Budget boost for tenants

Thursday 25 May 2017

Tenants are set to benefit from increases to the accommodation supplement in the government’s 2017 Budget which was announced today.

By Miriam Bell

Finance Minister Steven Joyce’s first Budget featured a $2 billion Family Incomes Package, which included an increase to maximum amounts under the Accommodation Supplement.

The maximum rate for a two person household will go up by between $25 and $75 a week, while the maximum for larger households will go up by between $40 and $80 a week.

Additionally, Accommodation Supplement areas will be updated to reflect 2016 rents.

Some commentators said that, given the rental accommodation shortage, the increase, which amounts to nearly $400 million a year, will effectively be a transfer from taxpayers to landlords.

But Joyce told media that the government will be keeping a close eye on whether landlords start raising rents in response to the higher Accommodation Supplement.

He also said that while this was a risk, it hasn’t happened in the past.

NZ Property Investors Federation executive officer Andrew King agreed that when the Accommodation Supplement has been raised before there has not been a corresponding increase in rents.

“Rents have been rising faster than inflation since 2010 but that is because of the costs of providing rental properties and that is likely to continue.”

He said the level to which rents could keep rising to was limited anyway but the NZPIF welcomes the increase because it will make things easier for low income families.

“Landlords don’t get Accommodation Supplement money directly. Rather it is received by the tenants,” King added.

Aside from the boost to the Accommodation Supplement, the Budget included little in the way of property related spending or initiatives.

It did allot $100 million in new capital funding to allow vacant or under-utilised Crown land to be freed up for additional housing developments under the Crown Building Project, which was announced last week.

The Budget also announced an increase to Earthquake Commission (EQC) levies from 1 November.

This was prompted by the need to rebuild the depleted reserves of its Natural Disaster Fund following the Christchurch and Kaikōura earthquakes.

It means that insured property owners will pay 20c per $100 of insurance cover, with an annual cap of $276, which equates to an increase of up to $69 per property owner per year.

One big winner in the Budget was infrastructure development which was allotted $4 billion in new capital spending.

Joyce said this was essential to build the infrastructure for a growing economy.

But he added that the Government will also be leveraging the investment through further use of public-private partnerships and joint ventures between central and local government and private investors.

The Budget announcements were greeted with disappointment by some.

Property Institute chief executive Ashley Church said it was a pity that the Government had not used the Budget to alleviate the Auckland housing shortage.

“It risks giving the impression that the Government either doesn't understand the extent of the problem, or simply doesn't care.”

Church said he would have liked to have seen a suite of measures to incentivise people to start building houses rather than buying existing houses.

Property Council chief executive Connal Townsend welcomed the Budget’s investment in infrastructure but said it is only the beginning as New Zealand plays considerable catch-up both in terms of funding and planning our cities.

“More money is needed for infrastructure and buildings, but we recognise the current need is greater than can be accommodated in any one budget or even five budgets.

“Given the significant size of investment needed in bricks and mortar, money needs to go into new thinking and innovation around how we fund and deliver infrastructure.

“We also need to reform the wider planning and building systems so they deliver more effectiveness and efficiency for the economy.”

Read more:

Super City to get 34,000 new houses 

Address Auckland infrastructure issues 

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