As I discussed in my last blog post, I think one of the big questions we need to confront when we talk about improving housing affordability in Auckland is why it is that so many people in New Zealand are determined to buy their own homes.
It’s important not to generalize here: Clearly not all Kiwis want to buy their own homes but it’s pretty obvious from what you see in the media and the little bit of research you can find that many do.
As I discussed earlier, the determination of NZers to buy their own homes is creating some economic problems for us a country. It’s also not entirely normal in an international context: For example, this paper mentions that Germany, although a relatively prosperous country, has pretty low rates of home ownership. Several other European countries, such as France, also have pretty low levels of home ownership: In these countries, renting for life is not necessarily seen as a terrible thing to do.
So I thought it might be useful to discuss what factors drive young couples (and others) to buy their own house in Auckland. I don’t want to talk about the financial factors (such as our lack of a capital gains tax) that make buying more attractive than renting because I’ve already discussed those as have many other much better qualified people.
Instead I wanted to talk about the quality of life issues, which get discussed less often. In particular, I’m drawing on the experiences of a lot of my friends who have recently become young parents and (I don’t think this is a coincidence) have also bought houses.
Stability of tenure. In New Zealand, unlike some European countries, it’s virtually unheard for people to be able to get an indefinite or even a 5 or 10 year rental lease. The most you are likely to get is a 12 month contract. Landlords can, and often do, ask you to move for a variety of reasons at short notice. Obviously, knowing you could be asked to move suddenly is problematic for everybody. But it’s particularly frightening for couples who have young children and don’t want them to have to change schools. Being sure they an stay close to their extended family is also a big consideration for lots of young parents. I have friends who literally couldn’t work if their Mum/sister didn’t help out baby-sitting. But this kind of help is only really viable if your family live on the same side of the city as you.
Predictability of costs. Since we don’t have long-term tenure, landlords can raise your rent every year so long as it is within “market rates” for that area. I think what scares people of my generation about this is that ever since we’ve been old enough to take an interest (I turned 17 in 2000) house prices in Auckland have been rising. So we assume this will go on for ever, particularly given the number of articles like this you see in the Herald. On the other hand, people know that if they get a mortgage, and particularly if they get a fixed interest rate, they can accurately predict how much they will have to pay.
I don’t know what we need to do to reform our tenancy law so that more landlords offer long term leases which give both security of tenure and predictable costs. But let’s find out and do it!
Our rental properties are cold and damp and they are making our children sick. In theory, it may be possible to find a warm, dry, affordable rental property in Auckland. In practice, I don’t actually know anybody who’s ever lived in one. Brian Fallow cites a report by Statistics NZ in which “two-thirds of renters said they had major problems with their housing, such as being too damp, too cold, too small or far from their work.” A report by BRANZ compared rental and private housing in NZ. They found the rental housing was in significantly worse condition. The take up by landlords of insulation grants has been also incredibly low – just 25,000 or 5% of rental properties have been insulated, as opposed to 215,000 privately owned houses.
Obviously, being warm and dry matters to us all but it matters to parents with young children more than most. For example, recently my friend who has a one year old baby moved from her cold, dark apartment to a nice dry sunny house. Her baby is already sleeping and breathing better. If you buy your own house you can insulate, install extractor fans, put in double glazing and generally make your house liveable.
Our rental laws offer very little protection to tenants. I have lived in houses with illegal wiring and plumbing and I know many others who have done the same. In other countries, such as Britain, landlords have a legal obligation to do regular inspections of the electricity and gas systems of their rental properties to ensure they’re safe to live in. NZ needs something similar.
Lack of access to shared green space. Renters, particularly renters with children, value access to green space. Many Auckland rental properties don’t provide this. In fact, a lot of Auckland units actually do have green space around them but it’s not fenced. That means parents can’t let kids play outside (even watching through the window) as they’re afraid they might stray into the driveway. If you buy your own property, you can fence the garden and let your kids play outside.
So to recap: Why don’t young Aucklanders, and in particular couples with children, want to rent?
Well, basically because it sucks. This is particularly true if you are in the lower half of our income distribution and you can’t afford to rent a cosy little brick unit. It also makes no financial sense.
What do you think? Am I overstating how bad it is to rent in Auckland? Do you think our tenancy laws are weak compared to other countries?