The Government is being warned that clawing back $100 a week in subsidies for thousands of struggling households could further increase homelessness.
The risk falls disproportionately on groups overrepresented in receiving those housing subsidies, including Māori, Pasifika, older and younger people and the disabled, according to officials at the Ministry of Social Development (MSD).
The new policy, which changes how payments from boarders impact housing subsidies, will hit the pockets of tens of thousands of people when it comes into effect in March next year.
Currently, payments from a household’s first two boarders have no impact on those subsidies, a policy introduced in 1992 to ease the financial burden by encouraging greater use of empty bedrooms in state houses.
Welfare rates were being slashed at the time, while state housing tenants had to pay market rates. It was hoped that single parents in larger homes, in particular, would be incentivised to take on a boarder or two to offset their housing costs.
But this also created a double-dipping scenario based on the different treatment of payments from renters versus boarders, meaning the Government can end up subsidising the same accommodation costs twice.
The new policy means all boarders’ payments will be included in calculating people’s entitlement to housing subsidies, which the Government says is a fairer and more equitable method.
An estimated 7000 households have at least one boarder and will have their Accommodation Supplement (AS) cut, according to the just-released MSD analysis.
“The average loss per week for the AS client receiving board payments is $100 per week,” the Supplementary Analysis Report (SAP) said.
About 6200 social housing households are also expected to have their weekly rents increase by $132. This is because the payments from their boarders will lead to reductions in their Income-Related Rent Subsidy.
A separate analysis from the MSD said an estimated 18,600 people will face more pressure on their housing costs: “12,300 Accommodation Supplement recipients and 6300 Income-Related Rent Subsidy recipients currently have boarders.”
Overall, the Government will save an estimated $151 million over four years – which was already banked in Budget 2024.
But the law change to enable this wasn’t passed until Budget 2025, and it was done under urgency, meaning no select committee process that would have led to public feedback.
Stakeholder feedback was “broadly critical”, the SAP said, which included a beneficiary advocacy group, Community Law, and Pacific groups within the MSD, as well as public agencies including the Ministry for Housing and Urban Development, Kāinga Ora, Te Puni Kōkiri, and Whaikaha – the Ministry of Disabled People.
“These groups raised concerns on the financial impact for their communities, specifically on their ability to afford accommodation,” the SAP said.
“They also considered the change might result in people no longer offering accommodation to boarders, reducing the housing options available to many people, particularly young people, and potentially leading to increased levels of homelessness.”
The Government is seeking advice on how to stem increasing homelessness. A contributing factor is thought to be the massive reduction in emergency housing.
Officials said there were currently about 71,000 boarders receiving the AS, 35% of them under age 25 and 11% aged 60 or older.
“It is possible in these cases that households may reconsider the household arrangement, or the arrangement they declare to MSD, in order to minimise any reduction in government support for their household,” the SAP said.
Many disabled people live with a support person who pays board, and they have “less choice over whether they live with a support person or not”.
Social Development Minister Louise Upston, speaking in May during the third reading of the bill enabling the changes, said it was about common sense, fairness and making the welfare system more sustainable.
“This bill will only affect those who receive board payments. It will impact those people who are currently at an unfair advantage compared to others who receive another form of income, and these changes will address that inconsistency.
“Most people who receive housing subsidies will not be impacted at all.”
Green MP Ricardo Menéndez March responded by saying the Government’s and the minister’s hearts were “rotten to the core”.
“How else can you explain 14,000-plus people being left worse off as a result of a bill that will strip many low-income people from the Accommodation Supplement and the Income-Related Rent Subsidies?”
Labour’s Willie Jackson, also speaking at the third reading, feared that some beneficiaries would have their payments cut off even if they were following all the rules.
That’s because the MSD can suspend payments for eight weeks if there’s a discrepancy in information about the amount being paid for board and the amount being received. After eight weeks, the payment is automatically cancelled.
“A client who has provided correct information to MSD and complied with MSD’s requests for further information or evidence may still find their payments suspended, cancelled or their rent remaining at market rent, due to the inaction of the other person,” the SAP said.
“Without verification from the other party, MSD cannot be confident that the declared costs are the actual accommodation costs of that person.”
Other risks identified in the SAP included:
The Ministry of Housing and Urban Development (HUD) criticised the policy, as did Kāinga Ora.
“HUD believed that the IRR [Income-Related Rent] calculation ... would be unworkable in practice,” the SAP said.
“This is due to significant risk of non-compliance, risks of non-compliance jeopardising savings, higher monitoring and audit costs for Kāinga Ora and adverse outcomes from deterring people from taking on boarders.”
Derek Cheng is a senior journalist who started at the Herald in 2004. He has worked several stints in the press gallery team and is a former deputy political editor.