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The critical aspects of the systemic housing problem in New Zealand are a lack of supply, a crisis of affordability and substandard houses (cold, damp and mouldy). While housing is critical to wellbeing and plays a central role in the social security system, our scope and terms of reference were necessarily limited. Nevertheless, we are compelled to make the following observations.

First and foremost, there is a critical shortage of affordable housing for low-income New Zealanders, especially for those currently on public housing waiting lists. Disabled people are also particularly disadvantaged in securing affordable housing. Given the volume of affordable housing needed, the state has a central role to play in the building of such housing. The state is the only entity that has the necessary scale and resources to make the urgent and immediately needed inroads into building a sufficient quantity of affordable houses. The state must urgently expand and accelerate its efforts to build more affordable housing on an industrial scale, to meet the known need for such housing.

Nevertheless, the role of the ‘third sector’ community housing and innovative solutions should not be overlooked. Many other countries have developed a third sector of community not-for-profit housing providers as well as local authority providers. Furthermore, these providers and the state could allow for tenure choice, such as assisted home ownership and renting options for low-income households.

Innovation could include:

  • further developing a third sector of non-profit community housing providers able to deliver secure rental and home-ownership options for low-income families
  • realistic options for Housing New Zealand to develop affordable homes for renting, shared equity and ownership
  • culturally appropriate development options for Māori and Pacific households reflecting household size and function, and including papakāinga options
  • improving public and private rental housing with laws and regulations that support healthy homes and housing security, decent standards of housing quality, affordability and accessibility
  • enabling low-income families to develop an asset base, if they so choose, through options such as secure low-interest loans, rent-to-buy schemes, shared equity and other forms of microfinancing
  • a realistic definition of housing affordability that is proportional (25–30%) to household incomes in the lower half of the household income range
  • asset tests and abatement rates that do not disincentivise home ownership or employment
  • affordable, healthy, well-insulated housing developments with universal designs that greatly improve life for many disabled people and work well for the rest of the population.

As the supply-side measures increase and affordability improves, it will be important to review the roles of MSD, Housing New Zealand and the Ministry of Housing and Urban Development, to consider whether an integrated, single-agency approach to housing might be preferable. Housing services could be more efficient if they were dealing with building, maintenance, social support and finance and facilitating home ownership together, as occurred previously. Reinstating their former role of having a clear responsibility to house people unable to afford it in the market and provide pastoral support for those who need it could prevent many of the systemic problems that have grown over the past three decades.

"Housing support should be integrated as far as possible with the social welfare system, to ensure that social and housing support is provided in a wraparound fashion to provide adequate support around children and families.”

Current housing support is expensive

Housing support is a significant component of income support provided by the welfare system.

Currently, not including New Zealand Superannuation, the largest single benefit cost in the welfare system is Accommodation Supplement. When Accommodation Supplement, Temporary Additional Support (which is used primarily to meet heightened ongoing housing costs) and the Income Related Rent Subsidy are added together, they are projected to total $2.7 billion in 2018/19 and represent 3.1% of total Crown baseline expenditure. This is despite not everyone claiming their full entitlement because take-up of Accommodation Supplement among low-income working families is less than it could be (WEAG, 2019d; 2019e).

The subsidies provided through the welfare system are demand-side supplements that continue to increase in a housing market that is overpriced and undersupplied and where these factors are worsening. These subsidies simply increase with rent inflation and, some make the case that in all probability, contribute to higher housing costs. However, these subsidies could not be removed, given the current housing market, without increasing poverty and homelessness.

A redesign of all housing support, including Accommodation Supplement, would be ideal but such a significant redesign may require significant 'grandparenting’ so current recipients are no worse off. However, a significant increase in the levels of main benefit payments towards income adequacy should reduce the need for such large expenditures on housing-related support.

At the end of this chapter, we set out, in the detailed recommendations, areas for improvement within housing support that should be pursued or considered further. Further analysis would be required on the impact of change on low-income families that we could not do in our timeframe.

An important aspect is to ensure levels of housing support reflect the principles for income support design discussed above, particularly maintaining the relative value of the payments over time, encouraging people to move into and remain in paid work and ensuring they receive their full entitlement.

To improve the impact of housing subsidies on low-income families, the Welfare Expert Advisory Group recommends:

  • extending the period before income-related rent for public housing is increased following a move into paid work
  • reducing the co-payment rate for Accommodation Supplement
  • moving towards providing the same support to renters and homeowners (by changing the entry threshold to Accommodation Supplement)
  • addressing gaps in housing support for students.

Another significant issue is the levels of cash assets a person is allowed before losing their Accommodation Supplement. These levels were set decades ago and have not been adjusted. It means any attempt to save for a home results in a loss of housing support, which makes it even harder to save for a home. The Welfare Expert Advisory Group recommends cash asset levels must be immediately increased to at least $42,700 (the cash asset level for public housing) and further increased to allow people to be able to save for a mortgage deposit on a median-priced home. The cash asset abatement test should be removed, with housing support abated solely on income.

In all, the combination of changes to income support, housing support and abatement rates should make low and low–middle income households substantially better off.

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