The rich get richer by Susan Grimsdell
Warning: I’m in a particularly radical mood today. This is because of a news item saying that rents in Wellington New Zealand’s capital have risen to above $600 a week on average (or mean, to use a more appropriate word). This is so far above the affordability level of students, many of whom are working 20 hours a week as well as trying to pass a few exams, that they’re thinking of transferring to universities outside Wellington so that they can actually afford a place to live.
The rent increase is way way above the inflation rate which is so low you can’t see it unless you use a magnifying glass. The increase comes at a time when mortgage rates have never been lower in the history of our country. A $700,000 mortgage costs about $300 a week.
Demand fuels greed
So let’s think about this – why are landlords putting rent up? Their costs have not gone up – oh they moan about having to install insulation and a heat pump – but that’s all tax deductible and the whole cost would hardly be as much as a couple of weeks’ rent in a year. They put the rent up because of the law of supply and demand. People are desperate for accommodation.
The landlord is lucky enough to be one of those who managed to buy an extra house or two or three. Accommodation demand has rocketed, and instead of getting a modest return on the rental house, they are now creaming it. It’s like winning Lotto week after week. The owner’s expenses are minimal or non-existent given that the rent covers all costs, helped along by the taxpayer, either in the form of tax rebates, or in the form of the Accommodation Supplement.
The Accommodation Supplement amounts to $2 billion a year. Tenants claim it to – get this – help pay their rent. The tenant, by definition, must pass it along to the landlord. It slides through their hands straight into the landlord’s pocket. $2 billion a year, a gift from the taxpayer.
Students are working hard and handing over all their earnings to the person who owns the house. Let’s imagine a scenario: the student goes off to their minimum-wage job serving in a restaurant and – hey – there’s the landlord sitting there, ordering oysters and fillet steak. Whose money is actually paying for the food? The student’s. The landlord didn’t work all hours of the day and night to get the money. They or their parents stumped up a deposit, got a mortgage and from then on it’s sit back and enjoy the good life.
The tenant’s the one paying off the landlord’s mortgage. Nice work if you can get it, and a big thank you from landlords to successive governments who have facilitated this rort. Perhaps the landlord says to the tenant, while paying at the cash desk: “Do you think you could ask your boss for a few extra hours in this job? I’m intending to put the rent up $20 next week.”