www.oocities.org/ubinz/press/1999803HeraldWaldgegraveHousing.html

Dialogue, NZ Herald, 3 August 1999
 

There is something perverse about the notion that poor families should be denied affordable housing so that middle and upper-income property investors can maximise their profits from rent.

That is the fundamental argument put forward by two recent writers on this page. One was an Act New Zealand candidate, the other publishes a property investment magazine. They argue that Labour's pledge to reintroduce state house rents at 25 per cent of household income for low-income families will lower the value of private investors' rental properties.

Their arguments warrant rebutting from the points of view of both economics and social values. From an economic perspective, they unwittingly admit that the move in 1992 by Housing New Zealand to charge market rents on state houses has driven rents up overall.

From the late 1930s to 1992, the private property investment market functioned alongside the subsidised state house sector, with its income-related rents. Many private householders invested in rental property and benefited from that investment.

If returning to the position before 1992 will generate a loss of rental profit mar gin, as the writers claim, then clearly these margins must have been created by the move to market rents on state houses.

Secondly, they take a one-dimensional view of a multi-dimensional housing market. Property investors are usually much more interested in the long4erm capital gains of their investment than the short- term profits from rent.

Thirdly, the market many property investors are involved in bears little relationship to the low income housing market. Middle and upper-income householders, who invest in property to rent, tend to opt for the more secure market of those on somewhat higher incomes. This is particularly significant since Labour has said that its policy will not lead to a reduction of the accommodation supplement for those in the private sector.

Fourthly, the writers do not appear to have weighed up other significant market factors. For example, affordable rents on state houses will quickly increase the demand for housing. When two or three families move out of one overcrowded house and seek three separate houses, they increase the demand for housing.

A renewed state house building programme will generate jobs, income and investment. Previously poor households who could not afford to rent a house are much more likely to be motivated for work, education and other contributions to society.

For nearly half a century the state house sector was a fully accepted part of the housing scene. It was recognised that some households were not able to compete in the market but as citizens they had the right to be housed. The property investment market functioned perfectly adequately alongside state housing, as it does in most similar countries today.

In 1992, however, when the income-related rent policy changed to a market rent policy on state houses, poverty became further entrenched.

Our research has shown that many in the cities moved from paying 25 per cent of their income in rent to 40 per cent-plus and quite a number paying over 50 per cent. This occurred as part of Ruth Richardson's 1991 "Mother of All Budgets", when the same low-income families suffered significant benefit cuts and increased user charges.

The move by any political party, in this case Labour, to return rents on state houses to 25 percent of household income must be welcomed by any fair and reasonable New Zealander. Market rents have created utter misery for many poor families. In the New Zealand poverty measurement project, we estimate housing costs contribute about 60 per cent of the income shortfall of households in poverty.

Finally, it was argued by one of the writers that it was fairer that every house hold in need of help be given the accommodation supplement rather than providing some with state houses at income-related rents.

This argument misses the point that a stock of state houses can be allotted to those most in need. It solves the housing problem for those families immediately, in a manner that the accommodation supplement cannot. It provides an affordable house rather than an inadequate contribution to an unaffordable rent.

Affordability is only one of the issues. Accessibility is the other. The accommodation supplement has inadequately addressed the former and totally failed to address the latter.