By Alex Tarrant
“This…myth about the millionaires not getting the Accommodation Supplement…they’re the ones that do get it!”
- Labour’s David Parker ripping into the Accommodation Supplement in Parliament.
“Bear in mind that people can be paying their rent out of their Working for Families, as well as out of their Accommodation Supplement. There’s nothing magic about the Accommodation Supplement as a cash input.”
- Prime Minister Bill English defends against accusations the Budget move to raise Accommodation Supplement (AS) payments last week is merely a subsidy for landlords.
“It’ll go into the pockets of landlords, but straight out of the pockets of the landlords to meet the new regulations of keeping houses warm and insulated, and smoke alarms and 101 other things.”
- Olly Newland on Radio NZ saying the AS boost should go towards improving the rental stock.
Accommodation Supplement: Three Takes
The government’s move to increase Accommodation Supplement payments in last week’s Budget drew a barrage of criticism overshadowing what seemed to be only a small wad of support for the measure.
Labour led the attack – my pick of the speeches in Parliament was David Parker ripping into it from 6:10 in the video linked above. We learnt one thing – that under a Labour-led government the AS would likely be phased out over the long-term.
But in the near-term (a cynic would say “near-term” from a politician refers to the next electoral cycle) it would stay. Because rents and house prices have got out of control due to government inaction on housing policy.
Prime Minister Bill English was chief defender of the Budget AS move, pointing out poorer families received cash payments from a range of government schemes, including Working for Families, which could be put towards rent payments. Anyone arguing the AS was a subsidy for landlords would have to argue the same for other transfers, he said.
And Olly Newland popped up on Radio NZ on Monday morning to defend the measure too, arguing any boost in rents would likely go into rental stock upkeep due to pressures placed on investor landlords by policy changes requiring better insulation and other chattels.
‘It goes to Auckland's millionaire landlords’
“This…myth about the millionaires not getting the Accommodation Supplement. They’re the ones that do get it!” David Parker launched into the climax of his speech on National’s ‘families package’.
“If you’ve got multiple houses in Auckland that you’re renting out, you are a multi-millionaire. You’re the one that gets the Accommodation Supplement,” he thundered.
“It passes through the hands of the person struggling to pay their rent. But they don’t keep it. Every cent of it goes to the landlord. Not 98 cents in the dollar, not 50 cents in the dollar, 100 cents in the dollar of the Accommodation Supplement passes through the hands of the tenant that’s paying it to the landlord.”
The subsidy was bidding up rents and holding up house prices to the detriment of first home buyers, Parker said. “It is a disgraceful illustration of abysmal housing policy for nine years by the government.”
The need for the AS to rise was “absolute proof that their poor housing policies have these distributional effects on income as well, because the rich, with all their assets, are now getting more income through the increase.” Payments were rising from $890m in 2008 to $1.5bn now.
Labour reluctantly supports the measure in the short term. “But by God we’re not going to support the funding of this in the long term because it’s wrong and there are better remedies,” Parker said.
“I used to hear the [National-led] government railing against middle-class welfare. I’m ashamed that I now live in a country that we’ve got welfare for the millionaires, because that’s what this is,” Parker said.
“This is just further evidence of the widening gap between the haves and the have nots.”
‘Not a magic cash input subsidy for rents’
Prime Minister Bill English led the line on defence of the Budget measures Monday. Appearing before media at his post-Cabinet press conference, he was asked why the government had shrugged off official advice that included concerns that a boost in payments would flow straight through to landlords.
“The issue arises with any cash supplement to a household. And we have households who get hundreds of dollars a week in cash supplements from government. And that is the same issue – by providing cash to support households, is it going to mean price rises out in the market?
“Bear in mind that people can be paying their rent out of their Working for Families, as well as out of their accommodation supplement. There’s nothing magic about the Accommodation Supplement as a cash input,” English said.
“So we’ve taken the view that there isn’t strong evidence that it would feed through to landlords. And certainly nothing like the evidence you’d require to decide to not provide support to households who are paying a very high proportion of their income in rent,” he added.
“The truth of it is that…landlords can’t just put the rent up to any number they like. There’s a market. It’s a bit tight in some places at the moment. That won’t be forever, particularly as the housing supply continues to grow pretty significantly.”
If there had been no increase in the Accommodation Supplement, and a bigger increase in Working for Families then, according to the criticism, there would exist the same risk of landlords putting the rent up, English argued.
“Just because we put up Working for Families doesn’t mean the supermarket’s going to put up the price of Weetbix, even though it knows its shoppers will have more cash.”
‘Will go into improving the rental stock’
Property investment advisor Olly Newland offered up his take on the situation to Radio NZ. Tenants should benefit from the increased payments, he said.
“This increase will possibly give the tenants who are on these type of benefits an extra chance to get a better home,” Newland said.
“It’ll go into the pockets of landlords, but straight out of the pockets of the landlords to meet the new regulations of keeping houses warm and insulated, and smoke alarms and 101 other things - slightly increasing interest rates and insurance costs and rates and so forth,” he said.
“Obviously, it will provide a benefit to the landlords, but it will be a bigger benefit to the tenants who can afford better accommodation. Some tenants are living in not so good accommodation, and with this $80…they’ll be able to afford better quality accommodation.”
Investor landlords were on wafer thin returns, Newland said. “You’re lucky if you’re making 1% or 2% return on your residential investment, which doesn’t encourage people to buy an investment property or to maintain it – and ‘maintaining’ being the operative word.”
If rents were to be raised, this should be to provide better services for the tenants. “Because many of the benefits tenants have been getting have been below market, and this may bring the rents up to market,” Newland said.
He added that landlord investors liked tenants who were on some sort of benefit supplement because that meant rent was effectively guaranteed. “But [the supplements have] been lagging behind for some time and so the tenants will be getting a far better chance and a far better choice.”
Newland said he would be advising people “to meet the market, and to provide better accommodation and use any extra money they get to provide better and more comfortable accommodation for tenants, not just to pocket it.
“That’s not the point of it, is it? I think every decent investor landlord wants nothing more than to have happy tenants and quality houses. I’m not interested in the people who don’t want to do that,” he said.
82 Comments
The AS should be scrapped to punish the slumlord parasites. The dole, DPB and super should also be scrapped as this just funds the foodlord parasites (e.g. New World and Countdown).
Lets punish the rich by cutting all benfits to the poor. Make NZ a better place people!
Pretty much. The idea that the parasites will use the AS for upgrades on their property is laughable. I've lived in seven different rentals in three different cities in the last five years, each one having a landlord receiving some form of taxpayer supplement from someone in the flat. Only one property out of the seven would be considered habitable.
We have a shortage of rental homes across most towns and cities in New Zealand. We have a classic "caveat emptor" situation where the landlords can raise rents as and when they like without passing any real benefit such as quality, heating, insulation etc. to the tenants.
In the current situation, greedy landlords can and will raise rents to pocket 100% of the accommodation supplement.
People don't get it, most Nat voters are wealthy property investors and the government has been using taxpayers' dollars to retain those votes.
Many towns and cities actually have plenty of houses available for rent on Trade Me but the problem is they are not affordable. If you check how many rentals are 'available now", today it is about 53% (2100 houses) of listings in Auckland, 53% (249 houses) in Hamilton and 41% (130 houses) in Tauranga. If all these properties are available now then they must be empty and just too damned expensive.
The Housing supplement is a a lot worse than a hand out to the landlords, it is a very powerful poverty trap.
Look at the Working for Families website calculator to see how the system works and the range of assistance available.
http://www.workingforfamilies.govt.nz/calculator/filter.jspa
What becomes immediately obvious is that if you are able to accumulate some capital that could be put towards the deposit on a home you start losing the supplement, and once your savings start getting any where near a deposit you loose the housing supplement completely. In other words, it is a very powerful poverty trap that transfers wealth to the landlords while preventing tenants from ever being able to save for a home.
This is absolutely shocking.
From what I could see it would be relatively easy for a family to receive over $20,000/year in assistance, so the tax payer is also pretty well permanently locked into funding this subsidy to the landlords for ever.
Remember once upon a time, the child benefit could be capitalised and used as a contribution to a home deposit. The present arrangement has almost the exact opposite effect, if not intent. If this sort annual cash flow were to be capitalised then we could easily provide these families with over $100,000 deposit toward a home and the tax payer would be better off. Everybody except the landlords would be better off.
The net affect of all this is that while the recipients are being trapped in a situation where they will never be able to save a deposit and enriching the landlords; the increasing subsidies enable rents to rise and thereby raise property values, putting home ownership even further beyond the reach of the FHB. We are being governed by either complete idiots or very evil people; more likely a mixture of the two with the latter easily influencing the former. One really has to question whether this situation would change if Labour were in power as their philosophy seems to be to just throw millions of dollars into the subsidies and feed the monster, thereby (inadvertently?) making matters worse. They appear to be in the camp of the fools.
“It’ll go into the pockets of landlords, but straight out of the pockets of the landlords to meet the new regulations of keeping houses warm and insulated, and smoke alarms and 101 other things.”
So the taxpayer will be subsiding private landlords via the AS to upgrade rental properties that said landlords should be doing with their own money?
What he was trying to say is that landlords are not a business and are instead social welfare bludgers. You'd think installing these obligations would be a tax write off, and if they are running their property as a business they should have a positive income to offset these costs.
any business owner invests to improve, secure, modify.
I'm sure shop owners would love to be subsidized to put in security systems to protect workers,
why don't we subsidize factories and office buildings to put in sprinkler systems.
the reason they don't is votes, and the reason they do subsidize landlords is both votes and many MPs are investors.
it was not that long ago the PM was caught claiming subsidizes for a house he was not entitled too
Why can landlords (yes specifically landlords) get subsidies for insulation and heat pumps for existing properties when people trying to build a new home can't. This is completely unfair we are trying to build a new home and need all the help we can get. You would think that by providing new housing stock we would be entitled to some help but no, just landlords and houses built before 2000.
Help for landlords - https://www.energywise.govt.nz/funding-and-support/funding-for-insulati…
Would someone please explain what is fair about this ?
This is so wrong, it should be illegal. - I suppose it all boils down to "man's inhumanity to man" and an "everyone for themselves" attitude. Don't misunderstand me, I am not a socialist but there are certain lines that surely should not be crossed otherwise there will be some sort of revolt among the "unwashed" then we are all in trouble.
If I could find any party that straddles the divide in any sensible way I would certainly support them but they don't seem to exist, I suppose the cost/analysis of gaining votes by sitting in the middle is not worth it to the analysts, except they are wrong, look at Trump.
“If you’ve got multiple houses in Auckland that you’re renting out, you are a multi-millionaire"
This statement from Parker portraying landlords as super wealthy exploiters is dishonest because he will be well aware of recent data showing the high concentration of Mum & Dad investors with low numbers of rental properties, many heavily geared.
With ROI for rental properties dismal, prospects of capital gain receding and the AS changes increasing tenants buying power, Parkers fictitious horde of multi millionaires is becoming even more fanciful.
The mum & dad investors sound like a group that we should be concerned about. If they have very little capital but have a lot of debt across multiple properties then they'd be the ones needing a bail out in the event of a financial disaster.
Are they capable investors if they are intentionally choosing a low ROI?
Logical behaviour to accept a low ROI where tax free capital gains are in the offing. Many will have significant equity in their own house or perhaps other rentals off which they have leveraged, so will have the capacity to ride out a storm. Middle NZ is a resilient group.
A bailout for greedy stupidity? Really?
I'm ticked off plenty about the various moral hazard bailouts of a decade ago. I very much hope that this doesn't happen again. One should never reward greed.
To restate in different words, I am very much not a fan of privatizing gains and socializing losses. If one puts chips down and gambles in the casino, then one should man up and accept the losses when one rolls snake eyes.
I can't figure out why it is the government thinks mum and dad investors in property should need protection while no such protection was offered mums and dads who got into the sharemarket in the 1980s. I wonder if this was a overweight share market that was threatening to do a Mr Creosote, there'd be welfare getting handed out all over the place to cover it.
"Just because we put up Working for Families doesn’t mean the supermarket’s going to put up the price of Weetbix, even though it knows its shoppers will have more cash."
What of the government increased working for families but specified the money could only be used to buy weetbix. I reckon weetbix prices would go up then...
I'm not sure you are seeing my parallel to the accommodation supplement. If the government gives a whole heap of money to people but tells them they can only use it to pay for accommodation, the normal forces of supply and demand are altered. The level of demand and the price is essentially being set by the government, and they just decided to increase the price.
so how does your analogy fit houses, the difference is vast, you make cereals mostly by machine now so the increase in production can be done at a fraction of the cost as the line can be sped up or slowed down to suit.
and even if you did need to increase substantially its not a big lead time to get more machines.
NZ house building require a lot of labour and we have not set up to mass produce in NZ
The whole issue of having to supplement income at all indicates there is something very wrong with society generally, not so much in principle but in extent. Basically anyone on a median income can no longer afford to house themselves and raise a family, you could understand say the bottom 10% needing some sort of assistance but half the population?
The claims that our levels of inequality are OK are deeply flawed for the simple fact that capital gains are not treated as income. Once they are included and considering the large numbers on very modest incomes we can see the yawning chasm that is splitting our formerly egalitarian society apart.
The challenge is that the only parties that actually appear to be addressing some of the causative factors are fringe parties. The only alternative party that has any potential for succeeding National is Labour, and their policies are demonstrably at least as bad as the current govt policies in regards to immigration, home supply, etc.
What change do you recommend voting for?
Reading this article and comments shows a way how to reduce rents. If giving higher housing subsidies and higher working for families payments go straight to the landlord through increased rent the logic must be that scrapping these payments would reduce rent and house prices. Come on Labour, please make it your policy,
you will get all these whiners on this site to vote for you then.
Here is a recent video of Phil Twyford taking about Labour's housing plan.
correct rents are what the market can afford, reduce the amount people can afford and a landlord has three choices
dip into his own pocket to make up the difference
leave it empty or sell it
subsidies distort pricing and market forces that is why we have dumping duty to protect manufacturing from countries that subsidize their manufacturers
https://www.wto.org/english/tratop_e/scm_e/scm_e.htm
LMGTFY - ha ha, I suppose anyone without a gender can apply for a benefit and woe betide you if your children wear any sort of male/female defining uniform, no benefits for you in fact you will be censored and never allowed to speak again on any social platform and the msm will call for your execution.
With these alternative facts, looks like Billy Boy is still on planet Key.
"as the housing supply continues to grow pretty significantly"
I respectfully suggest the prime minister to acquaint himself with the building consent data which shows consents leveĺing off at a rate that is woefully inadequate to keep pace with population growth, let alone to shrink the shortage, which apart from emigration, is the only way to sustainability reduce housing costs.
The voters will see through all this garbage. Was there no AS under labour. Ofcourse there was. I recall under the altenative party, when they were in Govt. they were signing up private landlords to sign off their investment houses to HNZ so they could lease it out to tenants in need. It all went back to the investors after their investments were smashed up. It must be elections again.
indeed and there are plenty of these smashed houses on the market now !! some of the damage is more than the entire 5 year rent HNZ paid for ... I wonder if Labour will remove the AS all together as long as it is such a disaster and bad for tenants !!
will be good if they put that up as policy ( where their mouth is) !!
Landlord subsidy from Accommodation Supplement?
There are nearly 500000 private rental properties. Only 200,000 (life half) get the AS. The other half of the tenants get no help at all from the Government. If you divide the total AS by the number of people getting it the numbers are simple. Compare that with the subsidies that HNZ tenants get. Regardless of the beneficiaries or low waged workers needs those tenants in private provided housing are getting a bum deal. It is not fair for them. Even with the increases they will still be getting way less than their friends on the other side of the street. Our society will never be fair but why should the Government take sides giving some people plenty and making the bulk of the children go hungry and cold.
>Landlord subsidy from Accommodation Supplement? There are nearly 500000 private rental properties. Only 200,000 (life half) get the AS. The other half of the tenants get no help at all from the Government.
A rising tide lifts all boats.
Just like women entering the workforce in large numbers raised the price of all houses.
Not when the boat in question has been said to be 'unsinkable'. We all know what happens when we get a bit too cocksure about something - someone loses the binoculars from the lookout and next thing you know there's an iceberg dead ahead but the rudders too small - nek minnit we'll have Darklords and pollies from first class jumping into the life boats and well who cares about the rest...
Chris - M good big picture overview. I'd agree with the unintended consequences of the AS that have contributed to the mess that is the NZ housing market, particularly Auckland. How would the unwind happen with the least damage to the vulnerable parties? Whose housing and taxation policies make the most sense and of those, which parties would have the mandate to implement them?
That logic does not work.
Most capitalists will argue that wages, rents and house prices would ideally be determined by the market. Companies need to pay enough to attract people to come and work for them. House and rent prices affect this.
The problem is the government is distorting this through taking taxes and giving money to people for whom the wages aren't enough to keep them in the area, with this money passed on to landlords. This means companies don't need to pay as much and landlords can afford to charge more.
John Key called Working For Families "communism by stealth" Source, saying this is "lunacy and National would "re-engineer" the system in government".
Of course, we know that once elected all thoughts of actually doing stuff seemed to evaporate, and the priority seemed to become holding on to power for as long as possible. In much the same way, National decided against raising the Accommodation Supplement in the past because they knew it would push everyone's rent up...but now they've decided basic economics no longer applies in the run up to an election.
employers in NZ are subsidized by the NZ government, you have low pay topped up by WFF and AS, as well as Flexi Wage.
also in the old days many companies paid for the training of staff at TECH or university, now its student loans
https://www.workandincome.govt.nz/employers/employ-staff/flexi-wage.html
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