Some thoughts on housing in New Zealand’s 2014 Budget

Housing didn’t get too much attention in this year’s Budget. The government had already signaled the increase of funds to community housing organisations. The actual amount given to them, compared to what they need to build to fill demand, is something I’ve yet to untangle. It’s also no surprise to see money allotted to MSD to handle tenancy reviews for state tenants, introduced earlier this year.

What got most media coverage on housing was the temporary suspension of tariffs and duties on building materials. The Government thinks that this will take $3,500 off the cost of building a house. Unfortunately, it is a drop in the price bucket – the average price of an Auckland house increases by more than that every year.

The Minister was careful to emphasise that the government’s most important contribution to tackling housing affordability was keeping interest rates low. Interestingly, despite economists agreeing that interest rates have little do to with who’s in power, it looks like there’s a strong perception that low interest rates as a result of the present Government’s actions. Regardless, a whole lot more needs to happen than low interest rates if we want to increase housing affordability, whether for renters or buyers.

One worrying announcement that affects housing concerns the increase of funding to motorways in Auckland, and the absence of funding to public transport there. A rent versus income map of Auckland released two days ago shares the deeply worrying findings of a study published in Cities earlier this year. People who live in Auckland’s (still expensive relative to income) cheaper areas pay large proportions of their income in petrol and parking. The fact that so many drive is testament to the failures of the current public transport system. There is an urgent need for investment in public transport.  As the creator of the map put it:

“If I hadn’t read that paper, I would have been surprised at how unaffordable the outlying suburbs become if you factor in parking and commute costs.”

The extension of free GP visits to all children under 13 is great news.  Still, I’d rather less children needed to access the GP or the emergency department. I’d rather they didn’t get sick to begin with. One thing we know would reduce rates of respiratory illness is measures to improve the quality of houses,  so that’s why it’s a shame to see that there is nothing in the Budget for implementing a WOF for private rental housing, where most children in poverty live (the results of a successful pre-test of a WOF were also announced yesterday).

One thing that interested me was a comment the Prime Minister made prior to the Budget:

“It’s pretty obvious I think that middle New Zealand pays a fair bit of tax and often doesn’t get a lot in return. As you move up the income levels they get less of things like Working for Families, probably don’t get Accommodation Supplements and the likes because our system is heavily dependent effectively on a redistribution system for those most in need, and that happens through programmes like Working For Families.”

There’s a lot to comment on here, but this is a housing blog. So I want to draw attention to the fact that the Prime Minister seems to think that some New Zealanders deserve tax cuts partly because they don’t receive the Accommodation Supplement.

The Accommodation Supplement is not some free gift that some people are lucky enough to get. You’re lucky if you’re wealthy enough to avoid applying for it. (Though indeed, you may be indirectly receiving it for the rent your tenants pay.) It merely acknowledges that housing is so expensive in New Zealand, particularly when seen against incomes, that many people cannot afford to pay their rent or mortgage without government support. Many people receive the very limit that they’re entitled to for their area, and it’s still not enough.

The Accommodation Supplement is an acknowledgment of market failure, of incomes not matching housing costs.  Many would argue that there are far better ways that the government could intervene to deal with this market failure, but that’s for another blog post.

Brooklyn Museum – Comme Sisyphe – Honoré Daumier. Public Domain.

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