Without giant help, aspiring homeowners in Queenstown, with few beans, will be left dangling. David Williams reports
He’s sheepish and apologetic, but obviously not feeling guilty enough to change course.
Darren, as we’ll call him, is in the final throes of buying a property in Queenstown to list on holiday let website Airbnb. “Sorry, I know that’s going to add to the issues here.”
Those issues are acute.
READ MORE: * Housing: a public policy disaster for 30 years * Housing crisis: Queenstown rips at the seams
Workers in the tourist resort are living in cars and tents, and big employers like skifield operator NZSki are buying hostels for staff accommodation. The queues to view the few rental properties are long – off-puttingly long.
It shouldn’t be like this. Council assessments show, on paper at least, house-building has kept ahead of population growth. But two big factors skew the reality.
Roughly a quarter of homes are owned by out-of-towners and spend most of the year empty. Ghost homes.
And according to council figures, about 4,500 homes are registered with Airbnb – a huge number in a district with a roughly 23,000 houses.
(Airbnb is only one player in short-term accommodation, but many people in town refer to the company rather than the industry.)
Tāhuna/Queenstown is rife with stories of renters being kicked out so owners can list their properties on holiday letting websites like Airbnb and Bookabach.
In that context, a dire shortage of rentals isn’t surprising. It has prompted the local council to start a campaign urging homeowners to rent out their spare rooms to workers.
Meanwhile, the massive hike in interest rates over the past few years has been a blow for aspiring homeowners, in a place where the average house goes for almost $1.7 million, and something “affordable” sells for around $800,000. And that might be a doer-upper in the close-to-town suburb of Fernhill.
Investors, dormant during Covid disruptions, are starting to circle again, which could mean greater competition for whatever’s about to be built.
Darren, a professional who has lived in town for years, knows all this, and calls the volume of holiday accommodation a “massive nightmare”.
But for those with the means to acquire a second house, or a room to rent to visitors, there are no negatives to letting out short-term, he says.
“You compare doing Airbnb versus a long-term rental, there’s so much against you renting out long-term now.”
(Susan Wheeldon, Airbnb’s country manager for New Zealand and Australia, says: “Housing affordability is a challenging and complicated issue not just for people and communities, but also governments genuinely looking to tackle this policy challenge.”)
Landlords are being put off renting, it’s said, because of the removal of tax deductibility of interest costs from existing properties, and pro-tenant policies making it harder to end fixed-term rentals. Warmer homes regulations apply to rentals but not short-term lets.
People are reacting to the incentives, Darren says, even if they’re perverse – “it’s not their fault”. “We’re just going to do whatever’s best for us, aren’t we?”
Therein lies the problem.
Queenstown’s planning history is littered with well-meaning, misdirected attempts to create more houses without ensuring they’re built for, or bought by, those most in need.
Often, stand-alone houses are built and snapped up by the well-to-do and investors. Many of them are whipped away from renters fighting to stay in town.
The council is intervening.
This year it issued a joint housing action plan, developed with the district’s community housing trust and government agencies. It’s also moving to formalise affordable housing contributions from developers, something called inclusionary zoning.
Tomorrow, councillors will consider a district plan variation to allow increasingly dense housing in certain urban areas, with the aim of encouraging smaller, more affordable houses to be built.
The biggest lever being pulled is a plan to re-zone an area along Ladies Mile, between Lake Hayes and the Shotover River, known as Te Pūtahi, that could eventually contain 2400 high-density residential units.
But will it make enough of a difference, and fast enough?
Despite his looming property purchase, and intentions to list it on Airbnb, Darren admits the town having so few properties available for rent is going to cause “massive issues”.
Evidence suggests it already has.
Trying to rent
The uneasy balance of a tourism town providing affordable accommodation for those who make it hum, and holiday houses for the wealthy, has tilted against workers who are paid the least.
What’s available for rent?
Harcourts Queenstown business manager Paul Hibbett says there are only 15-20 properties at any one time, “and they get snapped up pretty quickly”. Compare that to soon after Covid hit, when many renters had left town, and there were around 200 rentals being advertised, and rents were 30-40 percent lower.
“It’s chaos ... they’ve been hit by the tidal wave; they just can’t cope.” – Lincoln Haworth
There’s huge variation, Hibbett says, but, generally speaking, a standard, new-build, three-bedroom house will rent from $800 to $900 per week. A four-bed is generally $900 to $1100 a week, and, at the higher end, you’ll pay more than $1500 a week in places like Jack’s Point.
Newsroom’s quick check unearthed a one-bedroom, one-bathroom apartment at Arthurs Point, about 6km from Queenstown, where tourism giant Shotover Jet’s based, being advertised for $650 a week, including broadband, gas and electricity. (No pets or smokers.)
Hibbett: “Queenstown has generally always been tight in terms of rental accommodation but the emergence of Airbnb has led to fewer residential rental properties being available here. That started probably around eight to 10 years ago.”
Lincoln Haworth, a joint Kiwi-British citizen, has just returned to New Zealand after working a winter in Norway. The 33-year-old ski rental shop manager has been living in a Queenstown hostel while he searches for a rental with his second-in-charge.
“We just contacted two listings to rent a house ourselves and I just had a call back,” Haworth tells Newsroom. “There’s 35 people on the waitlist for a viewing. It wasn’t even worth it.”
Another recent listing had 60 applicants, we’ve been told.
The going rate for a rental in Queenstown is about $300 a week per room, Haworth says, but they’re trying to find something for $250.
“Last year, I paid $200 – there’s been 50 percent inflation in rent in Queenstown since last year.”
Just four years ago, Haworth stood for the Queenstown-Lakes council on issues such as higher-density housing, and active transport. He finished fifth, with 1797 votes, and wasn’t elected.
Things were bad back then. They’re worse now, certainly for renters.
“There’s a massive shortage; it’s demand and supply,” observes Haworth, a qualified lawyer (tried it; didn’t like it) who also completed a degree in genetics.
Piecemeal developments
Much of the land that has been developed in wider Queenstown, the Whakatipu Basin, over the past decade has pushed people in the geographically constrained town down the main highways and across rivers.
Across the Shotover River, there’s the 810-lot Shotover Country subdivision, and Bridesdale Farm, which had 134 sections. To the south, across the Kawarau River, there’s Hanley’s Farm, next to Jack’s Point, where 1750 sections will eventually be carved up, in the shadow of the Remarkables Mountain range.
Generally speaking, people in these subdivisions drive to work.
Haworth’s assessment is the council has approved piecemeal, poorly designed developments – “trying to put all the poor people away in a sprawly, pointless suburb miles away with crap transport links”.
“It’s chaos,” he says. “They’ve been hit by the tidal wave; they just can’t cope.”
Having lived and worked in Europe, he thinks Queenstown’s ripe for affordable apartments – instead of stacking stand-alone houses a metre from the boundary. He’d buy a small apartment, with his parents’ help, if he could.
“I had this conversation with my mum the other day," he muses. "Yeah, we could buy one – there aren’t any.”
(Since we initially spoke, Haworth has found a room to rent in an apartment, a short bus-ride to town.)
An $1100-a-week mortgage?
As previously mentioned, average house prices are almost $1.7 million, compared to a national average of $964,000.
Switching to median house prices, last month the figure in Queenstown-Lakes was $1.12 million, almost 14 times the district’s median income, according to Interest.co.nz. No other area of New Zealand – not even Auckland – was in double figures.
Queenstown-Lakes mayor Glyn Lewers says an affordable house in Queenstown is worth between $800,000 and $900,000.
(The town’s housing problems have become “more acute”, the mayor says. “I wouldn’t go as far as a crisis.”)
First-home buyers can get a Government leg-up, under certain criteria.
Kāinga Ora, formerly Housing New Zealand, backs some loans with a 5 percent deposit. Those in KiwiSaver for at least three years may also be eligible for a grant.
In Queenstown, the maximum purchase price for government-backed first home loans is $875,000 for existing properties, and $925,000 for new builds. To qualify, individuals without children must earn less than $95,001, while couples or individuals with children must earn under $150,001. There’s a loan application fee and mortgage insurance premium, but the rates are the same as someone with a 20 percent deposit.
Having scraped together a $40,000 deposit for an $800,000 Queenstown “affordable” house, what are the repayments?
“I’ll tell you exactly,” says Stewart Mitchell, a mortgage advisor with Loan Market, punching in the numbers. “For that you’re looking at about $1120 a week.”
(Mortgage payments are usually considered affordable when they’re no more than 40 percent of take-home pay. Someone on a $200,000 salary, pre-tax, has a weekly, take-home pay, before KiwiSaver, of roughly $2690 a week, according to online PAYE calculators. Forty percent of that is $1076.)
Mitchell says Queenstowners paying $700 a week in rent are itching to buy their own house. But they’re shocked to hear they’ll pay $400 more a week in mortgage repayments, with rates and house insurance on top.
Some banks might allow that to happen, but a common reaction from potential buyers, Mitchell says, is, “oh, shit”.
Put yourself in the shoes of a primary school teacher.
Salaries range from $51,000 to $90,000 at the top end, for those with a Master’s level qualification.
The median rental of $700 a week (the national figure is $560 a week) adds up to $36,400 a year, more than a third of the best-paid teacher’s gross income.
Then do the sums on servicing a $760,000 mortgage.
Ben Witheford, principal at Shotover Primary, says housing issues are significant, with no signs of easing. So far, though, there’s been little direct impact on his staff.
“I often wonder who many applications we don’t get due to the cost of housing, buying or renting. Unfortunately, there is almost no way of knowing the answer to this.”
Teachers aren’t paid extra for living in Queenstown.
Witheford says he has significant concerns about the future ability to staff schools in the area. It’s something he’s raised in the past with the Ministry of Education and union which, at the time, was not well-received.
Seeking Hope, 18 years ago
If Queenstown’s housing unaffordability seems outrageous then wait till you hear how long the town’s leaders have been trying to find a fix. Or the lack of a national safety net.
Serious concerns were raised in 2004, after a surge in average house prices, from $200,000 to between $400,000 and $450,000, since 2001. Over the same period, average rent for a three-bedroom home rose from $200 a week to $350.
A district housing strategy – known as Hope: Housing Our People in our Environment – was produced in 2005, warning market forces wouldn’t address the shortage of affordable housing. It suggested a community housing trust be formed, something that was done in 2007.
Hope’s medium-term (four-year) targets were for an extra 310 affordable rental and owner-occupied houses in the district, 250 in Queenstown. In the 16 years since it was created, the trust has helped 253 households.
Another target from the 2005 report was to lobby central Government for another 20 public housing units, and to get accommodation supplement levels increased.
When the report was written, Housing NZ had 14 houses in Queenstown and six in Wānaka – a pitifully low level compared to other locations with similar populations.
Today, Kāinga Ora, as it’s now known, has nine houses in Queenstown and four in Wānaka. That’s right, there are fewer state houses than 20 years ago in one of the most unaffordable places in the country.
Earlier this year, a petition was presented to Parliament calling for a review to the accommodation supplement’s zoning, as the boundaries haven’t been reviewed since 1992.
Government agencies are involved in discussions with the council, and iwi, and support schemes offered by the housing trust. The government, through the Ministry for Housing and Urban Development, is also a partner in Ngāi Tahu’s development, Te Pā Tāhuna, on the old Wakatipu High School site in Gorge Rd, which will eventually yield 300 apartment units and terraced houses.
(Paulette Tamati-Elliffe, Whakatipu region’s mana whenua representative, says: “We know it is important that the homes developed in Tāhuna-Queenstown meet the needs of the people who live and work there, and meet their budgets, in order to be part of a long-term solution for the town’s housing crisis.”)
But eligibility criteria for the public housing register are shutting families out.
In March, only 15 households in Queenstown-Lakes were registered.
Yet the community housing trust’s waiting list is sitting at 904 households – double what it was in July 2017. It’s the trust doing the heavy lifting.
Lewers, the mayor, says: “The trust has provided a significant amount of homes to working families and working people.”
Trust chief executive Julie Scott, who’s respected in the community housing industry, says, diplomatically, it would welcome central Government support.
It currently has 132 homes on its books, with another 96 on the way – 68 at Tewa Banks development, near Arrowtown, and another 28 at Longview, over the Crown Range at Hāwea.
The trust is working with developers and government to find ways to build more affordable housing in the district, Scott says.
Given its track-record, the trust is likely to expand; the Queenstown programmes are already held up nationally as industry exemplars.
But without larger contributions from developers, or serious money, probably from Government, its successes, while notable, are likely to remain modest, and incremental.
Mandating inclusion
Queenstown council’s draft inclusionary plan change, consulted on last year, wants to mandate affordable housing in new developments.
The suggested contribution rates of: 5 percent of vacant, serviced residential lots, or the monetary equivalent, transferred to the council at no cost, or 2 percent of the sale value of new houses in residential developments in urban neighbourhoods, and 1 percent for residential units in certain other zones.
An evaluation of the proposal says: “The rate of contribution seeks to minimise any adverse impacts on the operation of the housing market and accords with local experience.”
Overseas, inclusionary zoning is used to much greater effect.
In New York, half of new developments have to be affordable. Similar schemes in some London boroughs are about 40 percent, while municipalities in California can demand 15 percent as of right.
Tricia Austin, a senior lecturer in architecture and planning at University of Auckland, was a co-author of the 2005 Hope report.
She says Queenstown’s housing trust is an excellent vehicle, but asking developers of new housing to hand over a tiny percentage of houses or section for affordable housing isn’t going to solve what is a massive problem.
“They [the housing trust] need, probably, another dedicated source of funding so as to increase their capacity to do more.”
With a law change, a percentage point could be added to GST in the Queenstown-Lakes – something done in North America, where they also have low-income tax credits to help people into housing.
Or, Austin suggests, the housing trust – or local iwi – could get funnelled funds through a small percentage taken off every property sale in the district.
In some tourist communities abroad, second and third homes – that often sit empty for much of the year – pay higher local taxes, the equivalent of rates.
Toru, rua, tahi
Compared to other parts of New Zealand, Queenstown has a good approach to providing affordable housing, Austin says. “It just needs a lot more resources.”
The $100 million, 230-unit Toru Apartments development, was designed to make a dent in Queenstown’s affordable housing crisis.
Located next to Frankton’s Remarkables Park shopping centre, close to the high school, the development was meant to be spread across three high-rises – hence, Toru.
In the first stage, the housing trust bought 50 one-and-two-bedroom units, selling eight on the open market to finance the other 42 units’ use for progressive home ownership and affordable rental schemes.
Yet only one has been built, and the balance of the land, still consented for 152 residential units, is for sale.
Developer Roy Thompson, of New Ground Capital, told Stuff it’s selling because local business owners weren’t signing long-term leases, and the council wouldn’t cut development costs.
“If the business community wants to see this problem solved or supply issues solved, they’ve got to come to the party.”
Paul Gilberd, chief executive of Community Housing Aotearoa, says: “It’s the perfect opportunity for the Government to get involved.”
Fast-track, fast demand
Another missed opportunity seems to be the council’s controversial $1 billion Lakeview Te Taumata development, on the old campground site overlooking the town, which it’s pursuing with a trans-Tasman consortium of companies.
Fast-tracked by the Environmental Protection Authority last year, the development will add hundreds of apartments, and co-living rooms for temporary workers. But there’s also plenty of retail space, areas set aside for food and beverage outlets, and several new hotels.
Mayor Lewers says: “I’m confident that that will provide some extra housing.”
Mark Tylden is a director of Glenpanel Development, which has plans to build hundreds of units, some “affordable by design”, on land along Ladies Mile. He wants processes to expand housing supply sped up.
Demand for housing is completely overwhelming supply, which is driving up prices, and driving people out of town.
“Accommodation is the single-biggest problem for anyone wanting to employ staff, especially staff in the service industries,” he says.
“The problem is a regulatory one, where supply has been constricted, rather than a market problem … If the problem were left to the market there would be a plentiful supply of houses.”
Queenstown has heard this before.
First homebuyers come last
The previous National Government’s attempted fix was special housing areas.
The council signed a housing accord with John Key’s Government in 2014, pledging to consent 1300 sections within three years.
In 2015, then Housing Minister Nick Smith jetted to Queenstown to announce Bridesdale Farm, a 134-section development adjacent to existing subdivision Lake Hayes Estate, would be the first to be fast-tracked under new housing rules.
The idea was simple: build more houses, and more people will be housed at a lower price.
But that depends on the types of houses built, who can buy them, and their end-use.
Bridesdale had no affordable housing component, and none of the then 270 households on the housing trust’s waiting list could afford to buy there.
A 2017 analysis of property owners at Bridesdale by local newspaper Mountain Scene found fewer than 30 percent were first-home buyers or did not own property elsewhere.
(Lewers: “It was a learning curve for the council at the time, and they became a lot more sophisticated, in how we could apply that piece of legislation.”)
In 2018, veteran developer David Broomfield criticised the council for missing a golden opportunity with special housing areas to covenant sections to ensure they sold to first-home buyers. “Instead, all the speculators got in and had a field day,” he told the Otago Daily Times.
Tylden, of Glenpanel Development, says such a covenant is an interesting option, and one that may work. “But the bigger problem is getting projects through the planning process and houses actually built.”
Austin, of University of Auckland, has her doubts.
“There are significant questions around whether increasing supply will actually happen, and even if it does, will the housing delivered be affordable for working residents in Queenstown?”
‘Government must step in’
Gilberd, the boss of Community Housing Aotearoa, says there’s clear evidence across the whole of the country, and particularly in Queenstown, of a market failure to deliver affordable housing.
“The reason for that is really simple. If you’re going to deliver affordable outcomes, there has to be a subsidy, and the place, or the role of government, is to step in where there’s clear market failure.”
Faced with a post-war housing shortage, after an economic boom sent people into cities to find work, Sweden’s Social Democratic Party built a million homes, between 1965 and 1974, in a country of eight million people.
“They used generous, fixed, low-interest state loans, and large-scale, industrialised construction to do that,” Gilberd says.
Instead of spending billions of dollars on rental subsidies, he says this country should take an investment approach to delivering affordable housing.
“Since the reforms of the late ‘80s and early 1990s, there’s 40 years of evidence to show that unless the government is sending procurement signals to the market, that it wants affordable housing built by commissioning and buying it, or providing the finance to [Community Housing Providers], it just doesn’t happen.”
While this year’s general election is likely to be mainly about the cost of living, people in Queenstown will no doubt be looking to politicians for signals on housing.
At last week’s Community Housing Aotearoa conference in Christchurch, Housing Minister Megan Woods proudly stated one-in-seven public houses was delivered by the Government over the past five years.
At the same conference, National’s Chris Bishop and Tama Potaka said their party intends to focus on expanding community housing providers. National’s suggesting a $1 billion infrastructure fund for councils.
Whatever policies emerge on the campaign trail, to shift the rudder is going to require a big jolt.
An estimate in a Te Waihanga Infrastructure Commission report says the country has a $100 billion infrastructure deficit.
Relying on foodbanks
Back to Queenstown, that fairytale place where lakes and mountains look just as magnificent in person as they do in the postcards, which, for many, has become a nightmare.
Last week, the council released a labour market “snapshot” study for the district, prepared by economist Benje Patterson.
“Retaining staff as we move towards the winter season will now be the big challenge, particularly as it is getting harder to just write bigger pay cheques, and housing availability remains tight,” the report said.
Happiness House is a community support charity in Queenstown, which runs a food bank.
Fridays are “produce day”, when fresh food, donated by local businesses and individuals, is distributed to the needy.
“We used to have about 17 to 18 families and individuals … 40 people a week,” says manager Léna Boss, who is originally from Switzerland. “Last week, we had 25 families and individuals. It’s quite increase for us. That would more represent maybe 60 people a week.”
A family of four (and five, sometimes, when another of their children comes home), had their rent increase by $250 to $850 a week.
“They’re like, ‘we can’t afford this’, because only one of the parents can be working at the moment so it’s just not possible,” Boss says.
“We have families who have been here for over 10 years, and [the cost of living] has always been a concern for them, but now they’re really thinking of moving somewhere else.”
Part of the problem, as previously mentioned, is the sheer volume of short-term lets.
A recent Environment Court order – an agreed position after mediation between Queentown’s Council, Airbnb Australia Pty Ltd and others – has made it easier for home owners to let their homes to tourists for up to 90 days. They just have to register with the council. (Any longer, and a resource consent is required.)
Darren, our anonymous home-buyer who’s keen to use Airbnb, would, ironically, like to see clamps on the number of listings in Queenstown-Lakes.
Developer Andrew Tylden describes regulations on holiday lets or second-homes as an admission of regulatory failure.
“Failing to deal with the major issue of lack of supply cannot be overcome by tinkering around the edges with restrictions on the property rights of existing home owners.”
Queenstown’s council seems happy to tinker, though. As part of the re-zoning of land along Ladies Mile, the council wants residential visitor accommodation to be designated “non-complying”, meaning any unit listed on Airbnb will then require a resource consent – a tougher requirement for owners hoping to make big bucks.
It will take a lot more than that to tilt the housing balance back towards workers.
