Private sector shifts to multi-unit homes

Private home construction remains strong thanks to the shift to multi-unit homes. The number of consents is up 7% over the previous year, with 50,732 consents issued in the year ending September. Total construction value was up 12.4%. Much of this reflects a shift away from standalone houses to multi-unit housing: flats, townhouses, apartments and retirement village units.

Overall this is slightly down from the peak of 51,015 consents in March.

Construction costs are rising, and rapidly increasing interest rates are lifting mortgage servicing costs. This reduces the affordability of homes. Falling prices for existing homes is a further dampener on building, as new builds are worth less than expected on resale. Westpac senior economist Satish Ranchhod expects the gradual slowdown to continue. Economics consultancy Infometrics predicts consents to settle around 30,000 in 2024.

Three quarters of homes in the Auckland region were multi-unit. Auckland rents are rising faster in cheaper areas as inflation works on the market, causing rising costs of both living and of operating rentals.

Landlord’s perspective

The proportion of Kiwis owning their home has been in decline since the early 1990s, with rental households increasing from 23% to 32%. Around 1.4 million people live in close to 600,000 rented homes, and it’s estimated 30%-50% of those homes are in poor condition.

From 1 July 2024, all rental homes in the private sector must meet the healthy homes standards introduced by the Government in 2019. Penalties for landlords not meeting the standards are up to $50,000. However, while MBIE’s tenancy compliance and investigations team records identified breaches, it doesn’t have records beyond that, so the actual number of uncompliant homes is unknown.

There are records kept for public housing, showing that a third of Kainga Ora homes do not comply with the standards. On November 22nd the Government announced it was exempting Kainga Ora from the standards for another year – until July 2024. Housing Minister Megan Woods said COVID was to blame for the building delay – but this grace wasn’t extended to the private sector until the ACT Party objected, and Woods agreed to also apply it to private landlords.

In an opinion piece in Stuff, the Chief Human Rights Commissioner is calling for further subsidies like the Accommodation Supplement and the Cost of Living Payment, both of which have already risen. He’s also calling for a rent freeze, and increased enforcement of the healthy homes standards, but it’s hard to see the situation improving due to a lack of construction workers and rising costs. It’s not clear why the Human Rights Commissioner is being afforded press coverage for his political views.

New Zealand, like many other countries, had a shortage of construction workers for years before the pandemic. The deficit has risen to a supposed 200,000 workers this year. This is after record numbers of new apprentices entering the industry with the help of the Government’s free training program.

While the shortage of building materials has decreased somewhat, prices continue to rise. Fletcher Building plans to hike the price of Gib plasterboard over 15% in February – while maintaining record profits.

Public housing sector struggles

Construction cannot happen fast enough for our social housing program. As of June there were 26,664 applicants on the waiting list for public housing, up 8.9% from the previous year.

On October 31st, the Government announced a $55 million partnership with Māori providers to build 80-100 homes by July 2025 in Northland Māori electorate Te Tai Tokerau. The funding comes from the $730 million earmarked for 1000 new homes for Māori announced in last year’s Budget.

Expansion of public housing, administered by Kāinga Ora, is causing problems for some home owners as their new neighbours have proven to be disruptive or criminal, subjecting them to threats and abuse. Complaints have been made about noise, theft, prostitution, drug dealing and gang violence. One Residents Association chair in South Auckland says Kāinga Ora are “the worst landlord we’ve ever seen because they don’t acknowledge their responsibilities under the [Residential Tenancies] Act properly.”

This echoed National’s housing spokeswoman Nicola Willis, who said in February the agency had “repeatedly failed its legal obligations” and “shown a callous disregard to those concerned about personal and community safety.” She welcomed the announcement that Kāinga Ora would have the power to move disruptive tenants on via a three-strikes policy in the Act. As of July, despite their promises the agency had still not moved any disruptive tenants, and it is apparently continuing to fail to act.

The Ombudsman is currently investigating 18 complaints about Kāinga Ora. Police recently issued warrants for the arrest of a young female tenant who had been terrorizing her neighbours with violent threats for 18 months.