Rent drop pulls pin on private landlords

By SIMON COLLINS

Rents for private houses in South Auckland have dropped by more than $30 a week in the past six months in anticipation of dramatic cuts in state house rentals next week.

The Rent Shop, which manages 1000 homes in the area, says its average rent has dropped from $237 a week in April to $201 in October.

Many low-income tenants are turning away from private landlords and queuing for Housing New Zealand homes, which from December 1 will drop its rents to 25 per cent of the tenants' incomes.

In many cases in Auckland, the change will mean cuts from market rents of $250 to $300 a week to $70 or less.

So far there has been only a modest increase in the national waiting list for Housing NZ's 59,462 homes, from 9031 to 9885 in the past year. But officials expect the queue to lengthen dramatically after next Friday.

The Housing NZ policy change was one of the Labour Party's "credit card list" of key promises in last year's election.

It will cost taxpayers around $100 million a year.

It comes at a time when the Auckland property market is already weak because of tighter immigration rules and the plunging dollar.

The Rent Shop's chief executive, Warwick James, said rents were now "getting dangerously low from a landlord's point of view."

In central Auckland, Barfoot and Thompson property management manager Trevor Elwin said the cuts were forcing private landlords to spruce up their flats and drop rents.

Private landlords would find it hard to "buy a broken-down townhouse and just rent it out."

But Mr Elwin said he expected private sector rents to rise again as soon as Housing NZ vacancies filled.

Housing Minister Mark Gosche said Housing NZ was building 400 new units this year and planned to have 60,500 rental units in three years.

But he believed more houses would be needed to meet the expected increase in demand.