Claims that landlords will be rising rents were immediate following last week’s Budget announcement that there will be an increase to the Accommodation Supplement.
Now Green Party co-leader Metiria Turei has released some 2015 Treasury advice to the Prime Minister and Cabinet who were considering an increase to the Accommodation Supplement in that year’s Budget.
In the report, Treasury officials said there is a risk that the increased subsidy will lead to an increase in rents.
The risk was present because landlords might raise rents in response to tenants being able to afford to pay more.
Turei said that raising the Accommodation Supplement might give tenants more cash in the short term but, in the current broken housing market, rents will adjust to swallow that up quickly.
“We’ve already seen landlords advising each other that with a higher Accommodation Supplement on offer, now is a good time to raise rents.
“Unless the Government commits to building thousands more affordable houses, the Accommodation Supplement is really just a subsidy flowing straight to landlords."
The Government should instead be building houses, she said.
However, the idea that rents will automatically go up in line with an increase in the Accommodation Supplement doesn’t hold much traction in some quarters.
The 2015 Treasury report itself said there was no clear consensus on the degree to which raising the Accommodation Supplement might result in high rents generally.
It also recommended that the Accommodation Supplement should be increased.
Prime Minister Bill English told media today that they were focused on families, not on landlords and it would be worse not to increase the supplement.
He has been advised that the Ministry of Social Development researched it and couldn't find any evidence that when it was last changed in 2005 that increase went to landlords rather than families.
Landlords are restrained by the market and don’t have the option of just banging up the rent to any number they can think of, he said.
NZ Property Investors Federation executive officer Andrew King agreed.
He said that when the Accommodation Supplement has been raised before there has not been a corresponding increase in rents.
“Landlords don’t get Accommodation Supplement money directly. Rather it is received by the tenants,” King added.
Both the Green Party and the Labour Party actually support the increase to the Accommodation Supplement but feel it is problematic.
Both parties have extensive housing building programmes as a key part of their housing policy packages.
The Government also recently announced a house building programme for Auckland, which will see the development of 34,000 new houses.
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