Renters' life satisfaction drops as housing markets heat up
Decades of rising house prices have entrenched intergenerational divides in New Zealand, leaving younger and lower-income renters facing greater financial strain and lower life satisfaction, a new Motu-Victoria University study shows.
The research, based on data from 84,732 households collected by Stats NZ, found that while homeowners accumulated wealth, renters’ non-housing spending fell by up to 3.9% for every 10% increase in regional house prices.
The working paper, Impacts of Macroeconomic Policies on Objective and Subjective Wellbeing: The Role of Housing Tenure, was co-authored by economists Arthur Grimes, Amelia Blamey, and Norman Gemmell for Motu Economic and Public Policy Research and Victoria University of Wellington.
The study examines how monetary and fiscal settings have influenced property prices and, in turn, affected the wellbeing of people across different types of housing tenure.
Grimes told journalist Bernard Hickey that the project combined three areas of his research interest – monetary policy, housing, and wellbeing economics. “What we’re looking at is how macroeconomic policies affect property prices, and then how changes in those prices affect the wellbeing of people in different housing tenures,” he said.
Between 2005 and 2021, New Zealand house prices rose by 142%, with half of that increase recorded in the five years to 2021. Grimes said that the sharp rise occurred during a period of low migration and was largely driven by monetary policy.
The report attributes the increase to expansionary measures such as the Reserve Bank of New Zealand’s liquidity programmes during the COVID-19 period, which channelled funds into the housing market.
The study found that outright homeowners benefited through higher spending power, but their life satisfaction remained unchanged. In contrast, mortgaged homeowners, private renters, and public housing tenants experienced declines in non-housing expenditure relative to outright owners. A 10% increase in house prices was linked to a 1.6% reduction in spending for mortgaged owners, 1.3% for private renters, and 3.9% for public renters.
The analysis also showed that renters’ life satisfaction fell when house prices rose, even though the wellbeing of homeowners remained largely stable. A 10% rise in property prices corresponded to a decline of about 0.045 points on the life satisfaction scale for renters – an effect roughly equivalent to one-quarter of the wellbeing impact of unemployment.
Grimes said renters were losing out as property prices continued to climb. He added that monetary policy had contributed to the surge, compounded by New Zealand’s lack of a capital gains tax. “We can easily turn the clock back by changing the tax system to one that’s sensible,” he said, noting that the country is one of the few OECD members without such a tax.
The researchers concluded that macroeconomic policies operating through the property market have widened wellbeing disparities between tenure groups. The paper found that while homeowners gained from rising property values, those without housing assets faced declining financial security and reduced life satisfaction.
