Editorial: City's recovery depends on rent control

Photo / Dean Purcell

Opinion

Christchurch Mayor Bob Parker did not hold back when commenting on landlords in the city who had hiked rents in the aftermath of last month's earthquake. They were just "looting by another name".

Christchurch, he added, would not get through this crisis if everyone took the same rapacious approach. Mr Parker wants the Government to stop such behaviour by using its emergency powers to introduce rental-price control.

That would be a fairly drastic step. Even Mr Parker concedes it would create distortions of the sort that are inevitable when market precepts of supply and demand are disturbed. At worst, it could deter repairs or rebuilding. Some commercial landlords offer another reason for caution.

Rent increases, they say, are being driven by businesses desperate to find premises after their buildings were destroyed. It is not landlords hiking rents, but tenants willing to pay more than the asking price who are upping the ante.

Much the same is happening in some cases in Auckland, where demand for houses and flats near the city centre is particularly strong. Supply has been outstripped because of a number of factors, including under-building in the past decade and the influx of people from Christchurch.

There have been instances of potential tenants competing on price. There have also been predictions that the housing shortage will lead to rents in Auckland rising by $100 to $150 a week in the next year.

A similar demand is encouraging Auckland homeowners to use their houses as money-spinners during the rugby World Cup. Already, supply is said to be short, and three and four-bedroom homes in central suburbs are fetching as much as $400 to $500 a night.

Nobody is suggesting normal market precepts should be abandoned in Auckland, and controls used to temper the consequences of the housing shortage. But the situation in Christchurch is vastly different. An extremely abnormal event has left supply abnormally low.

Businesses simply must find reasonably priced premises if they and the city are to get up and running as soon as possible. Higher rents could also mean the difference between hiring extra workers or leaving them on the dole. That is a cost to the New Zealand taxpayer, not just the recovery of Christchurch.

In such circumstances, it is trite for landlords to say prospective tenants are determining the price of rental property. They do not have to entertain that exercise. With the needs of the community uppermost in their minds, they should be maintaining their prices and selecting the most suitable tenant. This is a time for accommodating people, not taking advantage of their plight.

Extraordinary situations often call for uncommon responses. Market purity will have to take a back seat in several aspects of the rebuilding of Christchurch. If the hiking of rents became common, and an obstacle to the city's recovery, there would be grounds for the Government to impose controls.

This need be done for only a relatively short time until commerce has re-established itself and something approaching normality has returned. Thereafter, rental prices would increase soon enough in recognition of the supply problem.

In the meantime, some landlords might feel shortchanged. But, as the tenor of Mr Parker's comments make clear, they will have only themselves to blame if a rent cap or some other form of control is introduced.