How can we ensure quality rental housing?

Yesterday we heard that the Government plans to sell off some of its state houses. This morning’s news included this piece about substandard rental housing in Cannon’s Creek.

The article raises again the idea of a “warrant of fitness” for rental properties. The Cannon’s Creek advocate, Bill Hiku, is unconvinced, and I don’t blame him. However, his reasoning is slightly off – he says that improving the quality of housing will push up the rent, leaving the current tenants out in the cold. Are we to conclude that unhealthy housing is desirable because it’s cheap enough to be affordable for people in poverty?

Of course not. We can design policies to improve housing quality without raising rent. Doing so would improve the health of people in poverty, reducing costs to the health system and allowing them the freedom to escape poverty. But a “warrant of fitness” would not be such a policy.

Depending how it was implemented, a warrant of fitness could merely be a way for the owners of quality housing to send a stronger signal about that quality, enabling them to charge higher rents. That would itself provide an incentive for owners of low-quality housing to make improvements, which is great, but the rents will rise. If there are still people too poor to afford quality housing, they’ll be forced into an ever-shrinking number of low-quality dwellings. To the extent that those people are a significant proportion of the demand for housing in their area, as is probably the case in Cannon’s Creek, market rents would eventually adjust downward to allow landlords to tenant their improved properties. However, that would take so long the poorest residents would have left the area before housing became affordable, leaving the improved housing stock for people who could afford it – gentrification, if you like.

If the warrant of fitness was instead enforced as a requirement for rental property, I question the benefits. Landlords already have a legal obligation to maintain rental properties and keep them in compliance with the building code and health and safety requirements. If this provision isn’t being enforced adequately, how will a warrant of fitness improve things? The Cannon’s Creek landlord is clearly in breach of the law, and the tenants need direct support to bring their concerns to the Tenancy Tribunal, not more random meaningless housing policies.

What would be a meaningful housing policy? It’s hard to create incentives to “do the right thing”. Landlords providing housing for those in poverty are unlikely to be interested in grants or rebates for improving their properties – such measures wouldn’t fully cover their costs, and they can’t increase rent to make up the difference. Increasing accommodation support for tenants in improved housing would just bid up rents even higher. Direct enforcement of standards, through fines or licensing, would just create an army of housing inspectors and bureaucrats. Improving the Tenancy Tribunal process isn’t the answer either – it’s already phenomenally accessible and usually favours tenants.

Sometimes it’s best to place the provision of services in the hands of a body that can be trusted to provide them to a desired standard. The state housing stock is being reduced. But “social housing”, provided by private non-profit organisations like the Salvation Army, is receiving more funding. While I don’t know much about housing in the voluntary sector, the reform program that began in 2010 seems to express a genuine desire to let private social providers work out how best to allocate resources. Smaller, leaner and closer to the coalface are all good things for efficient service provision.

Bill Hiku says “These people can’t get into Housing New Zealand homes. They have nowhere else to live.” Maybe, with the voluntary sector empowered to provide social housing on its own terms, they will soon have options apart from a state house or an unhealthy one.

2 thoughts on “How can we ensure quality rental housing?

  1. Nice article.

    My experience of social housing in the UK was that they did a great job of delivering ‘wrap around’ social services to at risk clients – so fully agree.

    For me another big problem is the price of land, which drives high house prices despite our poor quality housing stock. If we had a comprehensive tax on capital it would remove the speculative aspect of house prices, which would free up capital to invest in productive stuff. In this case, productive stuff would be providing quality housing.


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