Should Dunedin  Impose Higher  Flatting Standards?

Should Dunedin Impose Higher Flatting Standards?

Aaron Hawkins

Everyone deserves to live with dignity in a warm and healthy home. For the tens of thousands of Dunedin people living in flats, from students in the north end to families in the south, this means putting together minimum standards for rentals across the city. This will save tenants money, reduce the strain on our stretched health system and attract the talent we need to make Dunedin one of the world’s great small cities.

Better insulation, more efficient heating and declaring war on moisture would all contribute to lowering the amount tenants spend on power. The cost of power has been increasing in New Zealand while real wages stagnate or fall, and therefore takes up more and more of your flat’s budget. Nobody should have to choose between heating and eating. Given how hostile and unpredictable the winters can be in Dunedin, this is more relevant here than in most other parts of the country.

People who live in dry, warm and healthy homes get sick less often than those who don’t. No matter how many jerseys you wear, or how tight around your neck your sleeping bag is, breathing in lungfuls of black mould every day can make you very sick. Going to the doctor for recommended remedies is an expense many people struggle with, particularly young families, and reducing their need to do so would be a huge help. People getting sick less often due to their living conditions would ease the pressure on community and Student Health Services, and fewer sick days can only be good for our productivity as a community.

Dunedin produces some of the greatest young minds in the world, thanks to the University and Polytechnic, and has international standing as a centre of creativity, ingenuity and passion. We need to encourage and support students who have the desire to set up here when they graduate, and lure back alumni after their overseas jaunts, but poor quality housing is a huge obstacle. Thousands of our smartest people leave town each year full of stories of winter suffering, fuelling the myth that the city is a cruel and hostile mistress. When our reputation for being a great city of ideas is no longer burdened by our reputation for being a city in which you have to freeze, great things will happen. Minimum standards for rental housing will go a long way to helping this.

A Warrant of Fitness scheme doesn’t mean that the cost of rent will rise accordingly. There are currently schemes in Dunedin, run with the support of government agencies (both national and local), that will cover up to 90 per cent of the cost of winter-proofing flats. In some parts of the country this is as high as 100 per cent (and yet somehow some landlords are still reluctant!). Looking to expand access to these schemes should help to alleviate those concerns. This is also something that needs to be phased in over at least a three to five year period to give landlords time to adjust to the new system. As urgent as this is, rushing the process and excluding all interested parties would be fatal for its success.

The argument against intervention has largely been based on Market Choices. If flats are bad, or too expensive, tenants will choose to live somewhere else and this will drive changes in conditions and pricing. For students, however, this has failed, largely because housing doesn’t exist in a vacuum. Our bus service is neither cheap nor efficient, parking on campus is scarce and it’s pretty dangerous for cyclists. Students have limited options in terms of where they choose to live if they want to be able to access their lectures and libraries. It is a captive population, and to suggest otherwise is disingenuous.

Minimum standards for flats, managed by a Warrant of Fitness Scheme, will improve the physical and financial health of tens of thousands of people. It will also make Dunedin a more attractive place for people to live in, work in, move to and return to. As long as we don’t dive in without a robust consultation process, this will be hugely beneficial to the city of Dunedin.

Guy McCallum

Everything we do and don’t do sends a signal to anyone capable of observing your actions. It tells them something about what you’re doing, and allows them to relate it to what they’re doing. This is how markets work. Everything you do has a ripple effect. Changes in the market touch everything, no matter how remote. Signals also help us choose the best available option given the finite resources at our disposal.

This is how we deal with scarcity in the economy – you manage what you have according to what you need or want. If you want to have more money after paying rent, you embrace the conditions that will make that possible. We all have to accept particular tradeoffs, both in order to obtain the things we most value and enable ourselves to make better tradeoffs in the future.

Proposed regulations to force landlords to meet higher standards takes away certain choices in the market. It inevitably means higher rents as well. To say otherwise, as Mayoral candidate Aaron Hawkins does is, unfortunately, misleading.

While it isn’t deplorable to want better quality housing, it isn’t reasonable to expect landlords to provide it at a loss, nor to expect that it will be any cheaper than higher quality housing that is already on offer.

So the obvious question then, is this: are the proposed regulations going to have a positive effect? That is, will the tradeoffs between quality and price be any different than they are now?

There will be better houses on offer, for sure, but not necessarily better prices. Under the proposed regulations, students would not have the option to choose between an older, (tolerably) less functional house in order to save money or a newer house with all the creature comforts; they will have to choose the latter and simply do without the money it costs. Under such regulations, you will be given only one option: better, but more expensive, housing.

Regulations such as these have potential implications not only for housing prices, but also for the housing market.

Many rental properties in Dunedin are owned by small-scale investors: Mums and Dads who own an extra home or two as a way of saving for retirement. These investors are low on capital, and so usually borrow to upgrade or fix a property of theirs. If the costs of upgrading to these proposed regulations outweigh the benefit of owning the extra house, they will have little choice but to abandon their investment. Either someone with more money will come along to buy the house, or some other investment owner will try the same thing but end up selling to a bidder with more economic pull.

This will probably mean a gradual shift from dispersed rental ownership to the accumulation of rental property in fewer hands. Such regulations make economic ownership a reality only for those who can afford it. The higher the cost of the regulation, the more money you need to have; and the more economic power you have, the more your influence over price. I’m not saying there will be marauding rental monopolies overnight, but the creep will be noticeable over several years as the process of minor investors failing allows mightier investors to take over.

So the tradeoffs are these: better housing at higher costs, or mixed quality housing at mixed prices? Dispersed rental ownership, or concentrated ownership? A housing market anyone can afford to enter, or one purely for those wealthy enough to meet the standards? As the consumer, and voter, it is up to you.
This article first appeared in Issue 18, 2013.
Posted 3:50pm Sunday 4th August 2013 by Aaron Hawkins and Guy McCallum.