Prime Minister Jacinda Ardern challenged on 'eye-watering' rent increases, 'skyrocketing price of living'

Prime Minister Jacinda Ardern spent her first Question Time of 2022 defending her Government in the face of "eye-watering" rent increases and the "skyrocketing price of living". 

The Ministry of Business, Innovation and Employment (MBIE)'s Tenancy Services Rental Bond Data release for December 2021 shows median rents nationwide have reached $540 per week, up $50 from last year - the highest yearly increase on record. 

National's housing spokesperson Nicola Willis described it as "eye-watering".

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. 

Recent 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 expected to increase prices by around 7.5 percent.

The average hourly wage, by comparison, increased by 3.8 percent to $35.61 an hour, according to Stats NZ. Meanwhile, rents have increased by the same amount, and are expected to move higher given the impacts of inflation. 

National leader Christopher Luxon, in his first stand-off this year with Ardern in Parliament, asked if she accepted that Kiwi families were getting poorer under her Government when prices have grown twice as fast as wages.

"I reject the premise of that question," Ardern said. 

"If we track back from 2018, the average annual rate of people's wages was looking more at 3.5 percent relative to inflation which has been sitting on average at 2.2 percent. 

Prime Minister Jacinda Ardern.
Prime Minister Jacinda Ardern. Photo credit: Parliament TV

"What we have now is not something New Zealand is experiencing alone. It's an international phenomenon of countries experiencing high rates of inflation. We join the likes of the UK and the United States. We also join them for similar reasons - each identifying issues around, for instance, building and housing and particularly the increase in the cost of fuel prices. 

"This is not something people are forecasting to endure but we absolutely accept that it is having an impact on consumers."

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

Economists agree that stimulus-spurred consumer buying is a reason for inflation. But it's not that simple. COVID-19 has 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. 

Ardern said: "The Australian Bureau of Statistics noted that there were high levels of building construction activity and higher global oil prices. The UK Office of National Statistics - it came from housing and motor fuels. The US Bureau of Statistics again pointed to inflation being caused by gasoline prices, which were up 49.6 percent. 

"I reflect on what we are seeing globally. We're seeing the same trends overseas that we're seeing here in New Zealand."

'Cost of living crisis'

But that doesn't change the fact that Kiwis are struggling with the rising cost of living and the Greens say it's time for rent controls. 

Associate Housing Minister Poto Williams gave them hope when she recently told Breakfast it was being considered. But Ardern shut it down on Tuesday, telling AM the Government was "not considering rent controls"

Green MP Chlöe Swarbrick asked Ardern in Parliament how she could "reconcile her comments that the Government is 'pulling all the levers' on housing affordability with her statements yesterday that 'we're not considering rent controls'."

"Because we are pulling those levers," Ardern said. 

She pointed to the Government's suite of policies in March 2020 aimed at helping first-home buyers into the market, including the controversial move to end tax deductions on interest costs for rental properties, as investors made up the biggest share of buyers in the market and house prices had soared 20 percent in one year.

It's expected to pocket the Government $800 million from landlords

The Government further cracked down on property investors by increasing the bright-line test - the tax on property investment - from five to 10 years, however it will be kept at five years for new-build investment properties to help incentivise supply. 

The Government also tweaked income caps for state deposit assistance, though it isn't keeping up with inflation

National leader Christopher Luxon.
National leader Christopher Luxon. Photo credit: Parliament TV

"We've already seen in the mortgage data that there are more first-home buyers now in the market and investors now in terms of their takeup of mortgages are down at around 16 percent," Ardern said. 

Reserve Bank data in November showed that 18 percent of new mortgage lending the previous month went to first-home buyers. Year-on-year, new lending to first-home buyers was up 20 percent.

But Luxon suggested that, with rents up $125 per week or $6500 per year, New Zealanders were facing a "cost of living crisis". 

Ardern responded: "We have dealt with interest deductibility. We are growing the number of public and transitional housing places to over 8000 and another 2000 this year. We have reduced the number increases a renter experiences to once a year. We are reforming the RMA and in the meantime expediting housing projects that will make a difference to housing supply and as a result we have the highest number of consents on record. 

"This is a Government that is progressing housing solutions. I hear nothing from that side of the House."

Documents released in March last year showed the Government considered capping rents to stop landlords passing on increased costs after the 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 Ardern stood by the policy. 

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". 

Green MP Chlöe Swarbrick.
Green MP Chlöe Swarbrick. Photo credit: Parliament TV

Willis said the rise in rent prices was "clear evidence that the Government's housing policies are failing". 

"They were warned last year that if they imposed additional taxes on landlords, then renters would pay. That is what's happening."

But Housing Minister Megan Woods said the record number of housing consents was making a noticeable difference. 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. 

"On the supply side, we simply weren't building enough houses, which has been a major driver of increasing rents," Woods said in Parliament. 

"According to Stats NZ, media rent increased 4.7 percent between March 2021 and December 2021. The housing register has increased by 1838 applications between March 2021 and December 2021. 

"I do however note that there is a wide regional variation in the rent increases we have seen. For example, in Auckland where we have seen a strong increase in supply, rents were limited to a 2.4 percent increase. This shows that where we increase supply, there will be more moderate rent increases."