Labour calls for Muldoon rent freeze in Christchurch

April 14th, 2012 at 8:58 am by David Farrar

The Press reports:

Dalziel said the housing shortage had hit breaking point and was rapidly snowballing into an “extreme crisis”.

“The Government has to intervene. It has the most extensive powers that any government has had since wartime,” she said.

“Gerry Brownlee is like Pontius Pilate by just washing his hands of all this.”

She said there needed to be a cap on rent increases to stop landlords taking advantage of quake-hit residents. 

Oh yes a . That worked so well last time. Let’s look at the problem:

Recently disclosed Trade Me figures show demand for rental properties in has increased 42 per cent, supply has dived 40 per cent and rent has climbed 15 per cent on last year.

Okay so supply has dived 40%, and Labour’s solution is a rent freeze. Now can anyone who has studied economics beyond primary school tell Lianne what the problem with her proposed rent freeze is?

The Government would not intervene in the issue, he [Brownlee] said.

“A rent freeze doesn’t increase supply and will never encourage new stock to come in. We won’t be moving to regulate but we most certainly are actively providing new housing.”

He “recognised there was a problem a couple of weeks ago”, but criticism that the Government had ignored the city’s housing crisis was “unfair”.

“Political opponents have raised issues, not solutions. The Government is taking action and we have outlined our plan of attack many times.”

Land on the outskirts of the city had been freed for potential subdivisions, more rapid consenting processes were being discussed, temporary accommodation services and assistance packages were available, housing villages were expanding and he had asked Housing New Zealand and the Christchurch City Council to accelerate repairs on quake-damaged homes, he said.

I await Labour also announcing a price freeze as their new inflation policy.

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34 Responses to “Labour calls for Muldoon rent freeze in Christchurch”

  1. Bed Rater (239 comments) says:

    National is just as culpable for keeping up Government’s iron grip control on new development. But you wouldn’t dare criticise them would you?

    [DPF: If you think I never criticise the Govt, then you're bonkers]

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  2. metcalph (1,428 comments) says:

    What iron grip on new development? Permission for new buildings is in the responsibility of the CCC not the government.

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  3. labours a joke (442 comments) says:

    Noted…Dalziel starting her chch mayoralty bid early…

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  4. Fletch (6,294 comments) says:

    The entire concept of “rent controls” and “affordable housing” is deeply rooted in socialist economic theory—pitting the “rich” against the “poor.”

    Rent controls (when the government arbitrarily sets the maximum price a private property owner can charge to a renter) are especially detrimental to the poor—exactly the opposite of what those on the left claim. Any government-mandated price ceiling for apartments will either result in contrived scarcities or reduced quality. That’s the only result when owners are forced to rent their properties for less than they’re worth.

    When owners’ rent incomes are less than what they owe in mortgage payments, taxes and other costs, they either sell their buildings or abandon them—something thousands of owners have done in New York and other cities which have rent controls.

    Rent controls—instead of providing more apartments and lower prices—actually end up decreasing the supply and quality. Why? Because when property owners lose profits as a result of controls, they are less able to invest in their properties. That means they don’t make necessary repairs or provide regular maintenance, which inevitably leads to property deterioration and abandonment.

    Housing policy expert William Tucker estimates 30,000 New York buildings per year were abandoned between 1972 and 1982 because of rent control—a loss of almost 350,000 apartment units.4

    Paul Niebanck, a community planner and developer, concluded about thirty percent of rent-controlled housing in the U.S. has deteriorated, compared to only eight percent for apartments which rent at the fair-market value.

    5 Rent controls can also end up protecting rich tenants. Ed Koch, the former Mayor of New York City, benefitted from rent controls at the expense of poorer individuals who couldn’t find “affordable” rents.6 Since rent “controls” limit profitability by capping rents owners can charge, demand for new apartment buildings decreases and non-controlled dwellings—such as condos and luxury apartments— increases, causing excess demand and inflated prices.

    At the same time, those who can least afford expensive condos and luxury apartments face reduced availability of quality rental apartments. Rent controls violate fundamental free market principles. Even though the left likes to use non-threatening terms such as “humanitarian” and “helping the poor,” when making a case for rent controls, they are immoral.

    The government has no right to violate the rights of private property owners to decide what price they can charge for their own property. That type of intrusive coercion is more indicative of socialist-controlled economies than free market capitalistic ones. Both the prospective tenant and the apartment owner have the moral right to agree on a mutually acceptable price.

    They also have the moral right to disagree. While the left describes government intrusion into the private affairs of citizens as being “humanitarian,” it clearly violates the concept of economic freedom. Most economists (on both the right and the left) agree controls are generally bad. Right-leaning Nobel Prize winning economists Milton Freidman and Friedrich Hayak and left-leaning Nobel laureate Gunnar Myrdal are in unanimous agreement that, in the words of Myrdal, “Rent control has in certain Western countries constituted, maybe, the worst example of poor planning by government lacking courage and vision.”7

    Assar Linbeck, a Swedish economist from the “left,” asserted that, “In many cases rent control appears to be the most efficient technique presently known to destroy a city—except for bombing.”8 Clearly, the best way to ensure maximum housing availability at the lowest prices is for the government to allow the free market to function with minimal government intrusion.

    Jackson, Greg (2011-07-13). Conservative Comebacks to Liberal Lies (Kindle Locations 1785-1810). JAJ Publishing. Kindle Edition.

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  5. wat dabney (3,724 comments) says:

    Labour understands that Mugabe economics worked very well for Mugabe himself.

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  6. David Garrett (7,110 comments) says:

    A rent freeze! Excellent idea! worked wonderfully well in ’82…Ah I remember it well…tenancies terminated because “the house is being sold” or “I need it for family” then re-rented a few days later for 20% higher rent…and those were just the obvious rorts…

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  7. Other_Andy (2,608 comments) says:

    @labours a joke

    “Noted…Dalziel starting her chch mayoralty bid early…”

    And what a choice so far, ‘no fracking’ Bob and ‘back to the future’ Lianne.

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  8. orewa1 (410 comments) says:

    The most significant cause of rent increases nationwide is the government’s action in removing the ability of mum and dad landlords to offset losses from rental properties against their wages. For a typical rental house this increases the effective after tax loss (and most do make losses) by around $100 weekly. Add in rates increases way above inflation, and this amounts to a very significant rise in costs that has to be recovered somehow.

    And before someone parrots back the scornful “New Zealanders’ love affair with domestic property” line, let me ask you this. Given the shameful recent history of poor leadership in the financial services sector (ranging from breathtaking negligence a la Sir Douglas through to serious fraud) and the detrimental tinkering with the basics of Kiwi Saver, why would you blame mums and dads for using rental property as a relatively safe place to invest their meagre retirement savings?

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  9. philu (13,393 comments) says:

    surely a rent freeze is/would be about stopping greedy/unscrupulous landlords from exploiting the disaster..?

    phillip ure@whoar.co.nz

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  10. Inky_the_Red (756 comments) says:

    I think sometime between Muldoon (1994) and now the paradine changed from ‘An Economy is to help improve people’s standard of living’ to ‘People are here to serve the Free Market and people are less imporant than the economy’

    For some reason some of us still think that people are more important

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  11. BeaB (2,118 comments) says:

    Liannegrad – the new Christchurch.

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  12. trout (937 comments) says:

    ‘surely a rent freeze is/would be about stopping greedy/unscrupulous landlords from exploiting the disaster..?’ – a predictable knee jerk solution from an avowed lefty having no regard to unintended consequences. NZ is rife with ‘solutions’ that only magnify the problem because we generally act before we think.

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  13. David Garrett (7,110 comments) says:

    Inky: How did you learn the secret chant we used to recite before every ACT caucus meeting? Did Heather Roy leak that too?

    The woman’s perfidy has no bounds….That “the free market” was ACT’s version of “Gaia” was as secret as the most secret of handshakes, and only ever be divulged on pain of death…

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  14. Inky_the_Red (756 comments) says:

    I overheard the chant in the Backbencher on Wednesday at the table next to a balding gentleman named David

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  15. David Garrett (7,110 comments) says:

    Well no, that must have been an interloper…there were no “balding” members of our caucus, only “bald” already (Rodney and John) or “full head of hair for the age” Roger and Me (geddit?)

    We did have lots of people passing themselves off as us though…that was all part of the Alpha Plan…unfortunately the late Roger Kerr took some of the codes with him to the grave…

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  16. berend (1,704 comments) says:

    Look at what the National Socialist are DOING: Land on the outskirts of the city had been freed for potential subdivisions, more rapid consenting processes were being discussed.

    It’s the joke party. They are the ones who don’t understand economics and have run the entire Christchurch rebuild as one gigantic socialist project.

    On our way to $30 billion in debt guys?

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  17. berend (1,704 comments) says:

    orewa1: The most significant cause of rent increases nationwide is the government’s action in removing the ability of mum and dad landlords to offset losses from rental properties against their wages. For a typical rental house this increases the effective after tax loss (and most do make losses) by around $100 weekly. Add in rates increases way above inflation, and this amounts to a very significant rise in costs that has to be recovered somehow.

    +1, that’s what the National Socialist are doing.

    Always playing the we can’t help it our capitalist solutions are not working. Never ever responsible for anything. What a shame Labour is still worse and we have to wait for the current crop of Clarkites to die out.

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  18. berend (1,704 comments) says:

    philu: surely a rent freeze is/would be about stopping greedy/unscrupulous landlords from exploiting the disaster..?

    Philu, if I hated the renters in Christchurch I would love to try this out as a demonstration to people like you. On the other hand, no demonstration would ever have any conceivable effect on your apriori notions.

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  19. Inky_the_Red (756 comments) says:

    No the balding (bald) David was a Nat blogger.

    The chant was coming from a Nat table too with a former Nat MP. I think that former MP was looking to see if two current Nat MPs might resign so he could again be one.

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  20. Anthony (794 comments) says:

    Tax changes have nothing to do with this shortage of rental properties – that should be pretty obvious to anyone except orewa1 and berend. Like I’ve said before your typical mum and dad landlord bought existing old dumps to rent to unfortunate tenants – that increased the total supply of property not one ioata! It just pushed up prices as mum and dad waited for their tax free capital gains!

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  21. philu (13,393 comments) says:

    “..your apriori notions…”

    how so..?..that is not theoretical..it is practical..

    ..freeze rents…greedy landlords can’t exploit the disaster…

    ..how could that be a more practical (temporary) part-solution…?

    ..wot..?..will landlords strike..?..and refuse to rent..?

    ..don’t think so..eh..?

    phillip ure@whoar.co.nz

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  22. philu (13,393 comments) says:

    “..a predictable knee jerk solution from an avowed lefty having no regard to unintended consequences. ..”

    what would those ‘unintended-consequences’ be..?

    phillip ure@whoar.co.nz

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  23. PaulL (5,965 comments) says:

    There is some rationale in a rent freeze if housing supply is inelastic in the short term – if the rent freeze was for 6 months only then in theory nobody would exit the market. The question is what it’d do to those who were thinking about building new houses for rental. Presumably many of them would decide not to, which is the opposite of what we want.

    As usual, this is a solution of the left that claims to be helping “the poor” but is actually helping nobody. It’s a simplistic answer that ignores human nature, and is rooted in class warfare.

    If there is an adequate supply of land and if the government doesn’t get in the way of people building houses, then (in the absence of a monopoly situation) rentals will reflect supply and demand. The only way to reduce the price of rentals is to increase supply (reduce government controls) or reduce the cost of building houses (reduce government added costs).

    To argue that the rental market is full of people who are charging exhorbitant prices is rather absurd when basically any NZer can buy a house and rent it out – if the returns to rentals are so high then everybody should rush out and buy one.

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  24. Roflcopter (455 comments) says:

    Most of the problem isn’t landlords hiking prices, it’s tenants who tell landlords that they’ll pay $10 a week more than their best offer, so they don’t have to wait in a queue.

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  25. andretti (130 comments) says:

    I find it astonishing that anybody with a brain could think that a rent freeze would FIX the problem,anybody that believes that either is very young or has been on drugs since 1984.We all need to realise that govts dont fix problems they are the cause of them.The reason there is a shortage of rentals is because of govt (both local and national)policies and taxes.I didnt disagree with the clawback on depreciation adjustments to help place more funds in productive sectors but always knew that increased rents would be an outcome.Like David Garett said,i was renting back in 84 and got kicked out as it was being sold only to find out a freind rented it for $20 more a week,many many stories like this.Humans are cleaver sods and will always find out ways to overcome policies and regulations.

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  26. Bevan (3,923 comments) says:

    ..freeze rents…greedy landlords can’t exploit the disaster…

    Or, freeze rents and struggling (not greedy, many are middle class investors with a mortgage on the property you know…) landlords end up having to sell the rental property. If there’s a rent freeze no investor would touch it, therefore the house will most likely sell to a purchaser who wants to live in it – end result: renter looking for new rental property…

    ..wot..?..will landlords strike..?..and refuse to rent..?

    No, landlords would just sell and I doubt another investor would touch the property. Most likely the investor would look to invest elsewhere, say Auckland.

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  27. swan (665 comments) says:

    “There is some rationale in a rent freeze if housing supply is inelastic in the short term – if the rent freeze was for 6 months only then in theory nobody would exit the market.”

    Even if supply is inelastic, demand is elastic. If you have a rent freeze you will get actual shortages. If the price rises, the market clears. Young 20 somethings move back in with their parents. 30 year olds get a flatmate into the spare room. Contractors only there for 5 days a week bunk up 2 to a room.

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  28. Paulus (2,607 comments) says:

    Mayor Lianne with Jim as Tooth Fairy – can’t wait.

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  29. gazzmaniac (2,307 comments) says:

    The reason there is a shortage of rentals is because of govt (both local and national)policies and taxes.

    Must have nothing to do with a good portion of the housing stock being destroyed on 22 Feb 2011 then.

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  30. Inky_the_Red (756 comments) says:

    Gerry has the answer don’t worry about house some get someone in from outside to build an inner city
    http://www.stuff.co.nz/the-press/news/6743907/Super-city-architect-tipped-for-CBD-rebuild

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  31. Michael (904 comments) says:

    Remind me again, just how many Christchurch seats Labour lost election? Wasn’t it two of the four they held.

    Playing politics with the earthquake aftermath has not worked for Labour for the last year, why are they thinking it will work for them now?

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  32. Bed Rater (239 comments) says:

    [DPF: If you think I never criticise the Govt, then you're bonkers]

    Yes, from time to time I see you express ‘disappointment’ with a minister’s decision, or mourn the resignation of a dear friend. But seldom do I see you critically analyse the actions (or inactions) of the blue team as thoroughly as you do for the red.

    Let’s be honest, the red team are very easy targets currently. As the main opposition party (apparently) that’s bad for all.

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  33. pq (728 comments) says:

    I will be renting my 3 bedroom home shortly, and I can reasonably expect $380 or $390 per week.
    This is maybe a 6% return on capital value
    Getting a good tenant is priority, and this means not overcharging.
    Reports have it that rent increases have been about 15% since the earthquakes, so that is quite a lot, but not the crisis that is being called.
    It is worth remembering that average income in Christchurch is much lower than Wellington or Auckland, and that the East side of Christchurch has lower income than average Christchurch even .
    The problem is mainly the rent affordability for people of limited means.
    There are two houses within a stone’s throw of me waiting now for occupation.
    I do not know the prices being asked. Wild talk in the Press breeds speculation and invites us to be greedy, but not me,
    a bad tenant can cost you thousands.

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  34. hj (6,915 comments) says:

    Any land freed up on the out skirts won’t necessarily be cheap as we have an internationalised property market and are a “pro immigration country” and (of course) developers are business men and will be going for the top dollar.

    http://vimeo.com/38500767

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