Giving poorest a decent home

Lower-income New Zealanders were promised a helping hand in housing and superannuation. In the fourth part of our series on value for tax money we ask if Labour kept its pledges. CATHERINE MASTERS reports.

Labour's 1999 Pledge 5:
Restore income related rents for state housing so that low income tenants pay no more than 25 per cent of their income in rent.


The flea-ridden, overcrowded and damp state-owned Greenstone Gardens in Otahuhu became a symbol in the mid-1990s of the squalor some of the country's poorest people lived in.

The mainly Pacific Island tenants, many of them beneficiaries with young children, paid market rents of between $120 and $140 a week to live there. In 1997 the then Labour housing spokesman Mark Gosche, now the Housing Minister, said if it was not for a chronic housing shortage it should be bulldozed.

Publicity about the apartments helped gain momentum for Labour's election campaign to improve housing.

The party pledged a return to income-related rentals for state housing. Beneficiaries or low-income earners in private accommodation would pay market rents, helped by an accommodation supplement. But the formula on how this subsidy is worked out means low earners still pay substantially more than 25 per cent of their income.

Despite the change at the end of 2000 community emergency relief agencies say some people still rely on food parcels and handouts, but donations have fallen because of a public perception the policy has been a cure-all.

Others say improvements, though small, contribute to a happier, more stable and healthier New Zealand.

They believe the economic spin-offs in the long term will include a reduced health bill from diseases linked with overcrowding, such as meningitis. Parents will be able to afford better diets for their children, who in turn will be able to study better at school.

They say turnover of state houses has dropped, indicating people are more settled. This should improve school attendance figures.

And the extra money in people's pockets will be going into local communities, so local businesses will be helped.

By the end of this year taxpayers are forecast to have spent nearly $420 million subsidising the more than 52,000 households eligible for income-related rents since the policy was brought in.

Greenstone Gardens is still standing under Labour and is still drab, although some of the young families appear to have been replaced by the mentally ill. As one tenant put it, the apartments have become home for people nobody else wants as neighbours.

Another tenant, caregiver Malcolm Bunyan, says this is the first time he has had a place of his own. He has an income of $192 a week and pays $48 rent for a one-bedroom unit with a leak he says he cannot get Housing New Zealand to fix.

But he has no complaints, saying he could never afford to rent in the private market and has enough money to get by on.

The patient he looks after is vastly better off under Labour's policy.

She has a chronic health condition and lives in a rundown state house in Otara. Mr Bunyan said under the old system she had just $17 left for food and expenses after paying her rent. Now she has $155. It means she can afford to pay her $90 a month medical bill: "It's like Christmas is here for her every day."

The Herald spoke to people in agencies and the health sector along with politicians to try to gauge whether the policy has been value for money for taxpayers.

Auckland City Mission hands out more food parcels than ever - 3237 in 2000, 3328 last year.

More than 1000 of the individuals and families it saw in that time lived in private rental accommodation, but more than 700 families in state houses needed food parcels.

For many people the savings have been spent on paying debt incurred since the benefit cuts of 1991 and the introduction of market rents in 1993, both by National, and some has been eaten away by inflation.

"We're talking 15 per cent for milk," says the missioner, Diane Robertson. "Food prices rose 4.6 per cent this year and their incomes certainly didn't rise by that, so the pressure on their budget is certainly the same."

Shirley Woodrow, national president of the Federation of Family Budgeting Services, says the policy had an immediate impact on clients, though most are only $20 a week better off.

People cannot afford luxuries, but if the washing Machine breaks down they can meet part of the cost instead of relying on income-support emergency grants.

For clients in the private rental market, though, nothing has changed. Under the accommodation supplement tenants pay the first 25 per cent of their income, then the Government subsidises 70c of each remaining dollar to a cap that varies from area to area.

"So when you're managing on a very tight budget that 30c in the dollar is quite a lot to find sometimes," Ms Woodrow says.

Susan St John of Auckland University, a member of the Child Poverty Action Group, says the housing aid does not go far enough and New Zealand has strayed from home ownership as a goal of policy.

The formula for the rental subsidy means there is a high effective tax rate if extra income is earned, because the rental subsidy is reduced for the following year.

"It is impossible for families to get ahead or save a deposit for their own home," she says.

Researcher Alan Johnson says about 150,000 private rental households, possibly 400,000 people, have not benefited despite their needs being similar to state tenants.

The average weekly payment for the accommodation supplement, about $60, has not changed. This means people renting in the private sector are in a similar position to those renting state houses before income-related rents were introduced.

He says the private sector problem will worsen because the population is growing faster than the Government's state housebuilding programme and rents have been pushed up because of the property shortage.

Research from Massey University's real estate analysis unit points to population changes as the main cause of rising rents.

In Auckland the shortage is so severe that rental properties have been auctioned, and in some places the rent has gone up 20 per cent.

Mr Johnson says accommodation supplement subsidies will go up, but so will the "expense gap" - the tenant's 30 per cent share of any increase. The Government should put an emphasis on state house building and mortgage subsidies for low-income families, instead of providing rent subsidies to landlords.

But Charles Waldegrave, a Wellington social policy researcher, believes the policy will have a "phenomenal" impact.

He acknowledges private renters are still badly off, but says the Government had to start somewhere.

The average weekly savings for state house tenants in Auckland range from $60 in Grey Lynn to $40 in Papakura. In Southland, where housing costs are lower, the saving is $13.

"It's very significant," he says. "It's just not possible to say it's not helping those families.

"You're talking about 52,000 households, that's not individuals, who are among the poorest people in New Zealand who have had those sort of increases."

Public health specialist Chris Bullen says it is too early for results to be measured, but he believes there will be health benefits from people having a bit more money. People can afford to heat the house when it's cold, pay for the doctor and ensure their children have warm clothes and lunch at school.

It will also relieve some of the stress on people living on the margin with nothing to spare.

National housing spokesman Murray McCully, Housing Minister in the last Government, says Labour had a mandate to spend money on the policy.

He believes the housing policy helped the party win the election but that did not make it fair to everyone in need.

"We remain convinced any policy which delivers support on the basis of whether you can get into a state house or not is fundamentally flawed," he says.

If the Government had another $150 million a year to spend on housing support it should expand the accommodation supplement to benefit all low-income New Zealanders with their housing costs.

Housing Minister Mark Gosche says a new system has been put in place to ensure those most in need are allocated state houses, and income is one of the measures.

Around 2000 more state houses would be provided by the end of Labour's first term as Government. If it gets a second term it will add to the stock, along with continuing other programmes, such as the healthy housing project where extra rooms are added to areas high in meningococcal disease to ease overcrowding and hopefully reduce the health bill.

Long-term savings will be dramatic, he says.

But an even more important consequence will be improvements in the well-being of communities.

"You can either spend it on decent housing or spend it on enormous law enforcement, because that's where you end up going if you're not careful," he says.

Feature: The $1 billion question