Better conditions for tenants could help housing 'crisis': Eaqub

New Zealand has one of the least renter-friendly regimes in the OECD and changing that could be part of the solution to housing affordability problems, NZIER says.

Friday, July 18th 2014, 12:00AM

by The Landlord

It has released a new working paper on home affordability, which says rising unaffordability cannot be fixed by a single solution such as changing immigration policy or urban planning rules, or imposing a capital gains tax.

Principal economist Shamubeel Eaqub said: ““It’s not just Chinese investors, it’s not just a lack of an effective capital gains tax, it’s not just councils’ planning rules, or cheap credit. With that many variables in the mix, the solutions will be complex and perhaps the most effective measures could come from unexpected corners, like rental market reform.”

He said renting was not seen as a long-term option for many people. But he said if tenants were offered better security of tenure and could treat the property like their own home, some might be willing to forgo home ownership.

The NZIER report said New Zealanders’ desire for home ownership was one of the reasons it took the country years to recover after the global financial crisis. “Our reliance on future capital gains to pay for debt-funded spending caused a long hangover when households realised they needed to pay off the mortgage.”

Eaqub said at today’s prices, an average Auckland house would take 50 years to pay off on an average Auckland salary. That’s compared to 30 years in the 1990s. Ownership rates were back to 1951 levels but Eaqub said the country should embrace that rather than "obsessing" about it.

“Economies prosper when people invest in business, not just housing. We need to create level-playing fields for different types of investment, and parity between renting and owning, to support a much needed cultural change around housing.”

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