Thursday, June 28, 2018

State housing capture

State house tenants are on a good wicket. MSD explains: (note: benefit = advantage)

The benefit tenants receive from subsidised rents (IRR/IRRS) [Income related rent subsidy] is (on the whole) significantly greater than the benefit received by people who get the Accommodation Supplement (AS) - creating pressure on public housing places.

Exits from social housing are decreasing rapidly.

MSD explains some of this effect:

"The cost of public housing to government is very sensitive to growth in rental prices
Rental growth has three key impacts:
• IRRS [Income related rent subsidy] increases directly as market prices increase
• growth in rents above incomes means proportion of rent paid by tenants
falls (IRRS grows faster than rental growth)
• higher level of IRRS means tenants are further from the market > decreased
exits and increased durations.
If rental growth per year is 1% higher than what is already built into Budget
forecasting, costs to government grow by 20% and the number of exits falls by
6% over 20 years."

So part of the housing 'crisis' - the shortage specifically - is the result of the normal flow in and out of state houses becoming disrupted as market rents rise.

State housing is about provision of homes for the neediest, hopefully as a temporary state of affairs, because the housing stock hasn't grown for decades. That can't happen if  current occupants batten down.

Every move the government makes that impinges on the private housing market eg land restriction and bureaucratic interference on many more levels, comes back to bite them at the social housing end.

Now instead of reversing restrictions and bureaucracy they plan to increase the supply of state houses and have increased the accommodation supplement. It's just not a viable solution.

No comments: