renters, says Luxon, are “very grateful” his government is bringing back interest deductibility for landlords. “It’s one of the things we campaigned on because we care about renters in New Zealand,” he beamed. “What has been utterly unacceptable is that [rents]… just kept going up and up and up. And a big reason for why they go up is because landlords have been hit with costs associated with the removal of interest deductibility and the extension of the brightline test, and those costs have just been passed straight through to renters with higher levels of rent.”
I know renters on the island are deliriously happy – no, let’s use Luxon’s forelock-tugging term, ‘grateful’, to have relief on rent which consumes, in most cases, much of their income. Although some of them are also baffled, as they have – surely a typo – just been hit with a steep rent increase.
Skyrocketing rents are a serious problem throughout the country, as we know if we are a renter ourselves, have family or friends who rent, or simply digest news about housing – pieces like a report from RNZ this week about the two-income families in Northland who can no longer afford rent.
Luxon has said a “big reason” for generation-impoverishing rents was the removal of interest deductibility by the Labour government (to stem investor demand for existing homes). If he is right, rents across the country will drop as altruistic landlords pass on savings to their tenants.
But when demand is greater than supply, as any economics student knows, the value rises. Luxon would argue that making landlordism more attractive will help fix scarcity. But is it that simple?
On Waiheke, it is online short-term rentals, not a lack of interest deductibility, which have decimated the island’s rental market. An unscientific Trade Me survey of Waiheke rentals revealed only nine of 22 total listings sought long term tenants. Airbnb, meanwhile, groans with 698 Waiheke listings.
On Waiheke, affordable rentals, like gold, sapphires or water in a desert, show the savage effect of scarcity on prices.
Back in December 2021, Gulf News editorialist James Belfield mourned “the GPs, teachers, long-time stalwarts of the community, family and friends” leaving Waiheke because they could no longer afford to live here. “Soaring house and rental prices have highlighted a genuine class divide on Waiheke,” he wrote. This strikes at the “vital and intricately woven community” of everyone who lives here, whether it is your daughter renting and trying to save for a home, a tradie paying a mortgage, a solo mum who rents out the room downstairs, or a chef who sleeps in a car. Waiheke’s housing crisis affects us all.
Rental unaffordability is going to get even worse if Waiheke’s permanent population of 9,300 expands to 14,000 (the council’s top estimate) by 2050. A Gulf News story by Paul Mitchell in February headlined ‘Island needs 43 extra houses a year to keep up with population growth,’ warned that at current build rates Waiheke will get around 150 new houses in the next 30 years. It needs more like 1,294.
High land prices, infrastructure issues and steep council permit costs make it virtually impossible to build affordable housing on Waiheke. Although compliance costs would seem the easiest fix, trying to change the council’s Unitary Plan is like doing a U-turn in an aircraft carrier.
What else can be done? What about all those Waiheke houses occupied for only a few weeks every year? The 2018 Census recorded 3,780 occupied private dwellings on Waiheke, and 2,079 unoccupied.
For the Bay of Islands town of Russell, it is even worse. A staggering 70 percent of homes are thought to be occupied for a few weeks each year, amid a chronic shortage of worker accommodation.
Far North Deputy Mayor Kelly Stratford is looking at ways to incentivise owners to rent long term, although she won’t discount a harsher approach if that doesn’t work. “There’s the carrot approach or the big stick approach,” she told RNZ.
What might a ‘big stick’ approach look like?
Tourist traps around the world have begun to tightly regulate or even ban online short-term rentals.
In the UK, as pretty coastal towns in Wales, Dorset, Devon, North Yorkshire and Cornwall become ‘seasonal ghost towns’, locals have resorted to a range of ingenious penalties and taxes.
In Salcomb in Devon, new builds are banned from being second homes, and ‘holiday landlords’ have been hit with a ‘bin tax’ of 350 pounds. In Southwold, Suffolk, the council has withdrawn bin collections and parking permits from second home owners. In Burnham Market, Norfolk, more than 80 percent of local residents have voted for an outright ban on second homes.
A former Southwold barrister who campaigned for changes like these told The Guardian: “This area has a crying need for rental housing for people to live in year round, we have so very little of that. It’s a minimum-wage economy, it’s shameful that young people can’t afford to live here.” • Jenny Nicholls
