Andrew King, vice-president of the New Zealand Property Investors’ Federation, says it’s common to experience a flood of rental listings during the slump phase of the property cycle.

“In a slow market, tenants have a high degree of choice and often face nervous landlords who may be willing to reduce rents just to secure a tenant,” he says.

King monitors TradeMe rental listings, and says May and June saw the number increase by 50 per cent from about 6800 to more than 10,000.

While growth in the number of listings has slowed by about 10 per cent during the past 10 weeks in many areas, prospective tenants are still generally spoilt for choice.

Rental listings in Auckland city are up 40 per cent from early May, and are up 25 per cent on the North Shore, 55 per cent in Waitakere, 20 per cent in Manukau and up by 40 per cent in Papakura.

Tauranga and Whangarei have 60 per cent more listings than in May.

During August, the number of rentals listed in Hamilton was 90 per cent higher than in May.

If they want to secure good tenants quickly, King urges landlords to present their property attractively and use various avenues to promote it.

Auckland professional Rachel Rae, 36, is pleased she decided to look for a new rental property this month. She and her flatmate moved from a trendy two-bedroom Herne Bay apartment to a spacious three-bedroom home in the beachside suburb of Torbay on Auckland’s North Shore last week.

Rae says they found there were “stacks” of attractively priced rental properties on the shore and faced little competition from other renters.

For the same rent as they were paying for the Herne Bay apartment, they found a home with twice the floor space, an extra bedroom, plenty of outdoor living and a sea view.

And because they held the bargaining power, they were able to sway the landlord into allowing them to move in with a cat and dog. Rae is working in Albany so wasn’t worried about moving from the central city.

Sylvia Lund, owner of Just Rentals, which lets properties in Auckland’s Remuera, Meadowbank and St Johns, says August was the toughest month for rentals its office has experienced in the past nine years. “The phone just isn’t ringing.”

With an influx of rental properties, mostly homeowners choosing to hold off selling until the market turns, Lund says tenants want rent reductions.

She says some properties sit vacant for up to six weeks, while earlier this year the process took half as long.

Last week, after struggling to fill a two-bedroom Kohimarama property near the beach for $420 per week, her office advised the landlord to drop the asking price to $380 per week, but still did not get a nibble of interest.

“There are too many properties and no sense of urgency [among renters],” Lund says.

Crockers Property Group’s list of median rental prices in Auckland’s suburbs show the popular or posh suburbs – such as the bays, Epsom, Sandringham, Devonport, Birkenhead, Remuera and Orewa – experienced rent reductions of between 1 and 22 per cent during last month, with one- and two-bedroom homes taking the greatest hit.

Demand remains strong in trendy, city-fringe suburbs such as Ponsonby, Grey Lynn and Herne Bay, but Huw Evans, rental manager at Barfoot & Thompson’s Ponsonby branch, says it is more difficult to fill the one- and two-bedroom properties.

“There are definitely more sharing groups and people looking to squeeze into properties to reduce rent per room – such as couples sharing,” he says. In one morning last week, Evans had four inquiries from groups of four wanting to occupy a three-bedroom property.

Three-bedroom homes priced between $550 and $700 generate the most response when listed, but Evans says they are not fetching premiums achieved for similar properties last spring.

“Everyone is looking for a bargain,” he says. “We recently reduced a rental price by $70 a week, just to get one phone inquiry.”

Evans has a tenant living in a Herne Bay apartment who, for the first time in many years, will be re-fixing his tenancy at a $30 less per week when his new tenancy commences.

“I had to explain to the landlord there would be no way I could achieve that premium price [$430 per week for a one-bedroom Herne Bay apartment reducing to $400] should he vacate and I was to re-let it in today’s market,” Evans says.

Agents from Barfoot offices in Mairangi Bay, Dannemora, Papakura, Milford, Glenfield and Mt Albert all say the market is oversupplied.

The Dannemora office says landlords should be prepared to wait for up to five weeks to fill their property, depending on the rent they are asking, and be prepared to knock $10 to $15 off the asking price.

There is also a large surplus of properties in Glenfield, and tenants are getting more for their money as landlords reduce the rent.

The Papakura office says it is particularly struggling to fill homes in Tuakau. In one instance, a landlord waited three weeks to let a property despite dropping the rent by $40.

Another near-new property which has been empty for more than a month is now advertising a negotiable rent – the landlord will be looking at a rent reduction of $50 per week.

In Mt Albert and surrounding suburbs, landlords can expect to wait up to six weeks to let a property and keep reducing the rent until it is let. The Barfoot office says selective tenants are snapping up the tidy properties first.

Brian Hancock, director of Quinovich Hamilton and president of the Waikato Property Investors’ Association, says it is definitely harder to rent properties in Hamilton than it was six months ago, but he hasn’t noticed a huge reduction in price.

He believes this is due to his company urging all landlords to present properties as immaculately as possible.

“If you’ve got a well-presented property, you tend not to have to drop your rent.”

The national landlord membership and lobby group, the Property Investors Federation, has released a guide which it wants members to show to tenants.

Federation vice-president Andrew King said most members were already following the code.

“There’s nothing to stop members breaking it. We don’t have any powers over them – that’s the job of the Tenancy Tribunal and the courts. If we are aware of them not getting things right, then by keeping them as members we have a better chance of stopping them from getting into trouble.

“The code isn’t to regulate them, it’s to inspire professional and profitable behaviour and keep out of trouble.”

Helen Gatonyi, manager of the Tenants Protection Association in Christchurch, praised the code and said all landlords should adopt it.

“Anything that helps the relationship between landlord and tenant or educates both parties has to be a good thing.”

The rules demand that landlords treat tenants with respect, in a businesslike manner.

“A rental property should be treated as the tenant’s home and regard will be given for the tenant’s peace, comfort and privacy,” the code says.

“Members should be aware of what government assistance may be available to their tenants in relation to their tenancy, and assist them if requested. Dishonesty, deception or misrepresentation shall not be used in any activities involving members’ property business activities.

“When asked to supply a reference for a tenant, members will supply true and accurate information in order to assist the tenant and fellow rental property providers.

“Members will provide the premises in a high state of cleanliness at the start of each tenancy and act promptly to investigate and remedy any reasonable request by a tenant, maintaining the premises in a comfortably liveable standard consistent with the age and character of the premises.

“Members will monitor the rental market and take a responsible approach to setting rental prices by considering market rent levels and any other specific or unique conditions of the property.

The code also bans any discrimination.

“In advertising and tenant selection, members will choose the most appropriate applicant and will not discriminate against anyone on the basis of gender, marital status, religious belief, ethnicity, disability -physical or psychiatric- illness, age, political opinion, employment status, family status, or sexual orientation.”

A tenant’s right to privacy is demanded.

“Credit histories will not be obtained without the prospective tenant’s written authority,” the new rules say.

The code demands community responsibility. “Members shall have regard to the neighbours of their rental properties and will take all reasonable steps available to them to protect neighbours’ peace, comfort and privacy from the member’s tenants.”

FLAT FACTS

• More than 1 million Kiwis rent.
• They are in 464,000 rental properties.
• Auckland weekly rents average $384.

Property Investors Federation vice-president Andrew King says a 25-year mortgage for 90 per cent of the cost of the country’s median-priced house, worth $345,000 last month, would currently cost a new home-buyer $745 a week, including rates, maintenance, insurance and an allowance for other costs.

By contrast, the national median rent last month was only $305 a week.

He will tell an Australasian Housing Institute seminar on affordable rental housing in Waitakere today that the ratio of mortgage costs to rents is higher in New Zealand than in five similar countries.

“Right now the gap is enormous, but it’s always been there because New Zealanders prefer to own their own property rather than rent, so they are always willing to pay a premium rather than renting,” he said yesterday.

“At the moment a first-home buyer could save more than $20,000 a year and rent for, say, three to five years, then they’ll have $60,000 to $100,000 extra to put towards a deposit.

“They can probably also take advantage of KiwiSaver, so there is a real incentive at the moment to rent.”

Like many pundits, Mr King predicts that average rents will rise as people realise that they are better off renting.

But a Crockers Real Estate analysis of tenancy bonds lodged with the Department of Building and Housing suggests that rents are rising only slightly, particularly in Auckland where they were already well above the national average.

The average rent for a three-bedroom house in Auckland rose by 3.8 per cent from $420 a week in July last year to $436 last month, roughly in line with the general inflation rate of 4 per cent. Nationally, the three-bedroom average rose slightly faster, from $320 to $340, or 6.25 per cent. The average jumped by 8.3 per cent in Wellington, but actually fell by 6.7 per cent in Christchurch.

Crockers marketing manager Karen Coleman said it was hard to generalise about whether it was better to rent or buy because everyone’s situation was different. “If someone was totally cashed up, why rent? But if you are going to borrow … ”

Source

This adds to the grim outlook portrayed in property mortgage insurer PMI’s mid-year report, released on Thursday, and Quotable Value’s monthly report, which is out tomorrow.

QV’s Blue Hancock said house prices were declining on a month-to-month basis, although annual figures had not quite caught up.

The PMI report said New Zealand house sales had hit a 10-year low and house prices could drop as much as 10 per cent over the coming year.

But King said more activity and good bargains were coming.

“If people have to sell because they have over-borrowed, or have invested but didn’t know what they were doing, you could see prices fall.”

Hancock said QV had noticed vendors pulling away from tender and auctions in recent months, and listing homes with words such as “desperate to sell” and “mortgagee sale”, attracting bargain-hunters and low offers.

“The advice is: be very careful on how you instruct your agent to market the property,” he said.

“It might not be in your best interest to put in ‘all offers accepted’ or ‘mortgagee sale’ or ‘vendor desperate to sell’ phrases.”

Martin Evans, president of the Property Investors’ Federation, said a greater number of lower-priced properties would come on the market about September or October when a lot of two-year mortgages came up for renewal.

People who bought properties in the past two years that were not returning a high-enough yield would soon be looking to sell, he said.

On the other hand, Hancock said a cut in interest rates and the official cash rate could come sooner than expected and it that would be interesting to see what happened when mortgages were renewed in September.

“If the interest rate reduces we may see a reinvigoration of what’s happening in the market place or a stabilising of it.”

Prices also depend on migration and world events, Hancock said.

Despite investment yields being down, the ANZ’s annual Property Investors Survey, released last week, showed most were still optimistic about the property market.

ANZ chief economist Cameron Bagrie said: “You look at what their expectations are and I do think they are a bit rich. They are looking for a pretty quick turnaround and that’s a bit of a stretch, given the dynamics the property market faces at the moment.”

One-third of investors surveyed predicted prices would fall over the coming year.

“The reality has sunk in, but people seem to think the market’s going to bounce back in three, four or five years,” said Bagrie. “People should be a little more realistic and circumspect.”

Finance Minister Michael Cullen said Inland Revenue would get an extra $14.6 million over the next three years to strengthen property transaction audits. Speculative activity was driving up house prices and household debt levels, he said. So giving IRD more money would help it enforce the law.

Property auditing gathered $100 million between 2004 and 2006, he said and it was important for IRD to have the resources it needed.

Of the country’s 1.4 million houses, around 400,000 are owned by investors. If a landlord buys with the intention of selling, tax must be paid on any financial windfalls.

Sharon Cuzens from Inland Revenue in Wellington yesterday welcomed the boost.

“It will enable us to pursue further, in-depth investigations and education on a risk area we have been actively targeting for some years,” she said.

IRD would improve information so people were more aware of their liability, monitor major developments to ensure accurate return of sales or profits, boost research and analysis of risk areas and increase audit activity in areas of identified risk, she said.

One housing investment expert also welcomed the Budget package. Andrew King, Property Investors’ Federation vice-president, said speculators who evaded tax were taking high risks. He encouraged those people who were eligible to come clean, declare their profits and pay tax.

“It’s like playing Russian roulette if you don’t,” Mr King said. But he also criticised existing tax law, saying it had too many grey areas.

Matthew Gilligan, an Auckland chartered accountant and specialist tax and legal structures consultant, also welcomed the package, saying IRD was too poor to do its job properly and the money would help.

“They’re grossly under-resourced,” he said, citing long waiting lists for taxpayers seeking rulings and waiting for investigations to be concluded.

Mr Gilligan, whose firm has 4500 property clients investing in residential housing, called for clearer rules on housing investment tax liability. Many IRD staff were excellent but it was not uncommon for staff to change so fast that some taxpayers were dealing with three IRD staff members over one issue, he said.

“That’s not uncommon on an audit.” Nor was it unusual for a taxpayer to be given conflicting advice by various IRD staff members, Mr Gilligan said.

Greg Haddon, a Deloitte tax partner, said the $14.6 million was not nearly enough to tackle the issue.

“This extra money won’t make a big impact,” he said, and failed to address the reasons for so many people investing in housing, because they regarded it as a surer bet than other forms of investment.

IRD has already announced the success of previous crackdowns.

Two years ago, it netted just under $11 million from a campaign in the Queenstown/Otago region. Its concentrated audit blitz on developers and speculators started in March 2004 and by November 2005, it had 120 cases either under investigation or heading for prosecution.

Auckland was also a target two years ago, when IRD said it was increasing resources to hunt down speculators and developers who had kept their profits a secret.

Senior Auckland department official Richard Philp said in January 2005 that an extra $106.6 million was gathered nationally within two years on property transactions, including $52.9 million from Auckland.

The rules

• If you invest for the long term, there is no tax on money when you sell the rental property.
• But if you buy with the main aim of selling for a profit, any money you make is taxable.

First-home buyers wait for Government handout

Prospective first-home buyers hoping for help through a Government-run shared-equity scheme will have to wait a little longer.

Housing Minister Chris Carter said $1.4 million had been allocated in the Budget for work on the potential design of a such a scheme, but a pilot would not be funded until at least next year.

Mr Carter has said the most likely location for a pilot scheme is Auckland and it could involve the Government paying for a 25 per cent or 30 per cent stake in a house, effectively reducing the purchase price of a $400,000 property to about $300,000.

If the house was sold, the Government would take back its percentage share. The scheme is expected to be aimed at the lowest quartile of the housing market.

Mr Carter said the Government was keen to explore how much demand there was for a shared-equity scheme.

If the scheme “flew”, it would be introduced as part of a suite of new measures including a possible Housing Affordability Bill. “Shared equity will also be introduced at the same time as the Government seeks to increase the number of houses in the price bracket affordable to first-home buyers.”

Mr Carter yesterday also announced $43.6 million over four years for other housing initiatives.

That included $23.8 million to increase the life of the Healthy Housing programme and extend it into the Wellington region for the first time.

The programme targets overcrowded households and assists them into more appropriate housing.

The Housing Innovation Fund, which provides government assistance to local authorities and community groups to develop affordable housing, would also receive a boost of $19.8 million.

Before assigning blame we need to ask two questions. Are property investors really to blame and if they are, would the capital gains tax on rental property help the situation?

When considering misinformation, Tapu Misa made an excellent point when she discussed “those investment seminars … the kind that promise to show you how to make lots of money by using the equity in your home to buy a rental property”.

This type of seminar is usually put on by organisations that sell you the rental property or help you “find” rental property and often do not portray reality. That would get in the way of making a sale.

There are few truly impartial seminar presentations on property in New Zealand. Empower Education is a reputable commercial educator as are the not-for-profit property investor associations all over New Zealand.

Many people do not understand just who a property investors actually is. A property investor is someone who provides long-term rental accommodation for tenant customers.

They are mostly Joe and Jane average New Zealanders, not multi-millionaires.

By contrast, a property speculator, developer or trader buys a property with the intention of selling it on for a profit. These traders often add value to the property and usually turn it over quite quickly.

Any capital gain traders make from selling the property is treated as income and they pay tax on it, effectively a capital gains tax.

The New Zealand Property Investors Federation (www.nzpif.org.nz) is an industry group for property investors, not property traders, with 20 local associations around the country. Hence this article refers to property investors or rental property providers, not traders, speculators or developers.

Many people believe that because property investors are able to claim expenses, such as mortgage interest, they have an advantage over home buyers. This is not true.

Rental property expenses are merely taken away from the rent investors receive and income tax is paid on the balance. This is just like any other business and doesn?t make buying a property any easier for investors over home owners.

The cost of buying a property and the rental return it will generate often mean investors have to top up the investment in the early years. These early losses are tax deductible, just as they are for any other business.

However, there are usually shortfalls and these have to be met by the investor. Most businesses make losses in their early years and this also reduces their tax payments.

Property investment is no different and rental providers do not receive any special treatment.

Many people think investors out-bid first home buyers. In my experience it is the other way around.

First home buyers fall in love with a property and have to have it. They often pay more for the property than the investor, who is more concerned with how to finance the property and isn’t so emotionally involved.

For these reasons property investors are price takers rather than price leaders. They want to pay as little as possible for the property and walk away if the price is too high.

Assuming that property investors are increasing the price of property, would taxing them more really help first home buyers? It is a fact that the cost of renting a home in New Zealand is considerably cheaper than owning the same home.

This situation allows renters the opportunity to save for a home deposit if they want to or invest the money in some other investment such as shares.

If rental property owners were taxed more it would simply drive rental prices up. This in turn would make it harder for renters to save.

If you apply a capital gains tax to rental property, shouldn?t this also apply to other investments such as shares, gold, antiques and art plus all other New Zealand businesses, including farms? These are all excluded from taxation on capital gains.

In fact the only investors in New Zealand who are not taxed for income generated by capital gains are fund managers. If anyone has a tax advantage in New Zealand it is fund managers, not rental property investors.

Probably the greatest argument against applying a capital gains tax on rental property is that it won?t actually help to reduce house prices.

Despite having capital gains taxes in Australia, the United States and Britain, these countries have had house price increases greater than New Zealand?s.

To be fair to politicians, it is not for political reasons that most don?t believe in a capital gains tax. They know from overseas experience that it is difficult to administer, produces little in extra tax income and doesn?t achieve the intended outcome on house prices.

There are no easy answers to controlling house prices, and in fact there are a lot of reasons why you shouldn’t try as it just causes anomalies.

Affordability is certainly an issue for both home owners and investors, and this should be enough to slow the growth of house prices without taking any action. This situation has occurred many times before and likely will in the future.

Currently there are no real statistics gathered on the housing market and what drives it. Regular studies would reduce the level of theories and speculation.

If the market doesn’t cool over the following year then perhaps we need to quickly and thoroughly investigate what really is driving the market, because it is unlikely to be first home buyers or rental property providers.

* Andrew King is vice-president of NZ Property Investors Federation.

The property investor who caused controversy last week by telling people they should stop buying coffees and cars and going overseas on holiday doesn’t buy coffee himself and owns a $15,000 car he bought two years ago.

New Zealand Property Investors Federation president Andrew King said his only real extravagance was a five-week holiday to Malaysia and Thailand with his family.

But he did admit to cracking now and then. His initial response was “none” when asked if he had any coffees. But when pushed he came back with, “Well, I have the occasional one.”

King was a bit bemused by the ruckus his comments caused – he said he was just giving advice to people who want to buy a house but still want to live the high life.

“It’s basic economics – you can have anything you want but you can’t have everything you want. But it’s about what you want in life. If cars are more important to you than owning a house then rent. But if they do want to own a house they are probably going to have to give something up.”

And King said he followed his own advice when he bought his first house at age 24. He didn’t own a car and his biggest luxury was buying lunch on Friday afternoon. He knew he would have to live a cheaper life if he wanted to be a homeowner – something he always planned for.

“It’s about looking into the future and what you would like to have happen to you,” King said.

Property experts say those facing a lifetime of renting must change their ideas if they want to get on the housing ladder.

DTZ’s Ian Mitchell, who worked on the two Centre for Housing reports issued on Monday, said Aucklanders simply had to change their expectations.

“In Sydney or Melbourne, if you wanted a three-bedroom house on a section close to where you work, you’d know you would have to compromise and buy a unit or apartment instead,” Mr Mitchell said.

Aucklanders’ home dreams and aspirations were out of touch with reality because people had not adjusted to the city’s growing population and changing housing market.

“Auckland is starting to face the problems of any large city in the world,” he said.

Property Investors’ Federation vice-president Andrew King said people unable to buy what they wanted had to change their expectations.

“If they can’t afford to save, they should buy a cheaper house and have a lower mortgage,” Mr King said.

He also encouraged Aucklanders to adjust their target suburb expectations.

“You can buy houses for under $350,000 in Auckland,” he said, citing 47 properties for sale in Te Atatu.

Three could be bought for around $300,000.

“More will be available in Henderson and Massey,” he said.

Hunting hints

• Lower your expectations
• Get a flat, not a house
• Live further from work
• Live in a smaller place
• Live without much land
• Spend less, save more

Property Investors Association vice-president Andrew King predicted yesterday that Auckland rents could leap 20 per cent in the next two years.

The head of the property department at Auckland University, Associate Professor Laurence Murphy, said a 20 per cent increase would be necessary to restore yields on rental properties to the rates prevailing in the early 1990s.

But other experts consulted yesterday were more moderate. All expect more increases, but most do not expect them to reach 20 per cent.

A consultants’ report published on Monday forecast continued pressure on the rental market as a spinoff from rising house prices.

Average rents registered with the Government’s tenancy bond centre rose in the year to March by 3.3 per cent in Waitakere, 6.1 per cent in Auckland City, 6.9 per cent in Manukau and 8.8 per cent on the North Shore.

Mr King said big rises in house prices had left rents behind.

“The market is out of kilter at the moment. There is a big difference between the cost of home ownership and the cost of renting. In the last three years that has got out of kilter.

“Renting at the moment is much more affordable than owning your own home.”

This was driving many young couples to continue renting rather than trying to buy. More renters meant more pressure on rents, which were bound to rise.

“They could go up 20 per cent in the next two years.”

An agent for Harveys real estate in Mt Eden, Ann Farquharson, said the rental market had been rising since January after a seasonal lull late last year.

She has rented homes in Mt Eden where the rent for the new tenants rose from $460 to $490 a week in one case, and from $470 to $500 in another.

On average, she said, most rents were going up for new tenants by $5 to $10 a week.

Professor Bob Hargreaves of Massey University said the typical private sector renter would have paid 26 per cent of the average wage to pay the median rent in 1993. By last year, rents had risen to 32 per cent of the average wage nationally and 37 per cent in Auckland.

Overall, rents rose by 86 per cent from 1993 to the first quarter of this year but wages rose by only 50 per cent.

Professor Hargreaves said there was a high correlation between rents and net immigration.

“Rents started to take off again about October last year. Although net immigration has come off a little, it is still quite strongly positive. Net immigration is a very volatile statistic, but provided it stays positive, that’s going to keep pressure on rents.”

But he said a 20 per cent jump in rents in two years would be almost unprecedented and was unlikely.

Professor Murphy said the faster increase in house prices meant rents were now returning landlords a yield of only around 5 per cent, compared with 6 to 7 per cent in the early 1990s.

“If you were on a 5 per cent yield and you wanted to shift it up to 6 per cent, back to what it was earlier in the 1990s, you’d have to increase your rent 20 per cent,” he said. “On a $350 a week rent, that’s $70.

“Traditionally you would anticipate that the yield should bear some relationship to the interest rate because it’s a rate of return.

“The fact that it doesn’t at the moment reflects the way people finance their [investment properties] to get a tax loss and claim it off their tax, and because people are looking for capital gains.

“But if there was a general feeling that yields were too low, especially now that interest rates have gone up … it could lead to increases.”

Property Investors Federation vice-president Andrew King said people on $70,000 a year had to look at their other spending – on things like coffee and cars – if they thought they could not afford a house.

“It might not be the house that you want to live in long-term, but you could buy a $350,000 house in Te Atatu, Glenfield, Panmure or Pukekohe,” he said.

“People should spend less money on coffee and brand new cars and overseas trips.

“It’s up to them to save more. This is a culture of ‘I want it now, I want everything and I deserve it’.”

Yesterday, the Government floated the idea of property developers being forced to build low-cost homes in new estates to ease Auckland’s housing shortage.

Housing Minister Chris Carter after two new reports revealed that New Zealand’s most populous region faces a severe housing shortage and must accommodate growing numbers of people who may rent all their lives.

A study on rental housing by Wellington consultants DTZ predicts falling home ownership, a big increase in the number of people renting – particularly young families and the elderly – and a growing demand for rental accommodation.

Even households making $70,000 a year are being locked out of home ownership, the report says.

The city will need almost 55,000 new houses and flats in the next 10 years.

But high development costs are strangling new-house building – a topic the second report examines.

The housing supply report by consultants Motu proposes speeding up resource consent approvals by financially punishing councils for delays. It also suggests abolishing the artificial city limit boundary, freeing new tracts of land for development.

Mr Carter said he had two solutions – a new law that is yet to win support from other politicians, and funding for shared-equity schemes, which he expects to be in next year’s Budget.

The minister wants to force developers to build a proportion of cheap houses in large new Auckland estates. He said the move had succeeded in Australia.

“We would consider a home affordability bill to direct developers to build a certain portion of affordable housing,” he said.

“I’m enthusiastic about this but I need to convince my colleagues.”

He also favoured shared-equity schemes, in which the Government takes a stake in a house to reduce the cost for first-home buyers.

The scheme had been introduced in Britain.

Money for a pilot scheme should be made available in next year’s Budget, Mr Carter said, but numbers were yet to be decided.

He promised to issue a report within six weeks outlining options, and said a new law could be passed next year.

The reports sparked strong reactions from developers and landlord and tenant groups.

Patrick Fontein, an Auckland developer building a $400 million 500-house and apartment project at Orewa, was concerned about Mr Carter’s cheap housing proposals.

Forcing developers to build low-cost houses in new estates was no solution to the affordability crisis, Mr Fontein said.

The move could lower the tone of new estates and force buyers of higher-priced houses to subsidise the cheaper housing.

Mr Fontein said Mr Carter should work out ways to help people into existing homes rather than new housing, which was often out of reach for many first-home buyers.

Angela Maynard, co-ordinator for the Tenants Protection Association in Auckland, called for more quality rental accommodation and better security of tenure.

Landlords should have to get warrants of fitness for their houses or flats before finding tenants, she said, to ensure minimum standards were set.

Landlords should also have to give reasons for eviction, which could be achieved by amending the Residential Tenancies Act.

“At the moment, you can give a tenant 90 days’ notice without a reason,” she said. “We want landlords to give just cause for eviction.”

She said she was not surprised to find that people making up to $70,000 a year were faced with a lifetime of renting, but said the city’s property market was based purely on greed.

“Everyone in the equation is greedy and trying to get more and more,” Ms Maynard said.

The Salvation Army’s director of social policy, Major Campbell Roberts, called for swift Government action, saying very little had been done to alleviate Auckland’s crisis.

The region’s state housing supply was under considerable stress, forcing many people into the private rental market where rents had risen in the last year, Major Roberts said.

He urged a wide-sweeping range of solutions, including more state housing and more care and professionalism from private landlords.

“Mom and pop investors are not in the rental market primarily to provide accommodation,” he said. “They are there for investment and superannuation purposes, so if another type of investment comes along, they shift their money. They don’t care about the tenant.”

Hugh Pavletich, a Christchurch developer and investor and co-author of the Demographic housing affordability report, welcomed the Motu report in particular, saying its recommendations had stunned him because they were so radical.

The recommendations went much further than he had expected, he said, advocating freeing of Auckland land for housing – necessary to start solving the city’s housing crisis – and punishing councils for lengthy resource consent delays.