Are landlords cashing in on student loan changes ?
Background
The government recently announced that student allowance and living costs are increasing by $50/pw. There has since been a lot of media coverage suggesting landlords are capitalising on this by increasing rent by the same amount. I will look at tenancy bond data from the Ministry of Business, Innovation, and Employment (MBIE) to see if a rent increase is supported by bond data.
The details
The announcement was made late November so at the moment we only the December data should be affected. December should also have a higher proportion of students signing on for flats relative to the rest of the population (although January data would be helpful).
In the graph below we can see the average1 rent for dwellings in Wellington and Dunedin (I figured these are the most studenty places). We would expect rent for tenancy bonds lodged in December to increase sharply in 2017. However, the data suggests rent is increasing at the same rate from as early as 2016 (at least a year before the announcement).
If we look more closely at the numbers we can support that between the last two Decembers rent in Wellington increased by $43 (9.7%). Yet in the period before that we see a similar $43 (10.7%) increase. I have also compared the lower quartiles which show a similar trend, making it unlikely that lower rent student flats are not being affected. Do note though, that this is only lodged bonds and any changes in rent to people continuing their tenancy will not be captured. Although I’m assuming it’s less of a problem for students who are more likely to take up a new tenancy each year.
| Average($) | Change($) | Percent change (%) | |
|---|---|---|---|
| Wellington | |||
| 2013-12-01 | 390 | NA | NA |
| 2014-12-01 | 412 | 22 | 5.6 |
| 2015-12-01 | 402 | -10 | -2.4 |
| 2016-12-01 | 445 | 43 | 10.7 |
| 2017-12-01 | 488 | 43 | 9.7 |
| Dunedin | |||
| 2013-12-01 | 311 | NA | NA |
| 2014-12-01 | 302 | -9 | -2.9 |
| 2015-12-01 | 311 | 9 | 3.0 |
| 2016-12-01 | 343 | 32 | 10.3 |
| 2017-12-01 | 375 | 32 | 9.3 |
Conclusion
Rent in December has increased by the same amount in the last two years, providing little evidence of an increase due to a change in living costs or student allowance. Some landlords and property managers may have increased rent, but it doesn’t seem to have an observable effect so far. Hopefully we will get a clearer idea in January when I also hope to do more robust significance testing.
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The average was caluclated using the geometric mean, it’s basically a mean that is less sensitive to outliers. ↩