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Issues associated with falling home-ownership rates

Greater exposure to private rental market increases housing costs for renters

Greater exposure to the private rental market is likely to have increased affordability issues, especially for people on lower incomes. There is little information on housing affordability by ethnicity, except from the Household Economic Survey (HES). The Ministry of Social Development (MSD)’s Social Report 2010 noted that households with a Māori or Pacific person were more likely to have housing costs above 30 percent of household income. The biggest increase was between the 1980s and 1990s, probably partly as a consequence of introducing market rents for state housing.

Figure 36
Graph, Proportion of households with housing cost outgoings-to-income ratio greater than 30 percent, by ethnic group, selected years, 1988–2009.

Figure 36 from MSD’s Social Report 2010, shows housing affordability from HES. Data from HES is for households with at least one Pacific or Māori person and for all households.

Note: the relative sampling error, particularly for Pacific households, is quite high for some years, especially for owned households – the number in the survey was small.

On average over 1988 to 2009, households with at least one Māori or Pacific person spent more on their housing costs than people in all households. This was mainly due to the higher proportion of these households renting (around two-thirds compared with just over one-third for all households).

Why is renting less affordable? The figures for owner-occupied dwellings include households that have paid off their mortgage and those with a mortgage. Mortgage outgoings vary considerably. First-home buyers are likely to have low equity in property, while people who bought many years ago (before house prices began rising in the 2000s) have greater equity.

The data seem to indicate a significant increase in housing-cost ratios for Māori and Pacific households that did not own their dwelling between 2007 and 2015. Again the data is for households with at least one Māori or Pacific person. The housing-cost ratio went from an estimated 20.6 percent, to 23.7 percent, for Māori between 2007 and 2015. This figure represents around a 15 percent increase (11.8–18.6 percent depending on whether the upper and lower confidence intervals are used). The rate for a household with at least one Pacific person was 20.3–25.4 percent, which was around a 25 percent increase (22.6–29.1 percent if lower and upper confidence intervals are used). This compared with around an 8.6 percent increase for all people.

There was no significant change in housing-cost ratios for owner-occupied dwellings during this period. ‘Owned dwellings’ cover those owned with or without mortgage. Relative sampling errors were higher for Pacific people living in an owned dwelling (over 20 percent in each year surveyed). This variation is reflected in the wider confidence intervals for households with at least one Pacific person.

Figure 37

Graph, Housing Cost Ratios, HES 2007–2015.

Māori and Pacific people have greater household crowding

Households may alleviate the burden of housing costs through living with other people or families. The measure most commonly used to calculate household crowding in New Zealand is the Canadian National Occupancy Standard. Under this standard there should be no more than two people in a bedroom. A couple, or children of either sex aged under 5 years may reasonably share a bedroom, while children aged 5 to 17 should only share if they are of the same sex. Anyone 18 years or over should have their own bedroom.

While there may be some cultural differences around crowding standards, Goodyear, Fabian, & Hay (2011) determined this crowding definition worked well within the New Zealand context. Household crowding was high in 2013, particularly for Pacific people. Nationally, in 2013, around 2 out of 10 people with Māori ethnicity and 4 out of 10 Pacific people lived in a crowded house. The comparable figure for the total population was around 1 in 10 people.

Crowding was highest in the Auckland region. In 2013, 45.3 percent of Pacific people and 25.4 percent of Māori living there were living in a crowded household.

Research from the 1980s suggested (quoted in Bierre et al, 2007) that Māori and Pacific people found it more difficult to access good-quality private rental housing at that time.

Māori and Pacific people have more problems with housing quality

Māori and Pacific people were more likely than the total population to report quality problems with their housing (General Social Survey (GSS), 2010, 2014). This difference is probably related to the higher proportion of Māori and Pacific people in rental housing. Information from BRANZ (2010) and the GSS (2013, 2015) shows that rental housing tends to be of poorer quality.

In the 2014 GSS, a high proportion of Pacific people reported problems with their housing, particularly rental housing. European and Māori had similar rates when broken down by tenure. In the 2010 GSS, over 60 percent of Pacific people in rental housing reported problems with their housing. They also reported more problems with owner-occupied housing.

Figure 38
Graph, Housing problems by tenure and ethnicity.

The 2014 GSS also showed greater likelihood of housing issues for Māori and Pacific people, which again is likely to be related to these groups having higher proportions of renters.

Pacific people were the ethnic group most likely to report a major problem with cold (43 percent) and dampness (15 percent), while Māori were the group most likely to report a need for immediate or extensive repairs on their homes (13 percent).

Renters move more frequently

Evidence from the census and the Growing up in New Zealand study suggests that renters are much more mobile than home owners. Moving frequently can have negative consequences, for example with children’s schooling. The 2013 Census showed that renters were much more likely to have had a different address five years earlier than home owners. There were some differences by ethnicity.

The following information refers to all people living in households but excludes children under five years in 2013.

Māori and Pacific people had greater mobility than people with European ethnicity. In 2013, 54.9 percent of Māori and 47.1 percent of Pacific people had moved since 2008, compared with 44.4 percent of Europeans.

Figure 39
Graph, Percentage of people in households who moved in New Zealand after March 2008.

However, Pacific people living in dwellings they did not own had less mobility than other ethnic groups in the same situation. In 2013, 56.9 percent of Pacific people living in a dwelling not owned by the household had moved, compared with 71.2 percent of Māori and 74.7 percent of Europeans. One reason for this difference could be that a greater proportion of Pacific people live in social housing.

Mobility rates for people in rented housing were highest for those in privately renting households. For example, 73.8 percent of Pacific people who rented privately had changed address at least once in the five years before the 2013 Census, compared with 35.5 percent of those in HNZC housing.

Rates of mobility for children were slightly higher. Almost three-quarters (71.5 percent) of Māori children aged 5 to 14 years who lived in a dwelling not owned by their household had a different address from five years earlier. For Pacific children, the figure was 58.4 percent.

Falling home-ownership may reduce proportion of wealth Pacific people and Māori hold

New Zealanders have traditionally held a considerable amount of their wealth in property. Residential property (including family home, holiday homes, and investment property) is the major source of wealth for many households or individuals (Thorns, 2008; Statistics NZ, 2007). Therefore we might expect that declining home-ownership rates would affect the amount of wealth held by households. Households owing property would potentially increase their share of the nation’s wealth. Thorns (2008) notes:

The impact of 20 years of housing-prices changes from 1980–2001 has been a doubling of net wealth per capita. However, during the latest boom period from 2001–06 this doubled again showing the significant impact of this boom upon wealth transfers and accumulation.

Households that owned property before the 2000s, when house prices took off relative to income, are likely to have benefitted most.

Data on wealth has been collected infrequently in New Zealand: in the 2001 Household Savings Survey (HSS); in 2003/4, 2005/6, 2007/8, and 2009/10 in the Survey of Family, Income and Employment (SoFIE); and in 2014/15 in the Net Worth Survey. Results from the Net Worth Survey will be released in 2016.

These surveys show considerable disparity in wealth, by ethnicity. Figure 39 shows the difference in net worth (assets minus debts) in 2001 for couples and individuals, by ethnicity. Note: prioritised ethnicity was used.

Since wealth is strongly correlated with age, as people build up assets over time, some of the wealth differential is due to the differing age structures of the Māori and Pacific populations.

Figure 40
Graph, Net worth individuals and couples, by prioritised ethnicity.

Figure 41 shows the breakdown of assets when property is owned at the time of the survey. The value of property owned by Māori and Pacific couples was lower than the value of property owned by Europeans.

Figure 41
Graph, value of couples' residential property, by ethnicity.

Gibson and Scobie (2004) explored the disparity in wealth, by ethnicity, to determine which differences remained once age and income were accounted for. They found that age was the strongest contributing factor for differences in wealth between Māori and other ethnic groups, and expected this should reduce as the age gap reduces.

Information from SoFIE (Statistics NZ, 2007) reinforces the pattern of ethnic disparity in wealth. This longitudinal survey took place in eight waves from 2003. In 2003/4, Māori were 10.4 percent of the population but owned 4.3 percent of net wealth. Pacific people were 4.3 percent of the population but had just 1.3 percent of the nation’s wealth. Further SoFIE waves showed that while Māori and Pacific people’s share of the nation’s population grew, their share of its wealth did not increase (Rashbrooke, Rashbrooke, & Molano, 2015).

For example, in wave 2, Māori made up 12 percent of the population but owned 6 percent of the net worth. By wave 8, they were13 percent of the population but owned 5 percent of the total population’s net worth.

Pacific peoples owned 1 percent of the nation’s wealth through all waves of SoFIE but grew from 4 percent to 5 percent of the population This would be within the margin of error so may not represent a real change.

Table 4 shows the mean net worth of selected ethnic groups over SoFIE’s four waves. Note: the data is for total response ethnicity and so is not directly comparable with the Household Savings Survey (HSS), which used prioritised ethnicity.

Table 4
Mean net worth for selected ethnic groups

2003–10

 Ethnicity

 Mean net worth ($)

 Wave 2 (2003/4)

 Wave 4 (2005/6)

 Wave 6 (2007/8)

 Wave 8 (2009/10)

 European

 175,861

 230,684

 261,603

 276,096

 Māori

 78,556

 77,908

 90,258

 98,369

 Pacific peoples

 34,660

 41,508

 55,457

 56,170

 Total population

 156,244

 199,462

 228,837

 240,941

 Percentage of mean net worth for total population

 European

 112.6

 115.7

 114.3

 114.6

 Māori

 50.3

 39.1

 39.4

 40.8

 Pacific peoples

 22.2

 20.8

 24.2

 23.3

 Total population

 100.0

 100.0

 100.0

 100.0

 Source: SoFIE, Statistics NZ; Rashbrooke, Rashbrooke, & Molano (2015)

Whether declining home-ownership rates have led to a reduced share of the nation’s wealth for Māori and Pacific people is difficult to answer, due to changes in ethnicity reporting and data collection. However, it is clear that the proportion of the nation’s wealth held by Māori and Pacific people is low when compared with their population shares.

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