Putting state housing subsidies in context

An article in the Herald last week claimed that “the cost to taxpayers of housing subsidies alone has reached almost $2 billion a year.”

Given that the surrounding lines are about state tenants, it sounds like the author’s talking about the state housing system. If so, it’s simply not true.  Actually, just $662 million was allocated to subsidising income related rents for eligible state tenants in the 2013 Budget. (If you think that’s a lot, check out some of the other numbers in the Budget).

Perhaps Collins refers in fact to the accommodation supplement, which was allotted almost $2 billion in that Budget. The government pays the accommodation supplement to private renters to help them pay their rent to landlords, as wages are simply not high enough for many people to afford market rent. This is a massive expenditure, but it is something quite separate from the state housing system.

Housing people adequately saves the taxpayer money.  A ten-year study of Housing New Zealand tenants and applicants found that the longer people live in state housing, the less likely they are to access the health system. A study carried out in the emergency room at Wellington Hospital found that half of the children admitted lived in cold homes. Half of those admissions were considered preventable, and in a third of the cases improving housing conditions would have reduced the risk of admission to hospital. Poor housing is expensive: the average cost of a child’s admission to hospital is $2,645. The alternative to state housing – private rental housing – is more likely to be cold and damp.(For more information on these studies, start with paragraphs 36 and 37 in the EAG’s working paper no. 18).

The fairness of subsidising state tenants should be considered also alongside ways in which government policies and our tax system support home-owners.  Home-owners can access a deposit subsidy if it’s a first home (though the state contribution to Kiwisaver also benefits non-homeowners, when they retire).  If you wish to buy a home, the state will provide lenders mortgage insurance, so you don’t need such a big deposit. The state will gift you a deposit of up to $20,000 if the house you want is a state house for sale. Once you’re an owner, you won’t be taxed on imputed rents, unlike in some countries. And if you wish to sell up and move on, you don’t have to pay tax on the capital gain.

Even if you have not made use of any of these privileges, you may have benefitted from government support of homeowners in the past. Perhaps your mortgage is backed by your parents, or it wasn’t so hard to get because you were debt-free, because your family supported you through university. Your parents or grandparents may well have had wealth to pass on because they took advantage of the state’s offer to provide them with a cheap mortgage, or they exercised the right to capitalise on the family benefit.

All people have a right to housing (ask the Universal Declaration of Human Rights). New Zealand has little social housing – at 5% of the housing stock, it’s far lower than many other countries in the OECD.  It’s not enough for our needs. People in private rental who can’t afford rent is the reason why the cost to government of the Accommodation Supplement are soaring. It’s also one of the reasons why 34,000 people suffer from “severe housing deprivation”, often crowding in with family and friends.

In conclusion, Herald, subsidies to state tenants should be put in context with ways the state has supported or supports home-owners and landlords. And costs for housing state tenants should be thought about with reference to the cost of inadequate housing to health. The state housing system is not the problem, but part of the solution.

State houses, Harp of Erin, Oranga, Auckland, 1947. Public domain.


  1. Excellent article and analysis. Keep up the good work.

  2. jedenpol says:

    There are legitimate complaints to be had about government expenditure. Why must we always ride the same merry-go-round of cherry-picked statistics and popular scapegoats? I guess some commentators can’t help themselves. Shifting the blame to a lazy, overweight, and stupid strawman will always appeal to popular opinion in some capacity, I guess.

    Great post by the way!

  3. Peter says:

    The is what ‘Mind the Gap’ was on about, using poor consumers to fund rich by working class tax. None of those subsidies end in the pocket of tenants when state housing provide a service and not aiming to make a profit. It’s flowing upward through the gaps.

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