Controversy continues! Greens propose capping annual rent increases at 3%. Would you support it?

New Zealand Green Party co-leader Marama Davidson recently proposed strict controls on annual rent increases for existing rental homes, with the policy calling for an annual cap of 3%. The Greens believe current high rents are causing ‘immense harm’ to many tenants’ lives. The figure is based on the upper limit of the inflation rate the Reserve Bank of New Zealand aims to maintain.

New Zealand Green Party co-leader Marama Davidson

 

Davidson said years of inaction by successive governments had forced thousands of tenants to pay high rents to live in cold, damp and unhealthy rental homes that could even make them ill. The current rental market was more like a ‘game of Monopoly’, with landlords holding the power to set prices.

 

 

Stats NZ figures show that while rent is a major living cost for many tenants, it has been rising more slowly than overall inflation.

 

A continuing chorus of opposition

 

The Greens’ proposal caused an immediate stir and drew criticism as soon as it was announced. An association representing landlords warned that the proposed 3% cap on annual rent increases could prompt more landlords to sell their investment properties, worsening the shortage of rental homes. Next

 

New Zealand Property Investors’ Federation vice-president Peter Lewis said the election policy announced by the Greens on Sunday would, if implemented, drive more rental transactions onto the black market. Nobody wanted that, because tenants’ interests would no longer be protected. Lewis also questioned the logic of singling out rents for price controls when rent increases had consistently lagged behind inflation in recent years. Stats NZ’s latest inflation figure was 6.7%, while food price inflation exceeded 12%. By comparison, the latest annual rent increase was just 4.3%. Lewis could not understand why the Greens were pursuing restrictions on relatively modest rent increases rather than actively promoting strategies to curb rising food prices.

Property Investors’ Federation vice-president Peter Lewis

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He also pointed out that landlords were having a difficult time too: rents had risen little while costs kept climbing. Council rates and insurance were increasing more quickly, with further substantial rises expected. Lewis currently has 13 tenancy agreements and can comfortably make a profit from renting out properties, but that does not mean a new generation of property investors can do the same. When people find they cannot make money, they give up their rental properties, reducing supply. Data show that tenants on Waiheke Island and in Queenstown are already unable to find homes to rent, so simply legislating to prevent rent increases cannot work.

 

Using the law to limit rent increases? It could well backfire

 

Lewis said that as a Citizens Advice Bureau adviser, he had found that landlords had long been asking tenants to pay rent in cash to evade oversight. He worried that introducing rent controls of this kind would push more landlords and tenants into black-market transactions. He firmly believed that one of the best ways to help tenants was to restore landlords’ right to deduct mortgage interest against rental income for tax purposes.

 

Although the Labour government had yet to release its housing election policy, Housing Minister Megan Woods, responding to the Greens’ announcement, said Labour had already begun making meaningful improvements for renters, introducing rental standards and rules limiting rent increases, alongside a large-scale public housing construction programme. Meanwhile, the Greens also wanted to introduce a ‘rental warrant of fitness’ scheme to ensure all rental homes met healthy homes standards.

Green Party co-leader Marama Davidson recently pledged greater rights for renters if the Greens entered government

 

Davidson pledged that if the Greens were part of the government, they would introduce a new renters’ rights bill within the new government’s first 100 days and accelerate the implementation of these policy changes. The party would require landlords to tell new tenants the previous rent, helping to prevent increases exceeding the cap.