A Wellington social housing agency has hiked its tenants' rent at double the rate the housing ministry initially agreed to. Photo: RNZ / REECE BAKER
A Wellington social housing agency has hiked its tenants' rent at double the rate the housing ministry initially agreed to, citing "financial pressures".
Earlier this month RNZ reported Te Toi Mahana (TTM) tenants were despairing as their rent was put up while the cost of some private rentals were dropping across the capital.
A letter to tenants did not give a reason for the rent increase, which came into effect at the start of November.
When RNZ asked TTM why it was upping the rent, it said its costs had increased due to a rise in the consumers price index (CPI) - a measure of inflation.
However, emails between TTM and the Ministry of Housing and Urban Development (HUD) reveal that's not the whole picture.
An angry tenant says her landlord has not been transparent.
What the emails say
TTM has raised the rent an average of 2.2 percent, but emails between it and the housing ministry showed they had initially agreed on a 1.1 percent rise.
The emails, released under the Official Information Act, showed TTM had first asked HUD to approve a proposed rent increase of 2.7 percent, which it said was a "CPI indexed adjustment".
But the ministry wrote back: "...the 2.7 percent relates to all inflation across New Zealand for all goods and services rather than actual rentals. HUD uses the actual rentals CPI for the appropriate region."
It asked TTM to drop the rent increase.
"The CPI for the Wellington region is 1.1 percent, please recalculate your market rent increases with this percentage and resend it through for review."
TTM recalculated its rents with a 1.1 percent increase, which was approved - but the following day, TTM asked the ministry to reconsider.
"While we understand that the proposed increase is consistent with rental CPI movement for the Wellington region, it does not adequately reflect the financial pressures Te Toi Mahana is currently facing," wrote tenancy general manager Daniel Tai.
"Specifically, we are locked into a fixed 2 percent per annum increase in lease payments to Wellington City Council and our overall costs inflation (which includes both lease payment and incurred operating expenses) have increased by 2.2 percent."
Tai proposed a 2.2 percent rent increase, saying it "strikes a fair balance between affordability for tenants and the financial sustainability of our services".
The housing ministry approved that, but said: "For next year's increase we must use the actual rentals CPI for Wellington."
The ministry told RNZ that it worked with community housing providers (CHPs) to determine market rent for specific regions, and raising rents was not strictly tied to CPI.
"In cases where CHPs make reasonable and substantiated arguments for increases higher than local rentals CPI, we consider those requests seriously," it said.
Tenant says landlord's comments are 'deeply misleading'
A TTM tenant, who RNZ has agreed not to name, is furious.
She said her landlord was passing its lease costs directly to tenants.
"But that's not how the CPI system is supposed to work. CPI is meant to reflect market rental movements, not a landlord's internal cost structure.
"If every landlord increased rent based on their own costs rather than the market, there'd be no limit."
There was no mention of tenant affordability in the email chain between TTM and HUD, she said.
"No mention that tenants are using food banks. No mention of the $8 million support fund sitting unused.
"The entire negotiation was about Te Toi Mahana's costs and what they wanted - not what tenants could afford. That tells you everything about whose interests are being prioritised."
TTM's comments to RNZ earlier in November that referred to a CPI increase of 2.7 percent were "deeply misleading", she said.
"Te Toi Mahana knew they were comparing their rent increase to the wrong benchmark when they spoke to media - therefore the public was misled about the CPI justification."
Landlord defends rent rise
In a statement, Te Toi Mahana said it would have been able to manage a rent increase lower than 2.2 percent.
"However, such a rental adjustment would not reflect the increase in costs that we face, [and] lead to a reduction in revenue and put greater pressure on rent increases in the future."
It said the 2 percent increase in the payment to Wellington City Council was "standard practice" in commercial property leases.
Residential rents tended to track overall inflation "in the long run" as rising prices and wages were often correlated, it said.
"However, that relationship is imperfect as rents also reflect broader considerations such as housing supply, population growth, wage growth and so forth.
"This was the case in Wellington last year where consumer price inflation at 2.7% was higher than regional housing inflation at 1.1%."
It said it would continue to work with HUD to agree appropriate rent changes for future years.
Wellington City Council said TTM had to pay the 2 percent lease payment increase for two more years, then it would be indexed to CPI.
What do tenants pay?
Te Toi Mahana said about a quarter of its tenants received the government's rent subsidy (IRRS), meaning they paid no more than a quarter of their monthly income.
"Subsidies vary for those tenants which are not eligible for IRRS, but on average they pay less than 70 percent of market rent."
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