Will NZ Labour follow UK Labour with rent controls?

May 13th, 2014 at 2:00 pm by David Farrar

Fraser Nelson writes in the Daily Telegraph:

Something very strange has come over senior members of the Labour Party. Thoughtful, sensible, well-educated men and women are starting to behave like excitable, angry, slogan-chanting teenagers. A party that had gone through the painful process of modernisation in the Nineties, and made itself into a party of competence, now seems gripped by nostalgia. Not so long ago, Labour led the European Left in pioneering reforms of government – but that Blair-era generation has gone from the stage. In its place stands a group of people too young to remember the Seventies, yet seemingly dedicated to repeating its mistakes.

The latest to turn is David Lammy, a Harvard-educated lawyer who was a health minister under Tony Blair at the age of 29. A few months ago, he proposed an idea for London: rent controls, where the government lays down terms to landlords. There is a “patently obvious” demand for such controls, he said, because it’s so costly to rent in the capital. So landlords can be told not to charge so much. No one took the idea very seriously: after all, since when could government order lower prices? Wasn’t that kind of thing tried in the Soviet Union with, erm, mixed results?

But yesterday, Ed Miliband declared that he likes the idea so much he’ll roll it out nationwide. 

Muldoon tried rent controls. They were a disaster, along with his price and wage controls.

NZ Labour policy is for rent controls in Christchurch. Never mind this will stop new properties being built. Will NZ Labour propose rent controls nationwide? Don’t roll it out – many of their policies come from the UK Labour Party.

Mr Miliband’s strategy is, anyway, perfectly defensible. A populist wave is sweeping Europe at the moment, as demonstrated by the rise of Ukip in England and the SNP in Scotland. He is hoping it might also last long enough to sweep him into 10 Downing Street. Politicians can win easy applause nowadays by raging against the “establishment”, and accusing their enemies of being out of touch. In many ways, Mr Miliband seems to be positioning Labour as the Ukip of the Left; an angry party itching to exact vengeance on a growing list of enemies, inviting voters to blame their problems on corporate greed.

Sound familiar?

The economist Assar Lindbeck, a housing expert, once said that “rent control appears to be the most efficient technique presently known to destroy a city – except for bombing”. Who would have thought that this policy would be on a Labour Party manifesto in the 21st century? 

Watch this space in NZ.

Human Rights Commission calls for rent controls

December 10th, 2013 at 10:00 am by David Farrar

Stuff reports:

Capping rent prices in the wake of big natural disasters and a warrant of fitness on all rental properties are among Human Rights Commission (HRC) recommendations to the Government prompted by the Canterbury earthquakes.

The HRC today releases a report that considers the human rights challenges that emerged during the quake recovery.

The Human Rights Commission may have legal expertise but I don’t think they have economic expertise.

If you put  a freeze on rents after a disaster, then that will help ensure that new properties are not built and/or rented out. It will lead to even greated reduced supply and homelessness.

NZ First wanting Muldoon rent freeze

November 22nd, 2012 at 2:00 pm by David Farrar

NZ First have said:

New Zealand First says more evidence of rent gouging has emerged with a Christchurch family with nine young children landed with a rent increase of $100 a week to take their weekly rental from $460 to $560.

Nine young children?? I won’t even try and work out how much WFF they get!

Anyway we don’t know how many bedrooms their current house is but there are 16 properties currently on Trade Me that are at least five bedrooms for under $500 a week. And if you have three kids a room (they are young kids) then there are 72 four bedroom or higher properties for under $500 a week.

Christchurch Earthquake Issues spokesperson Denis O’Rourke says this vindicates repeated calls from New Zealand First for a short term rent freeze in the city.

No it doesn’t. A rent freeze did not work for Muldoon, and the fact some landlords increase their rents doesn’t mean you need price controls.

The economic policy of a Labour/Green/NZ First Government looks more and more to be wedded to the 1970s.

Rents have increased in Christchurch, but in some parts they have dropped according to the official stats:

A number of suburbs across greater Christchurch, particularly on the outside of the city centre, continue to show increases in average weekly rents of 20% or more. Russley, Hawthornden, Yaldhurst, West Melton, Halswell West, Halswell South and Kennedys Bush have all shown large increases for the three months ending October 2012 compared to the same period the previous year.

Meanwhile some suburbs in city fringe areas continue to show decreases in average weekly rents of 10% or greater. Ilam, Riccarton and Westburn have all shown large rent decreases.

And if you bring in a rent freeze, you will discourage new houses being built (which is the sustainble solution).

In Canterbury consents were issued for 396 new dwellings in September 2012, up 80% from September 2011. This is the highest number of consents issued in Canterbury since September 2007.

Yes it is tough if your rent goes up. But the solution proposed by NZ First will make things worse.

89 properties on Trade Me

June 6th, 2012 at 11:00 am by David Farrar

Stuff reports:

A 40-year-old solo mother has returned to prostitution to offset an “unaffordable” rent rise.

The domestic purposes beneficiary, who wanted to be known only as Sarah, was not proud of her lifestyle but wanted the public to know “people have had to go to extreme lengths to survive” Christchurch’s rental housing drought.

Sarah has had an $80 rent increase over the past year and said it was “beyond affordability”. …

Sarah, who has been house hunting for the past six months, said the Government needed to intervene.

One rental she viewed had no hot water and the landlord told her she could shower her children at Jellie Park, while other open homes had left her disheartened when people started offering more money than that advertised.

“Landlords are taking advantage of the situation and are increasing the rent just for the sake of it,” she said.

Sarah receives $660 on the domestic purposes benefit each week, and in September her rent will increase to $440.

The rise will leave her with $220 a week to pay for power, basic bills and food.

A rent freeze is a very bad idea. Christchurch needs more residential properties, and a rent freeze would deter investment in new properties. But turning specifically to this case highlighted, a search on Trade Me found 89 properties for rent in Christchurch for $350 a week or less – and all 3 bedrooms or more.

The distribution of Christchurch 3 bedroom+ rental properties in Christchurch is:

  • Up to $250/w – 7
  • Up to $300/w – 26
  • Up to $350/w – 89
  • Up to $400/w – 209

If one extends this to 2 bedroom+ properties (noting both kids are at primary school), you get:

  • Up to $250/w – 33
  • Up to $300/w – 113
  • Up to $350/w – 234
  • Up to $400/w – 389

So let’s be very clear on this. Her current rent is $360 a week – and there are 89 properties listed (just at this point in time) which have three or more bedrooms and are cheaper than $360 a week. And if you include two bedroom properties, then there are 234 properties listed.

Wouldn’t this be a pertinent fact in reporting the story.

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 rent freeze. That worked so well last time. Let’s look at the problem:

Recently disclosed Trade Me figures show demand for rental properties in Christchurch 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 rents 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.