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What's The Buzz Around NZ's Rental Crisis?


  • The demand for rental housing has increased considerably in New Zealand due to sky-high property prices.
  • Many residents have been living under emergency housing after the sale of their rental homes.
  • There is a need for tenant-friendly housing setups to help homeless people find shelter.

Since the onset of the COVID-19 pandemic, New Zealand’s housing crisis has only worsened with time. The situation is even more worrying for those living on rent due to the high volatility in the rental market. While the housing boom allowed New Zealanders to buy their dream home at low-interest rates, many people were forced to choose rental property as a last resort.

As exorbitant prices pushed some buyers out of the property market, the demand for rental housing also grew exponentially. Consequently, rental rates surged across the country, leaving many homeless.

Record-high prices compelled people to move out of their rented homes with no adequate alternative. Those who sought government help had to undergo a long and complex process and failed to reach a meaningful solution. In a way, insufficient housing has created a problematic scenario for the property market amidst the war-driven uncertainty.

ALSO READ: Housing imbalances & inflation causes of worry in NZ, says IMF

Heavy pressure on emergency housing

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As the property market enters a precarious phase, many citizens have been forced to live in emergency housing. Hawke’s Bay region has seen the worst of the lot, with the extreme shortage of rental housing wreaking havoc for its residents. Also, rental inflation is rampant across Wellington, where housing supply has lagged behind demand at an alarming level.

The government has recently opened a new hub in Rotorua to support homeless residents, spending a record amount on emergency housing. The extreme lack of rental housing has prompted a substantial increase in government spending on emergency housing. These emergency motels suffer from overcrowding, putting residents in survival mode. Besides, they do not provide a long-term solution as motel residents are largely looking for a way out of these facilities.

Meanwhile, many people have been forced to separate from their families and live alone amidst the escalating housing crisis for renters. The significant housing shortage has even left the Work and Income department helpless. Some residents even had to stay in holiday parks or camp out in open areas to get by the day.

The rental housing problem

New Zealand’s rental housing woes are not new and have been a telltale saga for decades. The current crisis stems from the fact that the number of people living on rent has quickly outpaced those with homeownership. Once this imbalance is created, rental housing becomes inaccessible and gravely botched for those who can secure it.

Specifically, the biggest issue facing tenants is the unpleasant living condition in these houses. Some of the available rental housing includes mouldy flats, with woodlice crawling throughout the house. Living in such unhygienic conditions can be detrimental to one’s health.

Controlling investor demand remains a challenge

Another issue plaguing the rental housing market is the new rule around interest deductibility. Under this new law, interest on housing loans is no longer tax-deductible, urging many landlords to push up rental rates. While the rule was introduced to help cool down the property market, it ended up having the opposite effect.

The move was targeted toward reducing investor demand, allowing first-time buyers to enter the market. Under the law, landlords have been denied the right to claim interest rates as a business expense. However, it has, in turn, hurt both tenants and landlords who were already suffering from painfully high property prices.

The existing challenges have highlighted the dire need for increased infrastructure activity across New Zealand. However, securing construction material has become difficult in the current climate, aggravating the lack of housing supply. The country is focusing more on developing apartments, townhouses, and attached dwellings as these are most likely to be rented out.

Amidst the housing supply shortage, main cities in New Zealand are gradually building new properties to ease supply-side pressure. Auckland is one such example, which has seen robust development recently despite many restrictions on the construction of apartments and townhouses in inner-city areas. As a result, the city has seen a slower rise in the rental price index than the inflation rate. However, it would take much more time for these improvements to be visible across other parts of the nation.

ALSO READ: Why is stagflation back on investors' minds?

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