Review threatens big rent rises for state tenants

Rents for New Zealand's 70,000 state house tenants could roughly double after a Government review of housing subsidies. Photo / Richard Robinson

Rents for New Zealand's 70,000 state house tenants could roughly double after a Government review of housing subsidies.

The review, due to be completed by November, aims to help "third-sector" housing trusts to house more needy families by reducing or removing the huge current advantage of renting from state-owned Housing NZ, which charges tenants only 25 per cent of their income.

Prime Minister John Key has ruled out returning state tenants to full market rents as under the previous National Government in the 1990s.

But Housing Minister Phil Heatley says officials are reviewing both Housing NZ's income-related rents and the accommodation supplement paid through the welfare system for private sector renters. "We've given them a clean slate. They are looking at income-related rents and accommodation supplement," he said.

"We've made no decisions. I don't want to close the door on anything except market rents for state house tenants."

Former Inland Revenue Deputy Commissioner Robin Oliver heads an external consultants group advising on the review, with commercial lawyer Sarah Sinclair, economist John Yeabsley, sociologist Ann Dupuis and a housing manager for a mental health trust, Annette Sutherland.

The group's terms of reference say officials "are focused on how to develop a market that supports the growth of multiple third-party social housing providers and enables the construction of affordable housing".

A recent Productivity Commission report on affordable housing found that community trusts typically aimed to charge 75 per cent to 80 per cent of market rents, but were hindered by the way the accommodation supplement paid less for lower rents.

A background paper prepared for Mr Heatley in December said: "Ideally the assistance to tenants would not be differentiated by housing provider, and instead would support a 'level playing field' among providers."

It said achieving this would require "current differences in levels of assistance to [Housing NZ] and other social housing tenants to be reduced or removed", and "all social housing tenants able to pay a market rent (or a discounted rent, where a provider was charging a discounted rent)".

At present, a sole-parent beneficiary with three children in a Housing NZ house would pay only $128.80 a week in rent - a quarter of her net benefit and family tax credits.

If they rented a three-bedroom house in the private sector at the current Auckland average of $437 a week, they would get an accommodation supplement of up to $225, depending on where they lived, but net rent would still be $212 - about $83 more than in a state house.

If Housing NZ moved to a "discounted rent" similar to community trusts of say 75 per cent of market rates, that rent would leap from $128.80 to $328 in gross terms, or a net $166 a week after allowing for the accommodation supplement.

On average, Housing NZ gross rents for a three-bedroom house would roughly double from around $130-$140 a week to $260-$280, although the real increase for a sole parent would average only around $18-$23 a week after allowing for current accommodation supplement levels.

The review is considering a wide range of other possible changes, including variations in how the accommodation supplement is calculated.

Community Housing Aotearoa president Alan Johnson said the implication of a "level playing field" was that state tenants would be moved off income-related rents, but it was too early to guess the likely outcome.

STATE HOUSE RENTS

* Originally fixed at "fair rent" based on property value, rates and insurance.

* Set in the 1970s at one-sixth of household income.

* Raised to a quarter of household income by Phil Goff in 1984.

* Raised to market rates by Bolger Government in 1991.

* Cut back to a quarter of household income by Helen Clark's Government in 1999.

* Under review in 2012 to achieve "level playing field" with community trusts.