Text Box:


What is the plan to build more homes and upgrade or renovate dated housing? Why suffers the rental housing stock mostly? What is the politicians’ response in the election year 2014 to improve the housing shortage and poor quality of rental housing?


What is wrong with NZ’s

Rental Housing Stock?

Follow kjs2006 on Twitter

Housing shortage and poor quality of rental housing


NZ has a long history of a housing shortage. Still in 2014 the availability of new purpose built rental housing is limited. Older apartments and multi-unit blocks are poorly built with lots of problems (leaky buildings, cold concrete blocks with ingress of moisture or condensation, lack of  heating).  Stand-alone rental houses on reasonable sections are owned by people, who purchased investment properties, or built a new family home by renting out the dated house for one common reason—to subsidize the retirement with a mortgage-free investment.


After the global finance crisis (GFC) and because of changes to taxation rules investors left the market and developers stopped building new homes. That has deepened the shortage of housing alongside increased immigration numbers over the last few years. 


Sadly, the poor quality of rentals has not improved either because of ill managed housing policies. For instance home improvements for landlords are not rent-deductible expenses and the depreciation for capitalized upgrades/renovations has been removed by new taxation rules—so the rental housing stock suffers mostly.


Politicians, as part of the 2014 election campaigns, have brought forward ideas like a WOF (warranty of fitness for rentals), an energy rating scheme, subsidies for first-home buyers, and of course the CGT (capital gain tax).  Those discussions have been going on for years, but where are the incentives to fix the housing stock problems?



Vacant housing and no jobs or jobs but no housing


No doubt housing politics will change because of pressure from the labour market and young people looking for jobs.  But, still the common view that home ownership would resolve the housing problems is against international trends. Look at NZ’s OECD profile and answer the question—what is home ownership worth in areas without jobs? Who can pay the bills without income?  The housing shortage is related to a deficit of housing in regions with jobs and a lack of jobs in areas with vacant housing.


I talk about homes which have not been built in cities where industry and infrastructure  are concentrated. That attracts young people who are searching for jobs. Or, why not utilizing better infrastructure for businesses in smaller cities with vacant housing?




Renting – Second class lifestyle option


Too often I have been told renting rates as the second class lifestyle option for two reasons; because of the misconception that renting is only for the poor and by over-rating a house as an investment. True, home ownership has been and is still the lifestyle of choice as owning a home gives people a sense of security and long-term stability.


But changes are emerging driven by the job market and the lifestyle of younger renters who are waiting to put pressure for  improving the rental housing standards (see under Millennials).


A major problem is  the older rental housing stock, far behind modern standards and with no or little heat retention, heating and comfort. You might have experienced that living in these older homes is not indulgence for renters and homeowners alike. Homeowners can do something about it by spending for home improvements. That is the real limitation for renters who cannot afford to rent a quality rental home.




Investments for new and finance for upgrading aged homes


Not sure how you would close the gap between demand and supply; supporting investments for building new homes or finance for upgrading/renovating substandard housing, or both? It looks to me like a matter of numbers and an urgency for both.


Looking at the specific many landlords face (“mums & dads” with one or few rental properties) is dealing which cash-flow negative rentals. These people off-set losses against income from day jobs in the hope to retire on a mortgage-free investment. Unfortunately, many give up at some stage and sell, causing tenants to move.


Where are the incentives to improve housing standards and motivate somebody to increase debts, which are not rent deductible expenses and cannot be depreciated either for residential investment properties?




 How to compare NZ’s rental housing stock?


NZ’s housing did not have the devastation of war like overseas countries. Building new homes is a matter of keeping up with the population growth. European countries rebuilt cities, preserved towns of historical interests, renovated heritage buildings and built new housing as needed.


The photo below shows two types of rental homes; one new built in the 70s and another one re-built from the 18th century. Both types have similar lifestyle values in terms of heating, insulation and comfort. European housing standards do not differentiate between rental and owner-occupied homes. Incentives are focussed on energy efficiency and environmental requirements. My parents have been renting a 3-bedroom flat in one of the picturesque houses for more than 30 years. Their home has been modernised every 10-15 years with moderate rent increases.  Environmental friendly house investments (heat retention, heating, solar energy)  were already tax-free for the first year as incentives 25 years ago.


In contrast look at NZ’s housing from the 20s to 70s. The standards of those houses are similar as they were built, time capsules of a bygone era. Consider this—if the finance industry would not only own the securities on NZ’s housing but also tax regulated support upgrading the outdated homes, as it is at my parent’s place, then the housing stock would be in a much better shape. I think people deserve it, would you agree?



Please feel free to comment or recommend this blog

on FacebookTwitter, or Google +1


 [  To Top  ]  [ Renter’s blog posts summary ]  [ Next Post ]


Rent or Own - Decision at some stage in life?

Klauster Properties Ltd - Renter’s Blog

Googling Klauster will lead you to different areas linked to a real person, IT professional, investor and business owner with interests in web and property developments, marketing and trading.


The passion for making experiences accessible and helping others comes from extensive travelling and the principles of life—how to avoid pitfalls when investing or forming relationships.


The philosophy to treat life, partnerships and hobbies as an investment has helped people in his circle. Life is something to do it now, not to wait for doing it in future.


Come along and join this blog—we can learn from you.