Rent Controls Do Not Make Renting Easier

Associate Minister of Housing, Poto Williams, indicated today that rent controls are being considered due to high rental prices in New Zealand.

“The NZ Property Investors Federation (NZPIF) would like to point out that rental price increases have been below the general rate of inflation for the past year” said Andrew King, NZPIF President. “This is despite many other housing costs, such as rates, insurance, repairs and maintenance increasing faster than general inflation,” he said.

Minimal increases in rental prices have been helped by low mortgage interest rates. However this situation is unlikely to continue.

The major factors resulting in rental price increases have been the government changes aimed at disincentivising the provision of rental property. These measures include extending the Bright Line Test, ring-fencing losses and removing mortgage interest as a tax deduction. None of these changes improve the quality of life for tenants and can only lead to more rental price increases.

Minister Williams is right to say that we need more houses in New Zealand, and this includes rental properties. Even when rental property providers do not build new properties, they still contribute by buying the properties of people building new homes to live in.

The Minister is also correct in saying that rent controls can appear to be a good solution for tenants but actually they have longer term consequences that make renting more difficult.

Rent controls will undoubtedly add to the problems which the above mentioned changes have already created. Rather than the Government controlling rental prices, tenants would be better served by the Government removing the causes of large cost increases that have in turn resulted in rising rents without any improvement in tenants’ living situations.

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