Opposition says plans to sell off state houses and offer more income related rent subsidies will drive up rents

By Lynn Grieveson

The Government has dismissed Opposition claims that selling off state housing while increasing the number of subsidised rents would be a gift for private landlords that drives up rents for all renters.

Labour housing spokesman Phil Twyford said the Government's plans to sell off an as yet unspecified number of state houses, while at the same time extending availability 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 everyone.

Appearing on TVNZ's "Breakfast" and at his regular post-cabinet press conference on Monday, John Key spoke about the government having a choice between building 1,000 houses at a capital cost of NZ$500 million or offering 1,000 income related rents (IRR) for 'third sector' social housing providers at a cost of NZ$12 million a year.

"You go and do the maths. It's a lot quicker for the Government to get social housing providers in there. They manage that stock better," 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."

“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," he said.

“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."

Green Party housing spokesperson 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."

Key and Housing NZ Corp Minister Bill English have yet to detail how many state houses might be sold off, or how the availability of IRRs might be extended.

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."

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."

Discounts for 'third' sector?

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."

At his post cabinet press conference on Monday, Key repeated the government's line that Housing New Zealand currently had "too much housing in areas where it's not required and not enough in others where it is," before adding: "the other big problem we have got is that there is a really big advantage to someone who is in a Housing New Zealand home currently, receiving an Income Related Rent, over someone who is not," he said.

"So that makes a materially massive difference to those households. But what we want to do is make sure more people can have that Income Related Rent. The question is 'what's the fastest way of achieving that?'"

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."

'We have the mandate'

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 (see video above), 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.

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

Former Labour leader David Cunliffe described this as "ridiculous nonsense, but par for the course with the Prime Minister."

"There were over 300 pages of policy on the Labour website from memory - certainly hundreds. A matter of only dozens on National's website," Cunliffe told reporters.

"I consider it deliberate deception by the government that they would not discuss their well-formed plans to privatise state housing."

Acting Labour leader Annette King, during question time, said: "Is the Prime Minister saying ... he never had even a nano-second to tell those he met he intended to sell off billions of dollars of state houses because he thought the Labour Party was busy talking about other things?"