About 3000 long-term state house tenants will be moved out into the private housing market under a surprise Budget move to put all existing tenants on fixed-term contracts.
The decision reverses a promise by former Housing Minister Phil Heatley that only new tenants would move on to fixed-term contracts from July 2011.
New minister Nick Smith, who replaced Mr Heatley in January, said the fixed-term system of reviewable tenancies would also be extended progressively to "all social housing tenants".
A spokeswoman said this would include tenants in housing owned by community groups "wherever the Government is supporting them through income-related rents".
As foreshadowed on Tuesday, the Budget extends subsidies for income-related rents to "approved community housing providers" as well as Housing NZ.
However, the "capped fund" allocated for this indicates that only a small proportion of community housing will be eligible. The allocations are $2.9 million in the year starting on July 1, rising in the three subsequent years to $6 million, $8.6 million and $9.1 million.
In contrast, the income-related rental subsidy for Housing NZ in the coming year is $662.2 million.
Housing NZ receives a subsidy comprising the difference between market rents and the rent that it actually charges most tenants, which is fixed at 25 per cent of their incomes. On average the subsidy amounts to $11,200 for each of its 59,000 tenants on income-related rents.
Using the same average, even the $9.1 million allocated for community providers by 2016-17 would subsidise only 812 of the 5000 homes owned by community groups.
Alternatively, the Government may require community groups to charge tenants a higher share of their income, which would reduce the subsidy per house and spread it across a larger number of houses.
Dr Smith's spokeswoman said details on how the money would be allocated had yet to be worked out.
"Officials are looking at how to do it," she said. About 10,200 new Housing NZ tenants who have moved in since July 2011 have already been given three-year tenancies.
The new policy means that 53,200 long-term tenants, who were already in state houses at that date, will be moved on to three-year tenancies gradually from next year. (A further 3978 state houses are vacant and 1500 are let to women's refuges and other agencies, which will not be affected.)
Dr Smith's spokeswoman said 4392 state house tenants were already paying market rents because their incomes were too high to qualify for income-related rents. Dr Smith said about 1000 would move into private housing in 2015-16 and 2000 in the following year.
"The review of tenancies will be undertaken with common sense," he said. "We understand the importance of certainty for tenants, particularly those with serious and long-term needs.
"Reviewable tenancies form part of the Government's broader social housing reforms that are aimed at supporting more people with serious housing need and using the Government's $15 billion of state houses more effectively to enable more New Zealanders to gain housing independence."
He said the policy would actually increase the subsidy required for Housing NZ by $11.4 million in 2015-16 and $35.4 million a year beyond that, because the new tenants would be on lower incomes so they would qualify for income-related rents.
Community Housing Aotearoa co-chairwoman Lisa Woolley said her own agency, Vision West Trust in West Auckland, had a policy of "long-term tenancies". "It's all about making sure the family is stable, connected to their community, that their children are going to the same schools."
• All social housing tenancies will be reviewed every 3 years.
• Selected community providers will get income-related rent subsidies.
• Ministry of Social Development will take over assessing housing entitlements.