People who spend more than a third of their disposable income on housing costs are likely to be in poverty. According to the Ministry of Social Development's 2004 Social Report: "In 2001, 24 percent of households spent more than 30 percent of their income on housing costs. Since the late 1980s, there has been a substantial increase in the proportion of households spending more than 30 percent of their income on
housing."
Housing policy helps determine both how many people are in poverty, and how much damage that poverty inflicts.
Evidence shows that when families live in their own home children are more likely to have a more stable and secure environment, in which they can thrive. They don't have to change schools several times a year, for example, if rents rise. However home ownership rates have been dropping in recent decades, as house prices have risen much faster than family incomes.
Worse, in the 1990s over 13,000 state houses were sold (out of a total stock of 67,000) and market rents introduced. This contributed to a tripling of child poverty rates and reduced the total stock of low-cost housing available, leading to huge waiting lists. Although income-related rents were reintroduced by the incoming Labour-led government in 1999 the waiting lists remain today, especially in Auckland, due to an ongoing lack of state housing.
Currently, 1000 new state houses are built every year, but 5000 are needed. There is no excuse for not meeting the overwhelming demand urgently. Almost the entire stock of existing state houses, plus those already sold off, were built in only a few short years because of a public outcry over the lack of affordable housing.
Child poverty in New Zealand could be substantially reduced through a purposeful, well directed and adequately funded social housing programme. People surviving on low incomes tell us that their housing costs and the associated insecurity of tenure are the major contributors to their hardship. Policy needs to support the goal of home ownership for low income families. Social housing progammes need to include:
There should be gradual phasing out of the Accommodation Supplement at the same time that there is increasing and ongoing funding for subsidised home loans for low-income families with children.
CPAG believes that rising levels of home-ownership in low-income households will have three significant social policy outcomes. The benefits of these would offer sufficient justification in themselves for a well-funded and generously subsidised low-income home loan programme:
It is acknowledged that the Government has made some progress, in recent years, in improving the housing position of some of the poorest New Zealanders. The reintroduction of income-related rents for Housing New Zealand tenants provided welcome relief to around 50,000 low income households - although it left a further 100,000 households living in similar financial circumstances no better off. The Government's modest state house building/acquisition programme over the past 5 years has not shortened state house waiting lists. In our view it is most likely that the planned programme of around 1000 houses per year over the next four years will barely cater for the growth in demand from households with a serious or urgent need.
The continuing policy reliance on landlord subsidies in the form of the Accommodation Supplement and tax relief not only shows a lack of imagination but is estimated to drain in excess of $1 billion per year from public funds. This money could be used more creatively and more productively in funding public rental housing, third sector housing programmes and in supporting low-income families into home ownership.
If a longer-term perspective is taken a compelling need emerges to address equity issues such as those around continuing and compounding inequalities. This widening gap between rich and poor is a consequence of specific policies such as the benefit cuts of 1991, the erosion of the value of family support payments and the liberalisation of labour markets and the subsequent stagnation in the value of wages for unskilled people. CPAG believes that any argument for policy changes should give some cognisance to historic redistributions rather than simply accepting the consequences of these redistributions as inevitable and inviolate.
The widening income and wealth gap is readily seen in what is happening in housing markets today. House prices, for example, can only rise faster than the incomes of the households which would live in them if something else is happening within the economy. Furthermore someone can only become a tenant if someone else becomes a landlord. There is some evidence that as the wealthiest 20% of New Zealand households benefited from the liberalisation policy of the late 1980s and early 1990s they began to buy up the homes of the poorest New Zealanders as investments. These investments were often financed through loans backed by the investors' own homes, which began to rise in value in the early 1990s. The wealth effects of these house value increases encouraged many middle class households to leverage their new found equity to buy a "renter" in a poorer suburb. These investments were often negatively geared which was not problematic because any losses could be partially offset by tax credits and in any case the real profit is expected to be in the capital gains from the "renter," not from the rental income itself.
This investment activity from middle class households pushed up house prices in working class neighbourhoods and hence pushed home ownership out of the reach of lower-income households. This shift increased subsequent demand for rental accommodation and this demand increase, combined with the introduction of the Accommodation Supplement, fuelled rapid increases in rents around between 1993 and 1995. The housing position of the poorest 30% of households became one of dependence on the whim of their landlord and on sharply abating benefits.
For the working poor, meanwhile, the limited availability of state houses and their tight eligibility criteria have made it increasingly unlikely that families and households in paid employment will ever gain a state tenancy. The bulk of poor households in New Zealand are employed and earning an income in the labour market.
Download the following publications by Alan Johnson, CPAG housing spokesperson: