House prices and rental costs are two related areas where New Zealand truly does punch well above its weight. This country happens to have the worst price to rent ratios, the worst price to income ratios, the worst real growth figures, and the worst nominal growth figures, in the entire OECD.
But here’s the thing. For some reason, the housing crisis here tends to be debated very much in terms of house prices and the barriers to home ownership, even though the neglected crisis in renting is arguably more acute, and immediate. According to Trade Me figures, the national median weekly rose by $40 last year to $560 a week. Last year’s Spotlight on Housing report (using 2019 data) found that even before the pandemic struck, a third of Kiwis were spending 30% of their income on housing costs, and a quarter were paying 40% or more. This renting crisis did not happen overnight. The home ownership patterns have been changing for the worse for some time, and the burden is falling disproportionately on the more vulnerable groups in society:
The drop in home ownership rates has been felt hardest by Pacific peoples, with the proportion living in a house occupied by the owner falling 35 percent between 1986 and 2013, compared to 20 percent for Māori and 14 percent for Europeans.
At this particular moment, inflation is piling even more pressure on renters. Despite the misguided fears of an inflationary wage/price spiral, the rising costs in the supermarket and at the petrol pump (plus added costs related to supply chain blockages) are not being compensated by anything like comparable increases in wages or benefits. As this column has mentioned before, the minimum wage increases (for members of the paid workforce) have not kept pace with inflation, and are by-passing beneficiaries altogether. What to do? The local website Eat Your Landlord has indicated one solution (with T-shirt merch!) to the problem. As yet though, there isn’t a Yotam Ottolenghi recipe that’s fit for purpose.
Unfortunately much of the official data being used to manage this crisis also seems weirdly out of date. Last week, the government was still citing 2018 Motu research that indicated not many landlords had treated that year’s accommodation benefit increases as an opportunity to jack up rents. However, the same research also says those meagre accommodation benefit increases were preceded by sharp rent increases, so at best, the extra benefit funds were merely playing catch up. Last November – and again citing 2018 data – the Ministry of Social Development conceded that over 60% of low-income renters in this country were spending over 40% of their income on merely putting a roof over their heads, this being the worst ratio of its kind in the OECD.
How has this happened?
Ever since the market reforms of the mid 1980s, wealthier New Zealanders have been given every conceivable incentive to speculate on housing rather than invest in innovative, productive enterprises. The recent combo of low interest rates, readily available bank lending and the government’s Covid support measures have fuelled that tendency. The extent of multiple rental ownership therefore, can hardly come as a surprise. According to research published in mid-2020, a whopping 70% of the housing stock is owned by people who own more than one property, with one sixth of investors owning 20 properties or more. More recent research by Stuff says much the same.
Despite our national myths about home ownership, an estimated one third of all New Zealanders and half the adult population are now reliant on renting. By and large, they are paying through the nose to live in properties that recent House Condition surveys found to be significantly more likely ( 32% of all rental properties) to be poorly maintained, compared to the 14% of owner-occupied housing in similarly poor condition.
Over summer, the November changes to bank borrowing criteria have started having an impact on house prices, which (reportedly) have begun to plateau all around the country, amid forecasts of falling house prices by year’s end. Unfortunately, the same stricter bank ending rules ( and rising interest rates) will mean that this softening in prices will not necessarily be making things any easier for first home buyers to get a foothold in home ownership. That door is closed to all but the few who can call on significant parental support, and to even fewer high income earning couples.
In sum, renters are unlikely to gain much benefit from a fall in house prices. Quite the reverse. Anecdotally, some metropolitan housing markets are seeing property investors selling up some of their rental stock while sky high sale prices can still be obtained. These sales appear to be a by-product (for example)of Aucklanders selling up and fleeing the pandemic to buy houses in cheaper, less densely populated parts of the country. If so, the rental stock in those locations will inevitably be shrinking as we speak. Moreover, the changes to capital rating in some metropolitan centres will almost certainly see the subsequent rates increases being passed on in even higher rents during the second half of 2022.
The government and Opposition alike seem to be bereft of ideas to help renters deal with the deadly combo of high and rising rents and galloping inflation. National, for instance, has come out against the ”bright line” test meant to deter property speculation by making landlords hold onto their housing stock for longer. As at least one social media pundit has dryly suggested, isn’t there something a bit questionable about a party led by a multi-millionaire who owns seven houses, coming out against moves meant to deter property speculation? For the moment, rent controls have been rejected by the government as a viable policy solution. Rent strikes may be inevitable. Something has to give.
Footnote: Housing is a global problem. Ireland, which has a comparable population to NZ, has reportedly just launched a 4 billion euro programme (annually) of house building, meant to produce 30,000- 40,000 new homes a year by the end of the decade. It sounds very much like the same problem Kiwibuild was supposed to resolve :
Many people have found themselves priced out of the market. Break-even for builders on a two-bedroom apartment is €450,000, according to a recent report by Trinity College Dublin economist and housing expert Ronan Lyons. The rental market has suffered the knock-on effects, with increased demand and lack of supply driving rents to often unaffordable levels. The housing squeeze is a major issue with the country’s voters and is expected to colour the fortunes of the country’s three main parties in the next general election, which is due by 2025.
Like Kiwibuild, Ireland’s equivalent Housing For All scheme is likely to run into capacity constraints:
If the housebuilding targets are hit, “a lot of the problems should certainly be eased, but we’re a number of years away”, [economiist Dermot O’Leary] said. It was also “not entirely clear that the state has the capacity, skills and experience” to pull off the plan, he added.
For the record, the Irish scheme includes a commitment to build some affordable housing for those on low incomes, and sell them at below market rates. As in New Zealand, “ affordable” though, is still something of a hurdle. The average price of affordable homes to first home buyers in the Irish scheme is 250,000 euros, which on today’s currency rates, is equivalent to $NZ425,000.
This includes about 90,000 so-called social homes for those on low incomes as well as 54,000 affordable homes, including some earmarked for first-time buyers at an average price of €250,000. Affordable housing includes about 2,000 homes a year designated as “cost rental”, where rents are expected to be 25 per cent lower than the market rate.
Love my rapid antigen test
As Omicron rages across the world, the Reductress website satirically noted last week that some anxious men are wishing that their girlfriends were a rapid antigen test. Reductress’s advice to women begins with an essential message of self-esteem: don’t compare yourself to a rapid antigen test.
This may be tough to hear, but you’ll never be a rapid COVID test no matter how hard you try, so stop comparing yourself to one! You should never linger on things that you simply cannot change. So just move on, girl – and focus on yourself instead! Think about all of your positive qualities (that don’t have to do with testing for a virus).
Just because you can’t tell someone whether or not they have COVID in fifteen minutes, doesn’t mean that you aren’t a delight to be around and have a variety of different amazing qualities. A rapid test probably doesn’t have a good sense of humour and a perfect ass like you do, does it? Yeah – didn’t think so!
In a related problem, recent political opinion polls have shown a surge in support for Christopher Luxon as preferred Prime Minister. Reductress has an answer to this one, too. It seems that when men say things that are wrong loudly and confidently, other people will tend to think that all evidence to the contrary, these men must be right. Right? Because otherwise, why would they be saying this bullshit so loudly and confidently? And oh yeah, Luxon once ran an airline. So running a quasi-state monopoly during boom times for tourism must mean that he knows how to run an entire economy during a pandemic, right? RIGHT?
Music and hegemony
Housing is at the sharp end of the generational divide in this country. Mea culpa, but the generation to which I belong enjoyed free education for itself and hung a student debt millstone on everyone coming along afterwards. It also gave itself tax cuts, which resulted in the systematic rundown of public health, and then once the pandemic arrived, the same generation went to the front of the queue for vaccinations and ICU care. Shame, shame.
As a small rumpus on last weekend’s RNZ’s Saturday programme showed, some members of the same generation demand that only its musical era – James Taylor, Neil Young etc – should be featured therein, and that all subsequent music is suspect, and/or inherently inferior. It was alleged by come responders that such offensive music must have been foisted on the presenter by some pimply faced young staffer, as if Ms Hill herself could not possibly like this stuff.
Good grief. Much the same reaction – from a vastly smaller sample – happens whenever I put hip hop tracks, or K-pop or some such at the foot of this column. Surely I can’t actually like such stuff. But I do. Offhand, I can think of about ten current artists/songwriters/bands – eg Adrianne Lenker of Big Thief, Mitski, Nilufer Yanya, Little Simz, Denzel Curry, JPEG Mafia, Ashley McBryde, Lana Del Rey, Dry Cleaning, Mdou Moctar, Valerie June, Waxahatchee, Weather Station, MUNA, William Tyler, Phoebe Bridgers, Jenn Wasner, FKA Twigs, Jazmine Sullivan, Kacey Musgraves, Sylvan Esso, Dogleg etc etc that are all well worth your while.
And in any given week, there are good – not amazing, life shattering- tracks to find and appreciate. The new Guerrilla Toss single for instance, sounds like a deceptively straightforward dance track, but the fragmented lyrical content – about how social living consumes your best emotional resources and fosters merely sensory connections in a cycle from which there seems no escape – are also interesting.
Drained my economy of empathy, ecstasy
I’m social with enemies and it takes the best of me
Tangible fanatic, my energy memory
That cannibal capital makes everything sensory
And from this week’s Werewolf playlist comes Nilufer Yanya‘s new single “Midnight Sun” As with almost everything she’s done since her breakthrough hit “ Baby Luv” in 2017, Yanya adopts the stance of a watchful outsider, looking in, weighing the moment.
Footnote: This Pitchfork capsule review of the “Midnight Sun” single is a pretty good account of what Yanya – the daughter of visual artists from Barbados and Turkey respectively – is doing musically here:
The chord progression is a puzzle box of trap doors and false bottoms, evoking Elliott Smith’s “Needle in the Hay” or Radiohead’s “Weird Fishes/Arpeggi.” The first two minutes pedal uneasily between B minor and B-flat augmented, the harmonic motion of a mumbling stranger pacing a public bathroom. Every eight bars, she eases into a brief, two-bar respite of G major before freezing up again. When Yanya at last allows the song to settle into major, the withheld catharsis is exhilarating, and the guitars bloom into distortion as if with relief.
Boomers, take note. By all means, stay in your nostalgia loop. But it’s your loss.