COVID-19 could help the rental housing crisis
Amid the COVID-19 pandemic, AirBnB hosts are seeing radical declines in bookings with cancellations beyond the lockdown – could this see long-term rental housing costs go down as a result?
The housing shortage has been well discussed by media and pundits in the past few years with an undersupply of anywhere between 7,000 to 130,000 houses being put forward. Census 2018 population data indicated population growth was less than projected, and the need for housing may be at the lower end of the spectrum. This is likely to be of little comfort to those looking for a rental in overheated property markets, particularly Wellington where demand was up 10 percent on the year before in January.
However, the drop in demand for short-stay rentals due to the impacts of suspended travel and border controls is likely to increase supply.
In some towns, particularly those popular with domestic and international visitors, short-stay rentals have depleted a constrained housing pool and affected rental prices. Just prior to the lockdown, rental housing supply increased as investors promoted their properties to travellers unable to leave New Zealand and needing somewhere safe to isolate.
AirBnB data from 2018 indicated there were 37,000 listings on the platform. Anecdotal evidence from property managers is that AirBnB hosts are withdrawing from the platform and looking for more permanent tenants. Listings of traditional residential rental listings have seen a sharp rise overseas. Should we see this trend in New Zealand, it could be good for rent affordability. If investors shift their focus away from short-term letting, a surge of properties will come on to the residential rental market, which may possibly result in lower prices. But the long-term demand for online rentals and the effect on the residential market is unclear.
The current rental market
Around one third of homes in New Zealand are rental houses, with the bulk of homes being owner-occupied dwellings. A small portion of homes are provided free of charge through government agencies, private trusts, or individuals. The number of rental properties has been increasing faster than the number of owner-occupied dwellings since the early 1990s when just 23 percent of homes were rentals.
The number of rental properties increased by 19.6 percent to over 520,000 on Census 2018 night, up from 436,173 in 2013. Previous Statistics New Zealand data on housing tenure estimated there were 625,900 rental properties in March 2018, although this was later revised down to 595,200. The gap between Census responses and official dwelling and household estimates hints at some of the issues with Census 2018 data reliability.