Media Release

22 May 2000

Income Related Rents Restored

"From 1 December low-income Housing New Zealand tenants will pay no more than 25 % of their income in rent," the Minister of Housing Mark Gosche confirmed today.

He said the Housing Restructuring (Income-related Rents) Amendment Bill tabled today would target those most in need. Independent studies have found that high housing costs are the largest single cause of poverty in New Zealand.

"The very people state houses were built for will soon be able to afford to rent them again," he said.

"Income related rents was a key pledge for Labour and the Alliance and today the Government is tabling legislative changes to deliver on this promise – well ahead of original plans to phase them in over three years."

“The Government is committed to alleviating the disparities that exist in our society and addressing the gaps that exist for Maori and Pacific people, many of whom are state tenants.

Mr Gosche said Housing New Zealand would still be expected to operate in a business-like manner with good financial oversight and stewardship. The company would be expected to efficiently manage its assets, liabilities and the Crown's investment.

But this would not be the organisation's primary focus he said.

"The organisation's primary objective will change from the current profit focus to one that better reflects this Government's social housing objectives," said Mr Gosche.

"Housing New Zealand will become an organisation that also exhibits a sense of social responsibility."

From December 1 Housing New Zealand rents will be income related. Rents will be based on the income of the signatories to the tenancy agreement and their partner.

Income related rents will be based on a calculation that takes into account household composition and after tax income. Those on low incomes will pay no more than 25% of their income on rent.

For income related purposes, low income means an income which is less than net New Zealand superannuation rates of $225.55 a week for single tenants and $347 a week for couples and sole parents. The rent for those whose income exceeds these figures will depend on their income.

Once income related rents are introduced on December 1, Housing New Zealand tenants will no longer qualify for the Accommodation Supplement or the Student Accommodation Benefit.

A small number of older state tenants, whose net rent is currently less than 25% of their income, will be protected in the move to income-related rents.

Income will not be the sole criteria for those who want to apply for a Housing New Zealand property.

Other factors include adequacy, suitability, accessibility and sustainability factors.

In August Housing New Zealand tenants will be individually advised of the process they need to follow to have their new rents calculated.

“Our commitment was to restore income-related rents for state housing so that low income tenants pay no more than 25 percent of their income in rent,” said Mr Gosche.

“Income-related rents will be in place from December, well ahead of the three year phase-in originally planned for.”

ENDS

For more information please call Christine Robertson on 04-471-9063 or 025-270-9004
Questions on Income Related Rents

1. Q How will income-related rent be assessed?
A Income-related rents will be based on a calculation that takes into account household composition and after tax income. Those on low incomes will pay no more than 25% of their income in rent. For those whose income exceeds the appropriate threshold, their rental will be set according to a formula up to the market rent for the property. The formula is:

 For single tenants without children, 25% of the household income after tax up to a threshold that is the equivalent of the after tax single living alone rate of NZ Superannuation ($225.55 a week). For couples and sole parents, 25% of the household income
(excluding family support) after tax up to a threshold that is equivalent to the after tax couple rate of NZ Superannuation ($347.00 a week); plus,
 50% of any income above that threshold; plus,
 25% of first child family support (ie 25% of $47a week) or 25% of any lesser amount of family support received.

2. Q Is there a minimum income-related rent?
A Yes. 25% of the applicable community wage rate.

3. Q Whose income will be taken into account when determining the rent?
A The income of the signatories to the tenancy agreement and their partner.

4. Q What counts as income?
A Broadly, any person’s income will include: income tested benefits (other than an orphan’s benefit or an unsupported child’s benefit), New Zealand Superannuation, Veteran’s Pension, student allowances, ACC payments, earnings, family support for the first child, interest from investments or savings, rent from properties etc

5. Q What is a low-income?
A For single tenants without children, low income is the equivalent of the after tax single living alone rate of NZ Superannuation (currently $225.55 a week).

For couples and sole parents, low income is the equivalent of the after tax up to a threshold that is equivalent to the after tax couple rate of NZ Superannuation (currently $347.00 a week).

6. Q When will income-related rents be introduced?
A 1 December 2000.

7. Q Will tenants be subject to an asset test?
A There will be no cash assets test for existing tenants. However, interest from investment or savings will be taken into account.

8. Q: Will income-related rents help Maori and Pacific people?
A Yes. Approximately 40% of Housing New Zealand tenants are either Maori or Pacific households (15,000 Maori, 8,000 Pacific).

9. Q Will anybody be worse off because of Income-related Rents?
A No. A small number of tenants (about 1,000) receiving the Tenure Protection Allowance or assistance under the 55 plus rent protection programme are currently paying a net rent of less than 25% of their income. The position of these tenants will be protected on 1 December 2000.

The tenure protection allowance was introduced in 1993 in order to protect Housing New Zealand tenants (particularly older people) who were living in houses too big for their needs and could not afford the market rent. This will no longer be an issue.

The 55 plus rent protection programme was originally intended as a temporary measure to ease tenants into market rents.

10. Q What happens to those households who rent in the private sector
A An accommodation supplement, paid through the Department of Work and Income, will continue to assist with private sector housing costs.

11. Q How will Housing New Zealand increase the number of state houses? And when?
A The Government is working on a range of ways in which to increase the number of state houses. The sale of state houses has been stopped. The backlog of maintenance on homes is also being addressed. A significant building policy will be announced in next month's budget.

The abolition of the Home Buy scheme earlier this year ensured that Housing New Zealand stocks were no longer being depleted.

12. Q How many will only pay 25 percent of their income in rent?
A About 41,000 existing Housing New Zealand tenants or tenants in properties managed on behalf of Housing New Zealand are receiving the Accommodation Supplement and it is likely that most of these will pay only 25% of their income in rent after 1 December 2000. Which of the remaining 17,000 tenants will pay only 25% of their income in rent will only be known after their incomes have been assessed.

13. Q How will Housing New Zealand tenants be told of the changes? What will they have to do?
A In August all Housing New Zealand tenants will get an individual pack of information advising them how to apply for an income-related rent.

This will comprise an information booklet outlining how income-related rents will be worked out and what they must do to apply. They will be asked to return an income-statement which will provide the basis for the assessment of their rent by Housing New Zealand.

Housing New Zealand staff will work with those who have difficulty with the application to ensure their assessment is made on time. At the same time, the Department of Work and Income will assist tenants who receive income support by sending them a statement of the benefits they have received over the last 12 months.

The applications will be processed by Housing New Zealand and the tenants advised of how much rent they will have to pay before the start of income-related rents in December.

14. Q Will tenants have the right to seek a review of their income-related rent?
A Yes. Housing New Zealand is currently developing a review and appeal system.

15. Q Will Housing New Zealand still have a profit focus?
A No. The income-related rents legislation will change Housing New Zealand’s primary objective to better reflect the Government’s social housing objectives.

16. Q What is the cost to Housing New Zealand of the change to income-related rents?
A None. Housing New Zealand will be compensated by the Crown (through Section 7 of the Housing Restructuring Act 1992). The Crown will make up the difference between income-related rents and the market rent.

17.Q How many state houses does Housing New Zealand have?
A. As at 31 March 2000 Housing New Zealand provided a total of 59,130 properties nation-wide. Housing New Zealand operate three types of properties. These include properties owned and managed by Housing New Zealand, properties owned by Housing New Zealand but managed by external companies, and private properties leased by Housing New Zealand.

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