INCOME LIMIT AND INCREASES IN FUTURE RENTALS TO PLACE STATE HOUSING ON SOUND BASIS

Gisborne Herald, Volume LXXVII, Issue 23219, 3 April 1950, Page 8

INCOME LIMIT AND INCREASES IN FUTURE RENTALS TO PLACE STATE HOUSING ON SOUND BASIS

( PA _) WELLINGTON, April 1. The rents of State houses being let for the first time—as distinct from existing tenancies —will in future be adjusted, according to a statement by the Minister in charge of the State Advances Corporation, Mr. J. It. Marshall, who explained that it is the Government’s desire 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. At the same time a major policy change provides that in future, apart from existing tenancies, State houses will as a general rule not be let to persons earning more than £o2o yearly.

“Our objective,” said Mr. Marshal, “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.”

The Minister said it was not proposed .0 change the rent of pensioners’ flats, not to disturb existing rentals where the present tenants remained in possession. When houses were vacated and let to new tenants, or when exchanges or houses were arranged ; tnus creating new tenancies, the .ature 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 oe a new provision by which the case of a tenant in difficulties through illhealth or other unavoidable circumstances could be given special consideration. _ . “The general idea of the Government is to reach the position where no familv should be required to pay moie than one-fifth of the family income by way of rent,” said Mr. Marshall.

Already £ 115,000 Debit

“Under the previous Government the loss for the year ended on March 31, 1949, was £IIO.OOO and this despite 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 is £195,000 and on the existing 32,d00 State housing units, if no alteration in rents were made, the future loss would be at least £236,000 per annum. “As the accumulated loss at -larch 31, 1950. will be approximately £415,000 the situation is one which no Government conscious of.its duty can ignore. "The Government's decision is supported by recommendations of the State Advances Corporation and by members of housing allocation committees who have been consulted, ’ said Mr. Marshall, “and I am confident that it will be endorsed by every member of the public who recognises the great changes that have taken place in the cost structure in New Zealand, particularly relating to house-building, since the original rents were fixed in 1937. “At that time rents were assessed, on a standard four-roomed house costing, with the section, £1202. The average cost of such a house is a great deal higher today; 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 mder the Fair Rents Act, the permissible rent for a four-roomed State house would be £2 18s 9d, whereas for a sixroomed State house the fair rent under the same formula, wouold be from £3 15s to £4. , “It is not proposed to go to the limit of that formula,” added the .Minister. Increasing Disparity. The National Party, while in 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 out of the Statehousing scheme and it was concerned at the increasing disparity between the State rentals and the housing costs of the- great majority of citizens, said the Minister At the same time it recognised that current tenancy agreements represented a contract binding the State Advances Corporation to observe the Dresent 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 sudden inconvenience or hardship on anyone.

Last year 3687 new houses were completed and let, 1113 houses were vacated and relet and 1712 exchanges were arranged between tenants. Thus there was a total of 6512 new tenancies during the year. At that rate, or anything approximating to it, there would after a year or two be a substantial improvement in the general financial position of the State-housing scheme. This would not onlv be to the advantage of every taxpayer, but also it would tend to correct the present maladiustment which placed the State tenants at a pronounced advantage compared with other sections of the communitv

Departmental Notification.

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 ecu nomic basis at the inception of the scheme in 1937 were adjusted to keep pace with the continued rise in building costs and also to cover the significant increases in the rates levied by local authorities which had not been reflected in the rentals. These representations had been ignored..

Alterations In Rents Alterations in the rents, said Mr. Marshall, would range from 5/- weekly in the case of single bedroom, double and multi-units to 10/- weekly extra in the case of standard four-roomed houses increasing gradually through the larger types of house and according to the amenities provided and reaching 15/- weekly extra in 'the case of seven and eight-roomed houses. Under the new scale the rent of a standard four-roomed house would be from 34/- to 36/9 weekly and of a five-roomed house from 37/3. These new scales would become operative at once in relation to all new tenancies. Referring to the new policy of not granting State houses to persons in receipt of more than £520 yearly, except in special cases, the Minister said that although the common conception of State houses was that they were intended for people in the lowerincome groups, there were, in fact, many cases of people with substantial incomes up to and even exceeding £IOOO per year who were occupying State houses. “While such people are legally entitled to continue as State tenants, the fact remains that their rent is being substantially subsidised from taxation levied on all sections of the community, including workers on lower incomes.- many of whom are also paying for their own homes,” said the Minister. First Consideration. 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. Its general policy in allocating houses would be to regard a sal ary of £520 per annum or a wage of £lO weekly, excluding family allowance .the upper limit for the allocation of a State house. Different considerations would apply to departmental houses As there were 550.000 of the activelyengaged population receiving less than £SOO yearly 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 necessitous cases among the lower-paid wage-earners on the present waiting lists.