Its new paper ‘Beyond Renting’, released today by the Army’s Social Policy and Parliamentary Unit, offers a bleak outlook for the private rental housing market.
To meet these future demands the report suggests the government needs to look beyond the private rental market and begin to invest heavily into home-ownership programmes and more public and social housing.
“The rental market is not going to be adequate to meet future demands for housing,” report author Alan Johnson says. “Kiwi Build is a great initiative, but on its own, it is not enough for the problems we face. We need a KiwiBuy scheme.”
Over the past 30 years New Zealand has relied extensively on private rental housing and small-scale ‘mum and dad’ investors to supply the majority of housing for new households and young families.
Over this time, rental housing supply has grown 145 per cent, nearly three times the rate of growth of owner-occupied housing, the report shows. Over the past five years, more than two-thirds of new households have gone into rental housing.
However, as this reliance has continued, investment yields for rental properties have fallen. In Auckland, yields have fallen from 7% in 1993 to approximately 3.5% now. While yields may pick up as rents rise over the next few years, it seems likely property prices have reached the top of the cycle, and further capital gains will be small, Mr Johnson says.
“That outcome is not great for tens of thousands of tenant households given the likelihood that rents will continue to rise faster than wages and salaries. Household budgets will be stretched further—especially for low-income families—and there is a real chance the levels of homelessness will continue to rise.”
To assist modest households into home ownership rather than having to rent, a government subsidised home ownership programme is required. We should be looking at KiwiBuy as well as KiwiBuild
“Kiwibuy should aim to help people earning around the medium income, not twice the medium income as Kiwibuild. If we apply imagination and courage to the design of KiwiBuy, then opportunities exist to ensure Kiwis in need can have a KiwiBuild house.”
Issued on the Authority of Commissioner Andy Westrupp (Territorial Commander)
The Salvation Army, New Zealand Fiji, Tonga & Samoa Territory