Why rent control isn’t on the agenda – yet

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Renters United bid farewell to the rent freeze in front of Parliament on September 25, 2020.
Photo: RNZ / Rachel Thomas

Tenants’ clamor for some form of rent control increases with their rents.

Associate Housing Minister Poto Williams said the government “no longer intends to change the rent” – so such a move is not on the agenda at this time.

She hopes the recently announced housing package for first-time buyers will reduce investor demand for the housing stock, freeing up supply.

New regulations to help people with secure tenure and to live in habitable houses include a provision that rents can only increase once a year. But there’s no rule on how much they can increase, and there is anecdotal evidence that some landlords sold or raised rents before the changes, which took effect in February of this year.

Williams says the rental market “is being watched closely,” and she points out that when rents significantly exceed market prices, you can ask the Rental Tribunal to reduce the rent to the going rate.

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The problem is that the current rate is increasing. Quickly. All over.

Supporters want rental caps or freezes and say countries like Germany have managed it.

But rent control is a double-edged sword, says economist Brad Olsen, and they risk backfiring.

One of the bedrooms in an apartment for rent in Wellington city center

One of the bedrooms in an apartment for rent in Wellington city center
Photo: Vic / Facebook Offers

One of the effects is to push investors out of the market, which reduces supply and “actually makes the problem worse rather than better,” he told Emile Donovan today. Detail episode.

Another is to lock people up in rent-controlled houses from which they cannot be excluded.

“We’ve seen this evidence from San Francisco… when people are in rent-controlled rentals, they’re probably staying longer than they normally would. Which also means that as their families change, as their family makeup changes, they may need fewer or more rooms. But since they know they’re getting a good deal, they don’t move around as much.

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“They probably kept more housing than needed.

“At the end of the day, those in a house might be in a better position … but anyone looking for a house after that finds it much, much more difficult. It doesn’t seem like a very good strategy to me. It gives me the impression of locking in the current gains and screwing the next lot.

The supply of housing is at the root of the problem and its solution. But it’s a problem that will take years to resolve, and in the meantime tenants are suffering from the sharp edge of the housing market.

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“People are definitely looking for ‘how to get something to move fast, what’s a quick fix for that?’ And I guess that’s the problem, that’s if it is [rent control] is our quick fix so it makes the problem worse in the long run.

“It’s putting a rotten, sticky old bandage on a wound. It seals the wound in the short term, makes it infected, and you must lose your leg in the long term.

“And that’s the concern, that we’re looking for those rapid fire options, we’re looking for silver bullets. And look, if we’re going to let a problem build up over 30 to 40 years, it’s not going to be quick to fix. And I know that’s not what everyone wants to hear.

“But this is the reality.”

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