The new government is changing lots of things. Not everyone is happy about the changes and it is hard to keep your seat when we hit bumps at speed. The key to not being hurt is anticipating what is ahead. To do that one needs to listen to the correct information. In our free democracy people opposed to change will publish their side of the story to convince others. Not all that is published is correct or will come to fruition but that does not mean you should put your head in the sand and hope for the best. I have gathered up a selection of recent media articles and thrown them on the pages that follow.
Huge changes to building regulations and urban planning are on the table. Some ideas will stick and others will sink below the waves. Tiny homes, granny flats, multi story chicken coops, and save the productive urban fringe land are swirling around. It is rare for old legislation to be completely forgotten. Usually more complex laws are applied like sticking paper over the half forgotten laws of the past that have a habit of being resurrected to hit landlords in the pockets when pushed into a corner in court. The old Housing Improvement Regulations of 1947 should not be forgotten. The RTA specifies such laws need to be complied with despite their age. If you are going to push the limits it is advisable to understand what the old laws say in order to convince others you know what you are doing.
“People staying in emergency housing have responsibilities they must agree to and meet. If they stay longer than seven nights, they’ll need to complete agreed activities to help meet those responsibilities.
“This includes paying their emergency housing contribution, and activities which will help them get a home. This could include things like meeting with a housing broker, attending a Ready to Rent course, engaging with support services or looking for a private rental.
“At each re-grant appointment, their case manager will check they’ve completed the activities they agreed to and talk with them about any support which may be available. This is an important part of helping to set people up for housing success.
“If people don’t meet their obligations without a good reason, they’ll receive a warning. After two warnings, if they don’t meet their obligations again, they won’t be able to get an Emergency Housing Grant for 13 weeks.
Back in April the Waikato Times revealed the cost of placing people in emergency accommodation in Hamilton alone had hit more than a quarter-of-a-billion dollars.
The Ministry of Social Development (MSD) then confirmed to RNZ that from 26 August it would make changes for “strengthening eligibility settings and the introduction of new obligations”.
People living in transitional housing pay rent of up to 25 per cent of their income, in line with income-related rents for public housing and Emergency Housing Special Needs Grants. The rest of the costs are paid by Te Tūāpapa Kura Kāinga – Ministry of Housing and Urban Development.
New Zealand’s accommodation supplement scheme is facing scrutiny, with Social Development Minister Louise Upston recently saying “there is merit in considering whether the current settings are fair and sustainable long-term”.
The means-tested accommodation supplement is a weekly payment helping households with rent, board, or mortgage costs. Following a NZ Herald Official Information Act request, the government revealed in the year to January 31 2024, it paid out NZ$2.34 billion to 364,000 renters and mortgage holders.
Yet despite rising rents and an increase in accommodation supplement recipients, government spending on the supplement actually decreased by $37 million last year. In fact, the scheme rarely exceeds its annual budget.
And my own research shows it’s become an important part of many New Zealanders’ household budgets. Government spending on the supplement directly affects people’s spending on food.
So before the government makes any significant changes, it is worth understanding how the accommodation supplement works now – and how the government could make it fairer.
How the accommodation supplement works
The accommodation supplement can be traced back to New Zealand’s welfare reforms in the early 1970s. In 1975, the Labour government of the day introduced the “additional benefit” – a supplementary allowance for housing costs and special expenses. This evolved into the “accommodation benefit” in 1981, which later became the accommodation supplement in 1993.
The accommodation supplement is calculated with a negative income tax formula. So for eligible taxpayers earning below a specific income threshold, the supplement is a cash payment deposited directly into their bank account, allowing people to spend it as they see fit.
The payment can increase or decrease independently of rent and mortgage costs. If a recipient’s income, tax credits, other sources of income, or personal savings increase, supplement payments decrease – and vice versa. Annual revisions of the main benefit can also lower supplement payments. Simply put, the supplement functions as an income maintenance scheme.
Accommodation supplement eligibility is based on income and wealth levels of households, not rents or housing choices.
My own recent research on the accommodation supplement has shown supplements do not distort the rental market by pushing up prices.
Current policy settings
Maximum payment settings for the accommodation supplement have been revised only twice since being set 1993. That is, clients’ payments can not exceed the maximum payment for years on end and essentially remain capped for around 13 years.
Current settings divide New Zealand into four geographical areas for rental payments, ranging from the most expensive (urban centres such as Auckland, for example) to the least expensive (rural communities). Even if the policy was revised to adjust payment settings annually to fairly reflect rent changes, compensation would not take into account local rent variations.
Capped maximum payments mean recipients depend on their income and not the supplement to cushion rent rises, keeping government spending on the supplement to around 0.5% of the gross domestic product.
Research from the United Kingdom found reducing housing allowances does not lower rents, but may cause overcrowding. Whereas maintaining the supply of accommodation allowances in the United States helps low-income households stay in their homes despite rent increases.
The flaws in the system
If the government wanted to make accommodation supplement work better to help the 364,000 renters and mortgage holders who rely on it today, there are three key issues it needs to address.
- The supplement does not provide relief proportionate to market rents and housing affordability. Rents have increased, but the accommodation supplement has not.
- Means and asset testing disqualifies couples from the supplement if they have cash assets exceeding $16,200 (for singles, the limit is $8,100). This is 1.75% of today’s median house price, restricting a couple’s ability to save for a mortgage deposit while receiving the supplement. This limit was around 17% of the median house price when it was last adjusted in 1988.
- Finally, the supplement has a mixed impact on recipients. It allows homeowners accessing the supplement to build housing equity, while renters can’t accumulate enough for a home deposit, widening wealth disparities. The supplement also benefits banks as they can use supplement eligibility to assess mortgage applicants.
Widely recognised as a measure to address rising rental costs, the accommodation supplement needs to be more responsive to changes in rental expenses.
Rather than scrapping the supplement, or reducing the number of people who receive it, changes can be made to ensure the policy is more effective in helping New Zealanders with housing during the current cost-of-living crisis.
