Landlords: youse are better off renting

• Steve Pierson
• 16 years ago
• Categories: housing

The graphic to the left was produced by the Property Investors’ Federation and was printed unquestioned in the Herald yesterday. The PIF uses the figures to claim Kiwis are better off renting. Here’s what’s wrong with them.

First, it’s comparing the average rent to the cost of buying a median house. Rental properties tend to be lower quality, cheaper – so are likely on average to be worth well below the national median. Comparing apples with apples would look at the rent on properties of the same value.

Secondly and most importantly, if you’re buying the house at the end of 25 years, you own a house. If you rent, at the end of 25 years you have nothing. That’s a pretty serious difference. If you buy rather than rent you might pay some more (less than the difference in the graphic though) but you end up with an asset in the end.

So, what is the Property Investors’ Federation‘s interest in trying to convince Kiwis they are better off renting? Well, as the name suggests, the PIF is a political lobby group that represents landlords – ie people who make money off others renting from them, people who obviously think that owning properties, multiple properties, is worthwhile.

Why would a group of landlords want people to think renting is better than buying?

• to decrease demand for buying houses, so PIF members can buy them more cheaply
• to increase demand for rentals, allowing PIF members to put up rents
• to undermine the demand for the Government to intervene in the housing market with a large affordable housing policy. If the Government builds lots of affordable houses, PIF members’ tenants will be able to find cheaper rentals and cheaper houses to buy. That’s good for most Kiwis, bad for the PIF landlords.

Landlord lobby group comes out with flawed figures suggesting renting is cheap just as the Government appears to be developing a housing affordability policy. Funny coincidence that.