Associate Housing Minister Poto Williams floats rent controls as cost of living bites

Associate Housing Minister Poto Williams has proposed rent controls as the cost of living bites low income earners - an idea ACT has described as "crazy". 

The Associate Housing Minister told Breakfast on Thursday that officials had been tasked with compiling a list of proposals the Government could consider to help renters - and rent control was one idea she said had been "floated". 

"What we are looking at now are some anomalies that are in our system which means that our rents are becoming unaffordable for our families," Williams said.

"I've charged our officials to go away and look at what are the options we can put in the short term to support our renters whilst we roll out the programme of housing."

She repeatedly said there was "nothing off the table", acknowledging that it is "tough" for renters and that "affordability is a tough nut to crack".

It comes as the cost of living soars, with the price of goods and services in New Zealand up 5.9 percent in the last three months of 2021 compared to 2020 - the biggest jump since a 7.6 percent annual increase in 1990. 

The latest results from Retail Radar show that in the fourth quarter - October, November and December - 57 percent of retailers increased prices. Nearly three-quarters of retailers expect to increase prices over the next three months by around 7.5 percent.

The average hourly wage, by comparison, rose just 3.8 percent to $35.61 an hour. Meanwhile, rents have increased by an annual 3.8 percent and are expected to move higher given the impacts of inflation, according to ASB senior economist Mark Smith. 

Associate Housing Minister Poto Williams.
Associate Housing Minister Poto Williams. Photo credit: Getty Images

The national median rent climbed $40 a week in 2021 to reach $560 in December, meaning tenants are now forking out another $2000 a year in rent, according to Trade Me's latest figures. 

Documents released in March last year showed the Government considered capping rents to stop landlords passing on increased costs after the controversial decision to remove tax deductions on interest costs for rental properties. 

Property investors threatened to bump up rents to make up for the increased costs. But Prime Minister Jacinda Ardern stood by the policy, because investors made up the biggest share of buyers in the housing market and she wanted to help first-home buyers. 

The documents reveal how the Government considered temporarily capping rents to thwart the negative consequences of the policy. But international data showed landlords would simply "increase rents as soon as the period of rent control ends". 

What's causing inflation?

The Government's big spending has been blamed. About $60 billion was borrowed to pay for the COVID-19 response, and Finance Minister Grant Robertson is planning a further $6 billion in new spending for Budget 2022. 

According to economic commentator Bernard Hickey, homeowners and businesses are $900 billion richer since the onset of COVID-19 and the Government's interventions, while the poorest are now $400 million in debt thanks to wage deflation and rents rising faster than incomes.  

Economists agree that stimulus-spurred consumer buying is a reason for inflation. But it's not that simple. COVID-19 has also disrupted supply-chains across the globe, and when too much money is available to purchase too few goods and services, demand outstrips supply, forcing prices up. 

The Greens continue to call for a wealth tax - an idea Ardern shut down ahead of the election. The Greens have also advocated for rent controls, among other policies such as a Warrant of Fitness for rental homes, to make life easier for renters.  

ACT's housing spokesperson Brooke van Velden.
ACT's housing spokesperson Brooke van Velden. Photo credit: Getty Images

ACT's housing spokesperson Brooke van Velden says rent control is a "crazy" idea. 

"At a time when the property sector needs confidence to build, Labour has dropped another bombshell," she said in response to Williams' revelation.

"As an economist, I know rent controls will mean fewer incentives for landlords to maintain existing properties and fewer incentives for property investors to create new supply.

"Building housing supply is a long-term activity. It takes years, paying for them takes decades. When the Government changes the rules of the game at a whim, confidence suffers and less gets built."

While construction costs rose more than 10 percent last year - the greatest rise since before the Global Financial Crisis - housing supply is one area the Government is getting right. Annual figures for the last nine months of 2021 show more new homes were consented than ever before - 48,522 in November, up 26 percent on the same period in 2020. 

And with councils forced to intensify - three homes up to three storeys can be built on most sites in Auckland, Hamilton, Tauranga, Wellington and Christchurch without the need for resource consent - the supply issue is being addressed. 

But it's no short-term solution. The only silver lining for renters is that Treasury forecasts inflation to cool off next year, though it will largely depend on COVID-19.

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