The rent is too darned high: Auckland edition

By Eric Crampton 21/03/2013

Matt Yglesias, author of “The Rent is Too Damned High“, points to work damning America’s blue states. The map shows that it takes far more hours of work at the state minimum wage to afford a two bedroom apartment in California, Maryland, DC, New Jersey, New York and the like as compared to North Dakota, Montana, and Oklahoma. While the minimum wage is higher in the blue states, land-use restrictions keep housing pretty expensive.

Now there are some potential problems in the measure. They set an affordability line at 30% of income assuming a single earner household, but they don’t seem to have accounted for the raft of other benefits that those low-income workers receive, most notably via EITC. So when they say that it would take a wage of $27.15 per hour to be able to afford a two-bedroom apartment in DC, that’s just the number you get when you take the HUD Fair Market Rent measure, divide it by 0.3 to get the monthly wage necessary to afford that rent, then turn that into an hourly wage rate. Add in a second earner and the household wage of $27/hour is much easier to achieve. And EITC tops up wages at the lower end of the distribution, especially for those with kids.

But it’s nevertheless fun to see where New Zealand’s main cities might rank in this kind of comparison. There are 380 2-bedroom apartments for rent in the whole Auckland region on TradeMe. Sorted by rent, the 190th apartment is going to be about the median rent. $520 per week. You’d need to earn $1733 per week to “afford it”, or $43 per hour. There are 1137 2-bedroom properties of any kind (apartments, houses, townhouses…); the 568th listing is $400 per week. You’d need to earn $1333 per week to “afford it”, or $33 per hour. [Updated to get the proper median property and to provide a stable link]

Maybe the median price isn’t a good indicator. Let’s take the median overall price as the maximum in our search and get the 25th percentile. The median 2-bedroom property in the “under $400” set is $350: $29 per hour. Maybe that’s too nice a place too. The median price on the first page of the low-to-high price-sorted search is $260: $21.67 per hour. On a 40-hour week at minimum wage, you’d be paying half your income in rent to afford it.

If the HUD FMR approximates the median market price for a 2-bedroom place, then Auckland ranks above the most expensive US state. If it approximates the market price for property at the 25th percentile, then Auckland ranks below Hawaii, but above everybody else. If it approximates the market price for the median rental property on the first page of a rental search sorted low-to-high, then Auckland is 9th: cheaper than Connecticut, but more expensive than Alaska.

The same process for Christchurch gives a median price of $365 per week and a 25th percentile price of $300 per week.

If you run the country as a whole, you get 3388 listings for 2-bedroom properties. The median, number 1694, is $340 per week. 25th percentile: $260 per week.

I’m not arguing we should set policy so that a single earner on the minimum wage can get a two-bedroom apartment on 30% of his salary. But that we fare poorly on a “number of minimum-wage hours necessary to rent a two-bedroom apartment” measure against the US, when the minimum wage here is much higher as a fraction of median the median wage than it is in the States, does suggest something about NZ land use policy.