What my rent decrease can tell us about the housing market

Friday, 15 October 2021

Apartment building has been carrying on apace in Auckland Central.

OPINION: Nothing could prepare me for the most unexpected event of the decade: a rent decrease in Auckland.

We all know that in the multiverse of possible parallel universes a renter getting a rent decrease has always theoretically been possible.

We also know a rent decrease at a place you’re already living in is a bit like the abominable snowman: theoretically possible but probably not real.

For many renters the prospect of rents decreasing is a more remote one than the chance they might own a home, yet there is one major city area where this is happening.(Video from September 2021)

Auckland Central is an oddity on several counts. Its residents are, on average, younger and more mobile, so you see changes in the rental market come through more quickly, but perhaps the biggest reason why Auckland Central is different is because the locals want more neighbours.

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This is completely different to the kind of outlook you get further out where every new resident seems to threaten somebody else’s enjoyment of their land.

Rents should go down as well as up, but it often doesn’t work out that way.

A couple of years back former NZ First List MP Barbara Stewart blamed a migration backlash on new immigrants who hadn’t maintained their backyards properly.

'Some of the Asian immigrants in particular, because they've never had to look after their section, they live in apartments, and it's quite difficult to be responsible for the ground outside and around your house.”

Her comments are perhaps the only time in history Asian immigrants have been blamed for bringing down house prices.

In central Auckland people want the opposite. They want someone to live in the apartment next door, and believe another person moving in can only be of benefit to them. They move there for the area’s diversity and because, in pre-Covid times at least, it was the closest thing New Zealand had to a 24-hour suburb.

The absence of “nimbyism” has made central Auckland everybody’s favourite place to build houses. During the last major change to planning rules in Auckland, known as the Auckland Unitary plan discussions, plans to allow more dense housing in Auckland’s villa belt were often rebuffed with the idea that apartments should be built right in the centre of the city instead.

In council planning policy documents the central city is a place to “accommodate growth and the greatest intensity of development in Auckland”, while the single house zone further out is a place for “planned suburban built character of predominantly one or two storey dwellings within a generally spacious setting”.

Still, being able to negotiate a rent decrease in one of the least affordable housing markets in the world, even if that place is an Auckland Central where new buildings are being built, seems odd given our national experience with rental prices over the last few years.

Yet my own experience is no aberration. Crockers Property Management publishes rental statistics from the Real Estate Institute of New Zealand and the Ministry for Business Innovation and Employment every month, and for every month this year the key median rent statistic in Auckland Central has been lower than the previous year.

Several months last year were covered by rent freeze legislation, making the drop even more unusual, especially considering when the freeze was lifted other suburbs experienced some of the largest rent increases in history.

My wife and I didn’t know this when we actually asked for a rent decrease, but we could see it in the TradeMe listings. Bargaining the landlord down turned out to be as simple as pointing to one apartment similar to our own and asking why it was being offered for $100 less per week.

In this case it helped to have a property manager in the middle, she was able to tell the landlord what was actually going on in the market, and convince them that we weren't being unreasonable.

Now we’re in a better quality apartment than what we had in Wellington a couple of years back, and paying less.

Successfully negotiating a price drop shouldn’t be unusual, especially in the current circumstances.

The Pacifica super penthouse in Auckland is listed for $40 million, and attracting plenty of post-lockdown interest from overseas.

International education and migration are non-existent now, and both of those things probably did a lot to fill up apartment buildings in Auckland Central. So, in a normal market, with less demand, you would expect lower prices, right?

One of the quirks of the housing market, at least as far as it operates in New Zealand, is that this doesn’t normally happen.

At best rental prices stay the same, because supply rarely responds to demand. When the price of housing goes up supply seems to stay static, or it increases at a rate below where most reasonable people think population growth is likely to go.

The housing market in New Zealand is not really a market at all. When the price goes up more houses aren’t automatically built, in fact the price going up is often a sign it is impossible to build new houses.

In the lead-up to the Auckland Unitary Plan the council commissioned research which made the argument restrictions on taller buildings led to much more unaffordable housing.

Instead of attaching a few extra floors to an apartment building those smaller dwellings would now effectively be built further out from the city centre, costing new residents more money in terms of commute times, and even in build costs per unit.

Building a house further out is simply more expensive than adding an extra floor to an apartment block you’re already building.

People often say the Government should build more homes, and it should, but for a long period of time the Government was bound by the same consenting rules everybody else was, which meant it was effectively hostage to neighbourhoods who would oppose more social housing near them. Government was coming up against the same frustrating constraints everybody else was.

In more recent years Wellington Central has taken a bit of a different tack to Auckland, and it shows. The recently reported case of a two-bedroom windowless “dungeon” in Wellington Central had a rental price attached to it higher than the median rental price of a two-bedroom apartment in Auckland Central.

Empowering residents to stop new things popping up in their neighbourhood can be a dangerous thing. I once sat down with a resident of the Chews Lane apartments who spent nearly an hour complaining about the Chinese garden development on the waterfront.

In her telling of it, if this thing were ever built she would have no choice but to see these Chinese-style gardens when she looked out of her window.

That was it. That was her problem with it.

All of this is a reason why we should be sceptical about new planning rules and conditions, including ones now being floated in Wellington to add affordable development levies and all sorts of other conditions to planning rules that would be better kept simple.

Each new condition simply gives an existing resident power over a new one, and new residents have just as much of a right to move into and shape their neighbourhood as an existing resident has to stay.