Roger Hawkins: Rates bills are becoming an existential crisis for elderly

Council-assessed values of homes has increased exponentially for more than 30 years, well exceeding the rate of inflation. Photo / Samantha Motion

OPINION

If central government increased taxes at a rate greater than inflation every year for 20 plus years, there would be rioting in the streets.

But that is what central government encourages local governments to do – every year. Every single year.

As the country’s demographics change and the population ages, new thinking by councillors and, most importantly, central government is urgently required.

As rates increase faster than the ability of the elderly (65+) on fixed incomes to accommodate those increases – so the need for reform increases.

It is now an existential issue for the elderly and the “not so well off”.

There are, however, easy solutions to address this rapidly emerging problem.

The problem is elderly have often lived in their privately owned homes for many years. The council-assessed value of homes has increased exponentially for 30+ years, well exceeding the rate of inflation.

Many elderly residents are on a “fixed” income, belatedly adjusted for inflation once a year and rates increases such as those recently imposed by councils are no longer sustainable.

Councils have always lacked the internal skills, inclination, or ability to address the issues. Rather, they have always just opted to roll out the embedded system

So what’s the solution?

Rates for homes that elderly live in themselves should be set at no more than 10 per cent of projected net after-tax income for that ratepayer, each year.

For example, if Superannuation gives a $20,000 net income after tax – then rates (being another tax) are then set at no more than $2000 (or about $40 a week).

Normal rates apply to any secondary properties owned – wherever they may be located.

It’s worth noting this is not dissimilar to how student loan repayments are administered – i.e. as a percentage of the student’s income.

This would allow a better and more sustainable quality of life for those who are over 65 and have paid rates in Auckland for most of their working lives or a significant portion of it. Many in this demographic have also helped build Auckland’s infrastructure, maintain parks, and care for libraries and art galleries through years of full rates payments.

If a ratepayer has lived in an area for, say, 15+ years and paid rates all that time, then they have clearly “paid their share” but may well not live too long into the future and can therefore “pass on the baton” to the emerging rates-paying demographic – who, incidentally, get to enjoy the fruits of their forebears’ labours (and their previous revenue contributions).

To fix the rates on a “value perception/guess” that council swings at every three years is simply no longer acceptable – as it inevitably results in an inability to afford the rates bill.

Long-term residents who have bought their house many decades before – and have therefore paid rates to cover the infrastructure build and maintenance (many times over, most likely) will see value and logic in not being gouged by the council, as will all thinking observers.

This must also accommodate where those elderly have recently “downsized” to a smaller or lower maintenance primary home, as they will have freed up their former primary residence for a family of full ratepayers to occupy.

The smaller properties now occupied by the long-term ratepayers should also attract lower rates, so this also helps mitigate the damage to councils budgets – that will help ease the pain to council accountants.

Roger Hawkins.

The alternative is potentially “rioting in the streets”. Many of us well remember Margaret Thatcher’s Poll Tax.

The only real issue is that councils need to understand and accept that this proposal deviates from rates based on property value only, to change to rates for over-65s to be based on a percentage of total net income.

To date, income redistribution has been the role of central government – why can’t part of this re-distribution fall to council rates, given that they are a tax on all homeowners also?

The elderly helped build this city – how about some gratitude and empathy to allow the next generation to enjoy what has been achieved, and what will be achieved through a more fair and equitable rating solution?

The only thing stopping this is the elected politicians’ inclination to help their ratepayers – as opposed to just maintaining the status quo supported by council accountants.

It is time for change – and now is the time to help relieve the long-suffering ratepayers. To our elected representatives: “Over to you.”

Roger Hawkins is a former marketing manager with Air New Zealand, part-owner and operator of a small business, and former lecturer in human resource management, advanced marketing practice, and advertising and marketing.