National rubbishes claims bigger rent subsidies would just pump up rents

Finance Minister Bill English has rubbished Opposition claims that an expansion of Income Related Rents to community housing providers would simply pump up rents by private landlords, saying that line of attack could rebound on cross-party support for rent subsidies worth almost NZ$2 billion a year.

Labour Housing Spokesman Phil Twyford said the Government's plans to sell off thousands of state houses and extend the availability and number of Income Related Rents (IRRs), would make the housing crisis worse and the winners would be private landlords. The Green Party described the plan as "economically reckless" and liable to drive up both rents and house prices for all.

“John Key’s plan is a win for landlords. Rent subsidies are a continuous transfer of wealth to private landlords, which will drive up rents for all renters," Twyford said in a statement.

“Vulnerable families will have to compete with other renters and first home buyers, making an already difficult housing market even harder to get into. And subsidies have only a short term effect, whereas a house is an asset that can support vulnerable families for decades," he said.

Twyford said building more state and social housing – although initially more of an outlay than a rent subsidy – was "a one-off cost for an asset that will help struggling Kiwi families for years to come."

Green Party Housing Spokesman Kevin Hague said NZ$1.2 billion was paid out in accommodation supplements in the year to June 2014, "a policy that is already credited with driving up rents", and taking state houses out of the market would result in rent inflation.

“The provision of state houses by the Government delivers a supply of affordable accommodation. A good supply of rentals at a reasonable rate helps contain rents for everyone, not just those in the state house," he said. “That function no longer applies when our stock of state houses are sold," he said in a statement.

English, who is also Housing NZ Corp Minister, has yet to detail how many state houses might be sold off, or how much the availability and number of IRRs might be extended. Social Housing Minister Paula Bennett last week foreshadowed announcements on increasing the number of IRRs.

English rubbishes claims, blames council planners again

On his way into parliament on Tuesday, English told reporters he expected to make more detailed announcements in the next two to three weeks and said he was surprised the opposition was arguing that extending the IRR scheme would increase rent inflation.

"If you went along with the Labour party argument you'd be abolishing all assistance for accommodation and we are certainly not doing that. I'm surprised. Many families are absolutely reliant on the Income Related Rents and on the accommodation supplement. In fact we pay the accommodation supplement for 40% of all private rentals in New Zealand and we are certainly not going to be doing away with that," English said.

"The big problem for the total number of houses available for low income families has been our planning regulation which has made it hard to build lower-value housing, particularly in Auckland but also in other parts of the country. And we are addressing that through working with the councils to get more lower value housing built. And we need that, because if we are going to have more Income Related Rents then people need to be able to find houses were they can live so that they can use the subsidy."

Recycling the money?

One point of contention in the debate over social housing reforms is whether all the money raised in state house sales will be recycled into building new homes, or be compensated by with increased Income Related Rent subsidies to expand social housing.

Asked if all the proceeds from state houses sales would be recycled into social housing, English said: "Certainly for the foreseeable future as much as we can. In the longer run if there's other people providing houses then the government wouldn't be giving them money for social houses."

English said the government had "looked at whether we would sell houses at a reasonable price, maybe with a bit of a discount to community providers, to get them up and running, because a lot of them don't have a lot of resources but exactly how that will work is yet to be seen."

20,000 to be sold?

Speaking to reporters on Tuesday, Key said he expected the number of Housing New Zealand properties sold off would be "less than the numbers that have been bandied around, but let's wait and see."

Bill English and Nick Smith have previously talked about selling up to 20%, or 13,600 of Housing NZ's 68,000 houses, which are worth NZ$18.6 billion in total. Some media have reported up to 22,000 homes could be sold.

Key would not answer directly how the proceeds of the sales might be allocated, and how much of it would be used to provide more IRR subsidies.

"You are talking about an operational item versus a capital extraction, whereas the better question to ask is 'will it be used to develop new social housing?' and the answer to that is 'maybe'," he said.

Balance sheet vs income related subsidy

"We are working our way through the policy and what we intend to do, and you will see all that laid out for you, but what I am saying is, one is an operational item where you make that payment of the income related rent every week and ultimately every year, and the other is the capital investment we have in the Housing New Zealand balance sheet and they are slightly different issues, but in principle there is a legitimate question to ask which is: 'if money comes out of the Housing New Zealand balance sheet what happens to it?'. Does it get reinvested into other housing initiatives and the answer is, 'we will give you that answer very soon'."

"What you will see is a much larger proportion of those houses being offered by the social housing providers."

Key dismissed opposition accusations that, in selling off large numbers of state houses, the government would be breaking its promise of " no more asset sales" and should have made the proposals a plank of their election campaign.

During question time in parliament on Tuesday, Key said the Government's intentions had been "foreshadowed for quite some time" and reiterated his claim that the focus on "Dirty Politics" and Kim Dotcom had left no room for National to discuss policy. Here is the text of the exchange in Parliament.

"The Labour Party was fixated with talking about everything other than policy and we know where that took them."