“It is incorrect and misleading to link the sale of state houses with the likelihood of higher rents” said Andrew King, Executive Officer of the NZ Property Investors’ Federation. “There are other factors influencing the situation.”
King explains that before income related rents were originally introduced there was overcrowding in many state houses. As state houses became cheaper to rent, extra people living in the household were not necessary in order to assist the tenant to pay the rent. People moving out of these state houses increased demand for rentals in the private sector. It was this increase in demand which fuelled the increase in rents at the time.
“In the same way” said King, “if income related rents become available to tenants of social housing, these tenants may be able to reduce the number of people per household which in turn would increase the demand for private rental properties. Whether this happens depends on the level of overcrowding in the properties of current social providers, the number of properties these providers own, and how many people would be looking for alternative accommodation in the private sector.”
King points out that if social housing providers simply take over existing state houses, there is unlikely to be a change in demand from tenants and rents in the private sector are unlikely to rise.