Cornwall Park Leases

One of the things that Shamubeel Eaqub talks about in NZIER’s housing affordability paper is the importance of making renting in New Zealand a better substitute for owning.

The Cornwall Park situation is where 21 year rent reviews and the enormous increase in land values of the property owned by the trust has led to tenants getting massive increases in ground rent.

I don’t have much sympathy for people who entered into these sorts of property use arrangements and then, when the trust is exercising its rights, cry out to protect their “economic rent” of not paying the full cost of living in this area by attempting to stave off massive increases in ground rent.

I would have thought that a prudent property owner would have set aside some savings to offset the inevitable increase in ground rent over a 21 year period. What would a diversified portfolio have earned over that period of time with regular contributions?

The real question to ask is how many holidays and automobiles these people have taken during the inter-rent review period. I’d wager hardly any of these people have set money aside for future ground rent increases whilst they consumed the difference in cost elsewhere in their budgets.

I would argue that these sorts of arrangements are actually ideal for improving housing affordability. They are less valuable than freehold arrangements and come with more risk, but they shouldn’t be ignored as an option for improving the supply of housing.