Market rent but cash to pay for it

The National Party says it will consider raising welfare benefits to help state house tenants cope with market rents in what landlords say will be a rising rental market.
National finance spokesman John Key said yesterday that no one should end up with less cash in the hand than they have now under National's policy of market rents combined with an accommodation supplement to their benefits.

The policy would raise the average rent of a three-bedroom state house from $100.95 a week to $127.87 a week for a couple on the unemployment benefit with children after allowing for the current accommodation supplement - apparently equivalent to a benefit cut of $27 a week.

But Mr Key said the changes were meant to be only a change in "delivery mechanisms" and would be revenue-neutral.

"We have not budgeted for any savings. It doesn't cost any less," he said.

"We are not going back to the days of forcing people into poverty by imagining that they will be left high and dry on their accommodation supplement."

He said he was a great believer in ensuring that everyone had the basic staples of life such as food and shelter.

"I really don't mind whether it's effectively a rental house that someone has with an accommodation supplement in the private sector or a state house.

"Whatever change we make, we would have to ensure that, if we make a change in the delivery mechanism, the effective in-the-hand support is the same."

He said one way to ensure this might be to raise benefits. As well as helping new tenants on market rents, higher benefits would raise the incomes of existing tenants who would be "grandparented" into income-related rents.

"So therefore you'd be effectively delivering to those in state houses. Their incomes would be rising. Therefore that would affect income-related rents and it would work with the accommodation supplement as well.

"That might be one way through it, but at this point I would have thought there might be a slightly easier way."

He said neither he nor party leader Don Brash had been closely involved in the housing policy because it did not have financial implications.

Auckland Property Investors Association president Andrew King said the policy would have little effect on the general rental market because rents were likely to rise in the next few years anyway.

Rents were pushed up across the board when the last National Government in the 1990s put state house tenants on market rents and introduced the accommodation supplement.

Mr King said the effect would be minimal this time because the Labour Government had kept the accommodation supplement for private sector renters, and because of National's plans to leave existing state tenants on income-related rents.

But he said rents had fallen far behind house prices. Median rents for three-bedroom houses had risen on a national basis by only 19 per cent in the past three years, from $235 to $280 a week, while median house prices rose by 52 per cent, from $185,000 to $282,000.

"I think there will be a catch-up with rents," he said.

However, a housing analyst with the Child Poverty Action Group, Alan Johnson, said he expected rents to stay low because of a boom in new houses and apartments.