After recent conversations with friends who are flathunting (renting) and househunting (buying), I’ve been giving serious thought to a scary and depressing scenario: renting for life in Auckland.
Let me cut you off right here: I don’t want to hear your comments about the pros of renting for life, unless you live in Auckland. I have been a renter since age 17. I know all about the pros, and for me, in the Auckland context, they don’t outweigh the cons, especially because we want to have a family. I am not interested in uninformed opinions from people who don’t have any clue what it’s like to rent, buy, live in Auckland. Okay, onwards…
This post over at The Conversation tackles the state of the property market in Australia, but it could just as well have been written about New Zealand.
“Renters are the losers in the property game. Not only do they struggle with high rents but tenant protection in Australia is among the weakest in the developed world. This is not coincidental: Australia’s 1.8 million and counting property investors support and are supported by tenancy legislation heavily weighted in favour of landlords. This produces a fundamental lack of security in rental housing.”
(I note that the UK is looking at introducing tenancy reforms, recognising that members of ‘Generation Rent’ need more rights. Good for them. We could use some of our own, since “compared with many countries, New Zealand and Australia are some of the most restrictive rental jurisdictions”.)
That piece at the Conversation argues that factors like tax laws and rapid appreciation create “effectively an infinite demand for property in Australia”, which I think is also applicable to us; NZ is right behind Australia in terms of ratio of housing stock to GDP.
A Forbes post recently did the rounds warning of a housing bubble here in NZ, and much as I would like to hope that Jesse Colombo is right (being an aspiring homeowner myself and all), I am more inclined to agree with local writers Brian Fallow and Bernard Hickey’s assessment of the situation. They both lay out some high-level reasons as to why they think a huge crash is unlikely, and while I’m not going to pretend I know anything about the Reserve Bank or exchange rates, here’s my plebeian take: here in Auckland we continue to have a shortage of housing; land is limited; and there are obviously still people with the means to pay current prices – and potentially higher.
The NZ Initiative isn’t afraid to tell it like it is:
“New Zealanders face a shortage of dwellings of just about every description, while paying far more for those we do have New Zealand houses are not only expensive compared to income but their prices too have been rising. New Zealand’s house prices have increased by a staggering amount over the past 30 years, aided by a mixture of policies and social and cultural changes that have forced up the price of building or buying a house.”
Let’s break that down:
“Someone in an inner suburb of Auckland who bought a home for, say, $70,000 in 1975, lived in it for 37 years, and did little but basic maintenance on it might find the house worth $1.5 million plus today. Someone in, say, Torbay on Auckland’s North Shore, who built a ‘standard house’ (land and section) in 1969 for $16,000 and did basic maintenance would find the property worth about $1 million today. The malign effects of the MUL [Metropolitan Urban Limit] that planners produced – believing that constraining the boundaries of urbanisation would work to the advantage of ordinary people, save transport costs, and restrain unnecessary local authority outlays – are absolutely
clear. The MUL has benefitted mostly older people who hath, and hurt younger people who hath not. The MUL favours the old and the rich and it punishes the
younger and the poorer.”
Ain’t that the truth. According to a Salvation Army report:
Housing has become more and more expensive for first-time home buyers and home-ownership rates have fallen. This fall has been aided by tax policies that favour existing property owners, and easily available debt that allows those who already own property to buy up lower-valued houses as rental investments. To some extent, this rental investment has been propped up by Government housing subsidies to low-income households that have now grown to $1.8 billion annually.
We, therefore, have the worst of all worlds when it comes to housing. Housing is too expensive for up to a quarter of all households to afford without Government assistance. Much of the housing is poorly-built and now needs further public subsidies to repair.
Worst case scenario: we are permanently priced out and left with no choice but to rent for life. What would this realistically mean for us?
No dogs in our future. It is damn near impossible to rent with pets – maybe cats, definitely not dogs. That said, based on my observations, I am not surprised that many landlords don’t want to rent to dog owners. Compared to the US where even apartments allow dogs, I found the dog culture over there a pleasant surprise – overall I felt most pet dogs were well trained, well behaved, quiet and clean, moreso than my experience of dogs here. I suppose a lot of that comes from having more of an indoor pet culture rather than an outdoor pet culture, as a result of density.
Spending a fortune on heating and dehumidifying. Aside from the top-priced tier of the market, the quality of housing here is generally quite ridiculous. It’s no good having a mild climate if you don’t actually insulate your buildings – might as well sleep under a bridge. Thanks landlords who don’t care about providing healthy accommodation and updating old houses! Longtime readers will recall my stories of mould in bedrooms, in wardrobes (trying to clean spores off your favourite dress blows), being able to see our breath in front of us while INDOORS and mushrooms growing through carpet.
Poor quality housing has been identified as a public health issue of major concern in New Zealand, with evidence that dampness and “thermal inefficiency” (which I’m pretty sure is a bullshit way of saying FREEZING COLD) are more prominent in rentals. Unsurprisingly, these things are associated with higher rates of respiratory conditions, among other icky problems. I don’t think it’s a coincidence that I have gotten sicker more frequently and to worse degrees since I moved out of home. I started having trouble breathing a few winters back. And I know many immigrants who developed asthma for the first time after moving to New Zealand.
Most likely bouncing around and around. Literally almost everyone I can think of who has rented a family sized house for any significant period of time (think your typical 3-bedroom) has been forced out at some point due to the landlord selling. Or, in a few cases, the landlord moving in a family member (in which case the notice period is only 42 days instead of 90 – this seems to happen suspiciously frequently, actually). Of the two larger houses I’ve rented, both were put on the market the year after we moved out. Cash in those capital gains, quick!
This is mildly annoying at best. At worst, if you’re settled with kids in school, I imagine it’s a freaking nightmare. We don’t exactly have an oversupply of rental housing, let alone quality affordable rental housing, and add in our lack of density and it can be a tough call to find a comparable nearby place in a pinch.
Renting is still cheaper, though the gap seems to be narrowing. I was surprised to plug in some numbers and find out that the mortgage on a $500k house would only be $550 a week; rent for a 3 bedroom house would start at about $400 for a crap place and run up into, oh, the 600s for somewhere nicer. (I’m not even talking central Auckland here, obviously, where a starter house is $1 million.)
While mortgage payments may fluctuate with interest rates, rent always goes up eventually over time. Here, rent can be increased as often every 6 months – granted, it usually isn’t raised that frequently, thankfully. And yes, there are additional expenses that come with being a homeowner, but at least they’re going into an asset. The problem of course is that coming up with a six figure down payment is a hell of a lot easier said than done, even if repayments are manageable. Thus, my fading dream of buying a humble house, insulating it, and living happily after with kids and dog. Who even knows how we’d house ourselves in retirement? The Productivity Commission itself states that people in New Zealand who enter retirement while renting may face financial hardship.
We continue to rent a tiny 105sqm, three-bedroom, leaking, crooked, mouldy, old house, that barely fits our family of five.
Do we upsize our rental so we are not falling over each other and pay out to a landlord more of what we could save as deposit, or sit tight for three to four years to save that money to reach our dream of getting a small lottery-sized deposit together?
Commentators report that it is better to be renting now than buy, but what happens when we retire in 23 years at 65, and if still renting, will this be affordable on superannuation income?
Could we afford to pay a landlord rent out of our Super or Kiwisaver until our 90s if we live that long? Will we be constantly on the move when rental properties are sold, and have no solid foundation steady home dwelling in which to welcome grandchildren and our children to?
But even if leaving Auckland were feasible work-wise, I simply wouldn’t want to. T threw out the idea of re-enlisting and moving to an army base – and that’s when I realised what I am NOT willing to sacrifice for cheap housing. I would not want to move to the middle of nowhere away from friends and family and my job. Financially I can see that it might make our lives a lot easier – lower expenses, and I could do some freelancing – but I know I would be miserable in all other aspects.
The Salvation Army recommends creating an affordable housing agency with meaningful and long-term budgets actually to execute its mission, but we all know what happens to these kinds of reports. I don’t think anyone who lives here would disagree with the following:
“Any ambition Auckland has to become the world’s most liveable city will be defeated if the housing future being offered by current trends continues to play out. Access to safe, decent and affordable housing is already the single biggest issue facing hundreds of thousands of Aucklanders. This problem will grow in size if the present wishful approach of Auckland Council and the present wilfully negligent stance of Government continues.”
But any fix is probably not going to come in time for us.
“Auckland’s housing problems are at least a generation in their gestation and most likely will be a generation in their resolution. There are no short-term answers or quick fixes—the problems are too big and the causes too ingrained in our social and economic fabric for that.”
Auckland, I love you, but I’m not feeling the love back. Let’s figure this out, stat.