Weekly Column by Dr Muriel Newman MP

The revelation that gangs and drug dealers are living in taxpayer subsidised state housing is a concern to all hard working New Zealanders. Despite reports that they have trashed properties and intimidated their neighbourhoods, until this week, the government had not evicted a single state house tenant since the 1999 election. As a result, law-abiding state house tenants have been forced to move out of areas where unlawful activities have been occurring because the government has chosen to protect the law breakers rather than their decent, long suffering neighbours.

But this issue is at the cusp of a more fundamental problem with this government's approach to housing. State housing is a dinosaur, a relic of a bygone age when the country did not have enough houses. With insufficient housing, the government stepped in to build houses for those families who couldn't afford their own home.

However, times have changed, and the private sector is now more than willing and able to provide that service. In fact, there are some 170,000 private property investors in New Zealand, who, according to the ASB bank, invest an estimated $42.5 billion into the rental property market. Since the Bank claims that rental property is a very popular investment option, it is difficult to understand why the government needs to invest $4 billion of taxpayers' money in houses when private capital could be used just as easily.

Housing support for low-income families used to be in the form of the accommodation supplement. That grant was given to families on the basis of their need. Of the 315,000 low-income families who qualify for housing assistance, some 50,000 live in state houses, 15,000 in local authority rental units and 230,000 in private sector homes.

The introduction, by the Labour Government, of income related rents for state house tenants, a policy which was shown to be a disaster in the 1980s, re-introduced privilege into our housing market. Obtaining financial assistance for housing is now no longer solely a matter of how needy a person is, but rather whether or not they have the state as their landlord.

These days a family, lucky enough to live in a state house and pay only $50 or $60 a week in rent, may have a more needy neighbour next door who pays three or four times more, because they do not have the state as their landlord.

Income related rents have played a major role in increasing pressure on Auckland's rental housing market: why would a family bother to have a lodger if they only pay $50 a week in rent? Of course they wouldn't, and as a result, state house lodgers have had to seek other accommodation, helping to drive up rental demand.

Basic economics tells us that permanent shortages arise and endure if, and only if, prices are pegged at below equilibrium levels and kept there through the force of law. The government's income related rent policy, by imposing artificially lower prices on a section of the market, has guaranteed such a shortage. Already the waiting list for state houses has eclipsed 10,000 and is growing on a daily basis.

The problem is that when income related rents were introduced, there was no form of exit strategy. That means that unless there are time limits on state house tenancies, or some similar mechanism, some tenants will never want to move on. This is not a new problem, with some tenants having lived in their state house for over 60 years, but it is a problem that income related rents will make much worse.

Take the case of a refugee family of 13, described in an excellent article on state housing by Deborah Coddington in this month's edition of North and South. The father of the family, who says he cannot work because of needing to pray five times a day, is on a benefit. The family will be receiving upwards of $700 a week in the hand, but will only be paying $60 or $70 a week in rent.

With the incentives that are currently in place, including Housing New Zealand Corporation's charter with its requirement to "recognise the housing needs of different cultures" - building bigger houses for larger families - I question whether that family will ever move out of their state house. I also question, under the present government's policies and practices, whether the family will ever move off a benefit.

State housing is a growing drain on taxpayers. The government has shown no desire at all to curtail the expansion of housing needs. Instead, both income related rents, as well as the government's strategy of buying or building homes of a quality that many hard working families cannot afford, will ensure that the demand on state houses will escalate. More and more taxpayers' money will be needed to satisfy this insatiable demand, and rather than encouraging New Zealanders into independence and self-sufficiency, the government is incentivising a growing reliance on the state.

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Dr Muriel Newman, MP for ACT New Zealand, writes a weekly opinion piece on topical issues for a number of community newspapers. You are welcome to forward this column to anyone you think may be interested.

View the archive of columns at http://www.act.org.nz/search.jsp?type=y1240 Visit ACT New Zealand's web site: http://www.act.org.nz/ If you no longer wish to remain on our mailing list please advise by return email. Muriel appreciates the opportunity to keep you informed and thanks you for your continued interest in ACT New Zealand.

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