By Alex Tarrant
The government is reviewing how it targets state house rental subsidies and the Accommodation Supplement as it faces a blow-out in costs due to rising rents, particularly in Auckland.
Meanwhile, the government is looking at policy changes to reduce land prices and the sizes of sections. That includes extending city limits, and making it easier and cheaper to subdivide sections inside city limits.
Housing Minister Phil Heatley told TV3's The Nation programme on the weekend that Ministers would have a "good feel" of where they wanted to head by the end of the year.
See Alex Tarrant's piece on Friday, Wholesale changes to how government approaches housing affordability as it drops helping demand and focusses on supply side.
The Accommodation Supplement cost the government NZ$1.2 billion in the 2011 financial year. While Treasury forecasts this cost will rise only slightly to NZ$1.3 billion by 2016, the government-appointed Housing Shareholders Advisory Group warned in 2010 that the cost could hit as high as NZ$2.2 billion by 2016.
Even the Group's 'low-case' scenario forecast Accommodation Supplement Costs of NZ$1.7 billion in 2016 - still well above the offiical projections. See more on its research, and on the Supplement, here.
Heatley said costs faced by the government were a central reason for reviewing how the Supplement was targeted. The focus follows Green Party co-leader Meteria Turei saying on interest.co.nz in December last year that the Supplement was a "subsidy for landlords." Labour Party Housing spokeswoman Annette King echoed Turei's comments two weeks ago.
"That accommodation supplement costs about NZ$1.2 billion dollars a year, and state housing rent subsidies cost about NZ$600 million, so you you're close to the NZ$2 billion mark, and that is of a serious concern to us," Heatley said.
"We're a bit like the Labour Party actually who came out recently and asked the question, is it a good spend for that NZ$1.8 billion?"
"We think it probably can be targeted better. For example, when you’ve got someone in a state house getting a really cheap rent - 80 bucks a week - and then they have boarders who get the accommodation supplement, you know that household could be getting that state house almost for free, and we've got to be careful," he said.
Asked whether the system was being rorted, Heatley replied:
"Look in the welfare system you get these things from time to time. If it's the rules then we've got to change the rules. Clearly if someone's being dishonest we'll catch them out."
Ministers would have a "good feel" of where they were going to head with the changes by the back end of the year.
"It's a big piece of work for Paula Bennett - because the Accommodation Supplement's under her purview - and of course income related rents in state housing is under mine, and the Minister of Finance is also taking an interest," Heatley said.
The government would not return to market rents for state housing, and had made that "very, very clear."
"We see a place for state housing, but what we're saying is, in terms of income related rents, accommodation supplement, the relationship between them, what levels they are, who gets them, we're like the Labour Party - we're questioning that," he said.
Meanwhile, if there was one fundamental issue driving unaffordable housing in New Zealand, it was the cost of land, Heatley said.
"The cost of land, the cost of sections is so high that when a builder comes along and buys a bare section and has to build a house on it, because he's paying so much for the land, he has to build a flash big house to make any money," he said.
"So if you get land prices down at a reasonable level you can start building less expensive houses - houses that don’t necessarily have two or three bathrooms. So get the land price under control, and land size under control, and I think you're a long way there."
While that approach was not the silver bullet, "I'd say it would be top of the list," Heatley said.
There were two ways this could be done: releasing more land for housing outside current city limits, and allowing more subdivision inside those limits. The Auckland Council was on board with its policy for 60-70% of new house builds to take place inside current city limits over the next 25 years, allowing for 30-40% outside.
"If you’ve got an elderly couple in Auckland, and there's thousands in this situation, they're in a quarter acre or a half acre section. They'd love to cut it in half, build a new house for them on one half and sell the other bit off, and make three or four hundred thousand dollars for their retirement," Heatley said.
"They don’t do it because it costs them NZ$40,000, [takes] two years and they may not even be consented. That’s crazy," he said.
"What we're doing is we're answering the problem head on, and the problem is we're not building enough houses, and we're not building enough houses that are affordable. So the release of land, making sure that Council processes are much more streamlined [will help]."
Builders who had downed tools during the building glut through the recession were just now starting to pick those tools up again.
"We just want to make sure they’ve got the land to build on, and the consenting processes to work with," Heatley said.