The Child Poverty Action Group (CPAG) has called for Government to remove the Accommodation Supplement (AS) and significantly raise the incomes of all benefit recipients and low-wage workers.
“CPAG claims that the AS keeps rental prices high however their own report disproves this” said Andrew King, Executive Officer of the NZ Property Investors’ Federation (NZPIF).
The report shows that private tenants pay 25% to 30% of the relevant benefit towards rent and the AS only covers 70% of any additional cost above this, up to a maximum ceiling. This design prevents landlords from simply being able to raise rents as the CPAG claims, because the tenant still has to find 30% of the increase and 100% of any rent above the maximum.
Maximum rates were increased in April 2018, which caused an increase in the AS from $1.2b to $1.5b. While many people believe that the AS is paid directly to landlords, this is not the case. While the AS increased 25% in the year to April 2019, rental prices only increased by 4.6%. This was also at a time of large cost increases and new regulations.
If, as the CPAG claims, the AS drives up rental prices, why did rental prices not increase more when the AS limits were raised?
The report claims that “in a period of cynical neglect of the AS between 20005 and 2018, there was no change to the maximum rates”. However rental prices increased during this time, suggesting that the AS doesn’t have any impact on rental prices.
The report wants a significant increase in state house building so people can move from private rentals into publicly funded houses. This would mean an increase in the Income Related Rent payments, which is the equivalent of the AS for state house tenants.
The report also says that by the year 2021, the AS will increase to $1.5b while the Income Related Rent subsidy will increase to $1.3b.
The AS provides assistance for around 290,000 households (an average $5,170 per household), while the Income Related Rent subsidy assists around 70,000 state tenants (an average of $18,570 per household). Do we really want to move people out of private rentals?
While the CPAG claims that rental property providers are getting wealthy from the AS, their proposal to wipe it will cost an extra $3.5b of tax payer funds per year in increased benefits. If it is such a poor use of Government funds, why are state house subsidies rising at a faster rate than the AS and why will it cost an extra $3.5b in Government funds to remove it?
“This is a poorly thought out proposal that is not in the best interests of tenants or tax payers” said King.