Investors eye poor areas
Govt described as ‘golden egg’ as landlords turn to short-term housing for homeless
Property investors are targeting houses and motels in poorer Auckland suburbs to take advantage of huge Government demand for rentals and homeless shelters.
And while investment groups say gouging is rare, some landlords are charging the Ministry of Social Development (MSD) up to $500 a night to house homeless people — the equivalent cost of a five-star international hotel.
NGOs (non-governmental organisations) which work with vulnerable families say the high rates paid for emergency housing are encouraging landlords to turn away from muchneeded permanent rentals to lucrative short-term housing.
“The Government has become the golden egg for motel owners, private landlords and property managers,” said Monte Cecilia Trust chief executive Bernie Smith.
Smith said one of the families Monte Cecilia was working with had been put up for a week’s stay in a Manurewa motel earlier this year at a cost to taxpayers of $3200 — more than $450 a night.
His organisation, which provided transitional and public housing, could not compete. It recently lost several properties which it had used to house vulnerable families because the owner wanted to use them for emergency accommodation.
Demand for public, transitional and emergency housing is soaring because of shortages which have driven up the cost of buying and renting a house in New Zealand.
Earlier this year, investors at a property conference were urged to consider buying in South Auckland as there was money to be made from the state amid the housing crisis.
“There’s good demand for social housing,” a Manukau-based agent told the conference. “MSD and Housing New Zealand are on the prowl in South Auckland.”
He said there were opportunities both to buy and on-sell to the agencies at marked-up prices, and to rent homes to the Government for emergency or social housing.
“Providers are looking for properties they can lease out, so some vendors are getting a 10-year lease,” the agent said. “South Auckland is where all the action is.”
Auckland Property Investors president Andrew Bruce said it was undoubtedly a growing area of investment. But very few investors were out to make a quick buck from MSD and many had altruistic motives, he said.
Bruce is renting a 13-unit motel to a public housing provider. He could not give further details because of a confidentiality agreement, but said it was a win-win investment for him and the organisation.
He benefited because all his units were filled and the tenants were wellmanaged, and the provider benefited because it got sole control of a large number of units at market rent.
“With 13 tenants, that adds up over a length of time. And if you’re looking at it from an altruistic side, there’s a feel-good factor too,” Bruce said.
The Herald reported last Monday on the case of a Ellerslie landlord charging MSD $2100 a week for a basic, three-bedroom apartment.
She claimed the price was relatively cheap because the tenants were difficult, transient and caused a lot of damage.
“I’m the cheapest,” the landlord said. “I ask each of the tenants how much they have paid in other places and one [large family] said they had paid $3800 a week.”
Landlords and housing bodies have since come forward with accounts of homeowners and moteliers charging MSD between $3000 and $4000 a week to house homeless people. For that price, a tenant could get a harbour-view room in the Hilton on Auckland’s waterfront.
MSD could not immediately confirm those rates. Regional commissioner Mark Goldsmith said MSD had guidelines for maximum rates. These could be exceeded in some circumstances, such as when large families needed a home and there was no suitable alternative.
The median rent charged by emergency housing providers in Auckland is $1500 a week, which has risen 40 per cent in the past three years. Rents for the broader market have risen by around 3.5 per cent over that time.