REVIEW OF LOSSES ON THE STATE HOUSING SCHEME

Wanganui Chronicle, 1 September 1950, Page 4

REVIEW OF LOSSES ON THE STATE HOUSING SCHEME

Corporation's Report Deals With Source Of Money Used

I’AKLIA.ME.XT BOLDINGS, Last Ni?ht (P.A.)—The esfimated recurring annual loss on all State Houses handed over 1“ the State Advances Corporation for administration prior to March 31, 1950, is .£210,000, and this loss cannot be overtaken until at least 8600 of the houses let before that date have been vacated and re-let at higher rentals, b, wih take many years—probably more than a decade—before the annual revenue and expenditure will

lie equated. These points are made in the innual report of the Corporation tabled in the House of Representatives today.

The report” says that in 'the intervening years accumulated losses on new State houses will be mounting and will, perhaps, exceed by a considerable margin, £1.000,000 by the time the annual income and outgoings are equated. The report says that in estimating the annual loss at £240,000 no account has been taken of houses which will be taken over after April 1, 1950, or of new rentals effective for all houses let or re-let after that date. “New rents, on an average, will be no more than sufficient 1o meet all the outgoings on new houses taken over from now on, and. there will, therefore, be no margin in rents of those new houses to assist in reducing the loss on units let previously,” says the report. “It follows that tho annual loss in the housing account in respect of new houses can be reduced only by increased revenue accruing from re-lettings after March 31 as distinct from new lettings. On an average basis the increased revenue from re-lettings will be about £2B per annum per house, but an uncertain factor is the number of re-lettings which can be anticipated in any. given period.” The total net loss for the year ended March 31, 1950, on all activities of the housing account, was £197,919, bringing the total accumulated loss to £419,861.

The report says the accounts and balance sheet of the housing account, are prepared on a basis that loan capital of £50,850.952 in respect of completed houses bears interest at one

per cent, on the first £5,000.000 and li per cent, on the balance, this being the rate of interest finally decided upon for moneys raised in the earlier years of the housing scheme for the specific purpose of this account. “However.” continues the report, “since April 1, 1942, all moneys raised by the Crown for national development purposes has been focussed I through the national development j loans account in the public accounts and consequently, loan moneys have post their identity on that account. It J would not be right to say that from i April 1. 1942, any moneys raised from I any particular source, including the (Reserve Bank, were for the specific purposes of the housing account, or any other Governmental account. In (actual fact, the public accounts show that no moneys were raised for housing or any other public work from the Reserve Bank, or any other source at the Treasury Bill rate of interest in the years ended April 31, of 1943, 1945, 1946, 1947, and 1949. Moneys raised for housing in those years were provided by the Treasury at normal market interest rates. The housing ac- | count, however, has been charged interest on all capital moneys at the low rates applicable for the initial borrowings from the Reserve Bank. It follows that there has been, and still is, an additional annual deficiency in interest on the moneys raised and allocated for housing purposes, but .this further deficiency is not recorded in the housing account under the administration of the Corporation. Any deficiency of this nature is, of course, I a charge on taxation paid by the community as a whole, including the home owner, who in this way must | pay his share of interest losses on State housing.”