STATE HOUSE RENTS TO BE INCREASED

Press, Volume LXXXVI, Issue 26078, 3 April 1950, Page 8

STATE HOUSE RENTS TO BE INCREASED

Salary Limit Of £520 On New Tenancies EXISTING OCCUPIERS NOT Affected (New Zealand Press Association)

WELLINGTON, April 1. Increases in the rents of State houses being let for the first time, and a general rule that in future State houses would not be let to persons earning more than £520 a year were announced to-day by

the Minister in charge of the State Advances Corporation (Mr J. R. Marshall). The increases in rents would range from 5s a week to 15s a week, according to the size of the house, Mr Marshall said. Under the new scale the rent of a standard four-roomed house wou’d be from 34s to 36s 9d a week and of a five-roomed house from 37s 3d a week. It was the Government’s intention, Mr Marshall said, to place the State housing scheme on a sound financial basis and thus help in easing the burden at present borne by the community as a whole. The increased rents would apply only to houses being let for the first time, as distinct from existing tenancies, Mr Marshall said. The limit of £520, he said, would also refer to new tenancies, except in special cases. “Our objective,” said Mr Marshall, “is to ensure that in future the people to benefit from the lower rentals of State houses will be those in the lower income groups, whose need is greatest.” Mr Marshall said it was not proposed to change the rent of pensioners’ flats, nor to disturb existing rentals where the present tenants remained in possession. When houses were vacated and let to new tenants, or when exchanges of houses were arranged, thus creating new tenancies, the future rents would be based on the new scale. At the same time, in order to avoid any serious hardships as a result of the new rental scales, there would be a new provision by which the case of a tenant in difficulties through illhealth or other unavoidable circum-

stances could be given special consideration. The general idea of the Government was to reach the position where no familv should be required to pay more than one-fifth of the family income bv way of rent. The National Party, while the Opposition, had been disturbed by the increasing extent to which the rest of the community, including many thousands of wage earners who had provided their own homes, had been obliged to shoulder losses arising from the State housing scheme, and it was concerned at the increasing disparity between State rentals and the housing costs of the great majority of citizens, Mr Marshall said. At the same time, it recognised that current tenancy agreements represented a contract binding the State Advances Corporation to observe the present rentals entered into by tenants in good faith, and accordingly the Government felt that such contracts must be respected. The action now being taken would gradually correct the position without inflicting suden inconvenience or hardshin on anyone. Last year 3687 new houses were completed and let, 1113 houses were vacated and re-let, and 1712 exchanges were arranged between tenants, Mr Marshall said. Thus there was a total of 6512 new tenancies during the year. At that rate, or anything like it, there would be. after a year or two, a substantial improvement in the general financial position of the State housing scheme. This would not only be to the advantage of every taxpaver, but also it would tend to correct the present maladjustment which placed State tenants at a pronounced advantage compared with other sections of the community. Losses in Housing Account As long ago as August, 1940, and at intervals since then, the State Advances Corporation had drawn the attention of his predecessor (Mr W. Nash) to the prospect of losses in the Housing Account unless the rentals originally fixed on a more or less economic basis at the inception of the scheme in 1937 were adjusted to keep Sace with the continued rise in buildig costs, and also to cover significant increases in the rates levied by local authorities, which had not been reflected in rentals. Mr Marshall said. Those representations had been ignored. _ x Under the previous Government the loss for the year ended March 31, 1949, was £llO,OOO and that in spite of the low interest rate payable on finance advanced for housing purposes by the Reserve Bank. For the year just closed, March 31, 1950, the estimated loss was £195.000, and on the existing 32,500 State housing units, !f no alteration in rents were made, the future loss would be at least £236.000 a year. As the accumulated loss at March 31. IPSO. would be about £415,000, the situation was one which no Government conscious of its duty

could ignore. “The Government’s decision is sup-

ported by recommendations of the State Advances Corporation and by members of the Housing Allocation Committees who have been consulted,” said Mr Marshall. “I am confident that it will be endorsed by every member of the public w r ho recognises the great changes that have taken place in the cost structure of New Zealand, particularly relating to housebuilding, since the original rents were fixed in 1937. At that time rents were assessed on a standard four-roomed house costing, with a section. £1202. The average cost of such a house is a great deal higher to-day, yet the rents charged for new houses have not been altered.

“It is of interest to note that under the formula introduced during the term of office of the previous Government for the fixing of a ‘fair’ rental under the Fair Rents Act, the permissible rent for a four-roomed State house would be £2 18s 9d, whereas for a six-roomed State house the fair rent under the same formula would be from £3 15s to £4. It is not proposed to go to the limit of that formula.”

The alterations in the rents, said Mr Marshall, would range from 5s a week in the case of a single bedroom. double and multi-units to 10s a week extra in the case of standard four-roomed houses, increasing gradually through the larger types of house and according to the amenities provided, reaching 15s a week extra in the case of seven and eight-roomed houses. These new scales wculd become operative at once in relation to all new tenancies. Income Limit Referring to the new policy of not granting State houses to persons in receipt of more than £520 a year except in special cases, Mr Marshall said that although the common conception of State houses was that they were intended for people in lower income groups, there were in fact many cases of persons with a substantial income up to and even exceeding £lOOO a year who were occupying State houses. While such persons were legally entitled to continue as State tenants, the fact remained that their rent was being substantially subsidised from taxation levied on all sections of the community, including workers on lower incomes, many of whom were also paying for their own homes.

The present Government felt that the first consideration should be the needs of the lower income groups whose housing problems in general were most pressing, Mr Marshall said. Its general policy in allocating houses would be to regard a salary of £520 a year or a wage of £lO a week, excluding family allowance, the uoper limit for the allocation of a State house. Different considerations would apply to departmental houses. As there were 550.000 of the actively engaged population receiving less than £5OO a year, there would be ample scope under the new policy for the State housing scheme to fulfil its major purpose of providing for those whose needs were greatest. An immediate effect of this important change would be to improve the prospects of the more needy cases among the lower paid wage earners on the present waiting list.