The changing nature of renting
Renting has traditionally been considered a second-class option in NZ, but new options mean that is changing. Miriam Bell reports.
Tom Cooper has lived in four rental properties over the last four years, and that’s because he has never had a tenancy agreement of longer than a year.
None of his tenancies has ended sooner than expected, although the first rental he lived in was on the market for much of his time there, and sold just before the tenancy was up.
But having to move every 12 months and constantly having to find a new place to live is time-consuming and stressful, he says.
“The main issue is that you want to feel secure in a home, and like you can be part of a community, and you can’t if you have to keep moving around.
“It feels particularly difficult if you are a younger person because you are the last person to be chosen, or even have your questions listened to at viewings,” the 24-year-old says.
“Families with young children, or older couples get preference over a group of friends, or a couple in their early to mid-twenties. And that makes the search for a decent rental even harder.”
Cooper, who has always rented on Auckland’s North Shore, says he has been lucky to have good landlords, although many of his friends have not.
The first rental he lived in was old, uninsulated, and in line for a Healthy Home upgrade, but the quality of his subsequent rentals has not been bad.
But the rapid rise of rents over recent years means what is available for affordable prices has got smaller, and is often of inferior quality, he says.
“Most people have a dream to own their own home, but that dream feels inaccessible in today’s market, given the high prices compared to what you get paid.
“If access to quality, secure, long-term tenancies was more of a realistic option, like it is in parts of Europe, I would have no qualms about settling down in a rental for many years.”
That is particularly the case as he does not want to stay in one place for the rest of his life, and home ownership binds people to doing that, he says.
“I’d like to feel secure in a permanent home though, and with the rental market in New Zealand as it is, there are a bunch of issues preventing that.”
High house prices and a shortage of affordable stock have led to a decline in home ownership. The most recent figure, which is in a 2020 Stats NZ report, puts the rate at 64.5%, the lowest in almost 70 years.
That means more people are renting and for longer, but renting in New Zealand has traditionally been viewed as an inferior, non-permanent option.
New research commissioned by Kiwi
Property Group, reveals that attitudes to home ownership, particularly among the younger generation, are changing.
Of the 1000 people surveyed, 59% of those aged 18 to 29 thought owning a home was the Kiwi dream, compared to 70% of those aged 30 plus who did. And 33% of people who rent or live with friends or family no longer believe in the dream of home ownership. But 85% of renters said that if traditional downsides to renting were removed, such as having to move out at short notice and strict rules on customising the property, they would be more inclined to rent long-term. They also said the top three barriers to renting longterm are a lack of quality rental properties (51%), security of tenure (51%), and inconsistent rent rises (48%). Kiwi Property Group chief executive Clive Mackenzie says the research shows that for many people who are looking for accommodation, renting is their first choice.
Home ownership has become so difficult to get into that people are pushed towards renting, even though many have had less than ideal experiences, he says. “One solution to this is build-to-rent housing, which is specifically designed for renters, and so can better meet their needs.”
Build-to-rent housing involves the development of multi-unit residential buildings for long-term rentals, rather than for sales to individual owners. The model is common in Europe, the UK and the US, and on the rise in Australia.
In New Zealand, build-to-rent has been slow to take off, although momentum has been building.
There are now about 2066 homes in 48 developments nationwide, and about 1076 homes across eight projects in the pipeline, according to the most recent CBRE figures.
For Kiwi Property, it is an opportunity to help improve the rental market by providing high-quality accommodation with secure, long-term tenure, Mackenzie says.
That has led the company to develop what will be the country's largest build-torent development when it opens in May.
Resido is a 295-apartment complex next to Auckland’s Sylvia Park shopping centre, which Kiwi Property owns. It is a mix of one, two and three-bedroom apartments, and residents can sign up for long-term tenancies of up to 10 years.
There will be on-site professional management, a gym, a residents’ lounge, co-working facilities and a rooftop terrace for entertaining. Pets are allowed, and residents can decorate and change interior colour schemes.
Mackenzie says it offers the flexibility of renting, with the stability of home ownership, and gives residents a place to put down roots.
He is confident there is demand for the offering, as expressions of interest opened recently, and about 500 applications have already been received.
A formal leasing process is being carried out, and he expects potential residents will want to visit the finished property before
“If access to quality, secure, long-term tenancies was more of a realistic option, like it is in parts of Europe, I would have no qualms about settling down in a rental for many years.”
Tom Cooper, left
making a final decision.
But applicants who meet the criteria could start moving into the $240 million development by June, and that is when rents will be set to meet the market, he says.
“There is the potential for build-to-rent to scale up, and that could change the way people live, and help alleviate the housing shortfall. It’s not the solution to the problem, but it is part of the solution.”
Kiwi Property has plans for more buildto-rent developments, and has resource consent for a 250-unit tower near its LynnMall holding in west Auckland.
CBRE build-to-rent specialist Natasha Sarkar says build-to-rent makes up a huge segment of the housing market in other countries, but until recently it has been missing in New Zealand.
“It gives people more much-needed choices, enables a well-functioning housing system, and without it we will continue to feel the pressure from the supply crisis we have.”
The average New Zealander is not aware of build-to-rent and what it offers, but the completion of Resido, which is targeted at the open market, will help to raise awareness, she says.
“A significant number of people rent, but they have largely been forgotten. This offers tenants from all walks of life the opportunity to live in a well-managed, healthy home in well-connected locations.”
But Sarkar says that for build-to-rent to take off in this country there needs to be greater input from the Government, as governments have been key enablers for the sector in the UK and Australia.
More regulatory levers need to be pulled to unlock the sector, and issues around depreciation, GST and access for overseas investors should be addressed, she says.
Renters United president Geordie Rogers says many of the homes in the current rental market are not built for renters, they are built for owners who are invested in them.
When looking overseas, the more successful rental markets where renters can live somewhere for a long time tend to have a build-to-rent component, he says.
“It is a model which is fantastic in metro areas, but not as suitable for places with less density and people. That’s because it needs the scale of apartment blocks or townhouses to have the most impact.”
But build-to-rent developments are good for the rental market, especially when coupled with incentives that means landlords guarantee long-term security of tenure, he says.
“High-quality, newly built housing where renters can stay for long periods is great, and it is hard to complain about encouraging more of that.”