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.