28 May 2024

Rent stress as accommodation supplement stagnant

11:35 am on 28 May 2024
Rebecca Dixon

Rebecca Dixon Photo: Supplied / Rebecca Dixon

The government payment designed to help people struggling to pay for housing hasn't been increased in six years, with one woman relying on it to pay for rent looking to cut back on her medication just to make ends meet.

And with rents hitting a record high and mortgage interest rates through the roof, the woman's budgeting advisor says the bulk of her clients are stressed about rent.

The payment is called the accommodation supplement, which helps more than 365,000 households pay their rent, board or mortgage.

The amount paid differs depending on factors like peoples' income, benefits and location, and is "generally based on their market rents", said Ministry of Social Development spokesperson Hayley Hamilton.

But the maximum available payments were last updated in 2018, she said.

"There are currently no requirements to make regular updates to the accommodation supplement settings in response to urban growth or housing cost increases," she said.

"Any decisions on changes to payments would be a matter for Ministers."

Some argue those changes are needed now.

'Really hard to manage'

Single mother of three Rebecca Dixon has been renting in the Wellington suburb of Tawa for the past 18 months, and said the way the supplement worked made "no sense" - because it did not fluctuate with a person's actual housing costs.

Dixon laid out her experience:

  • She previously owned a house in Shannon with her then-partner, and her mortgage was $1000 a week - but the accommodation supplement was $90 a week, covering just 9 percent of the cost.
  • Five years ago, she paid $475 weekly in a city townhouse, and received the maximum $220 supplement - 46 percent of her rent.
  • Now in her four-bedroom house in Tawa, she still gets the $220 supplement, which covers 30 percent of her $720 weekly rent.

"It makes zero sense, it makes absolutely no sense," said Dixon.

She counted herself lucky - her current rent was only that cheap because her landlord was her midwife, who knew how hard it was to raise a family in this economy, she said. Down the road, two to three bedroom townhouses were being rented for $50 to $100 more.

Dixon had "tried all sorts" to make ends meet.

She was currently hosting a 16-year-old exchange student, for which she was paid. As a solo mum, she felt safer with an exchange student rather than a boarder.

"That basically is adding another child to my load, it's parenting another child for a year in order to sort of, give me a little bit of break on the rent," she said.

"Things are really hard to manage, I'm just trying to see where I can cut costs."

The next thing to go would be medication for her chronic pain condition, she said.

Dixon's experience was an example of how the supplement was not fit for purpose, said University of Auckland property researcher Wasay Majid, whose PhD thesis was focused on the supplement.

Ideally it would provide "a cushion or a shelter commensurate to changes in that market" - but in practice, the support people got was falling, he said.

"Proportionally, their [supplement] will decrease, if rents are increasing, which rents usually do increase annually."

He called on the government to link the supplement to rental prices, and review it annually - like it did with the Income Related Rent Subsidy, which funds social and community housing places.

Rent costs a 'worry that's always there'

People essentially had less cash in hand because the supplement had not increased in line with rents, said budgeting advisor Heather Lange from Family Financial Services, based in Upper Hutt.

"When you've got people paying 70 or 80 percent of their income, to their rent, there's just no chance they're going to be able to cover all the other things for their whānau. Buy good food, get their kids engaged in school, pay the internet bills, keep the power on.

"It just leaves a huge portion of people scrambling to cover the necessities."

She understood why landlords were increasing rents, as they faced higher costs themselves, she said.

"But that cost is borne by a tenant who's just then got no shot at being able to afford the rest of the good things in life."

While the Trust helped people with all sort of financial problems, everybody was worried about rent, she said.

"You've got somebody who's just moved into a place and one of the first things they ask when they come into the office is, 'can my landlord raise my rent?' or 'how much can they raise my rent?' or 'how would I be able to afford it?'"

"I'm thinking, you've been in the house four weeks, don't worry about that yet, but I think that is what it does to people. It's this worry that's always there."

Minister considering whether supplement is 'fair and sustainable'

The proportion of people seeking financial help from the government to pay their rent had increased, said social development minister Louise Upston.

So the government was making moves to drive rents down and put more money in people's pockets through tax relief and controlling inflation, Upston said.

But she questioned whether the supplement was working well.

"It's right that the accommodation supplement exists as safety net for those who are really struggling," she said.

"But there is merit in considering whether the current settings are fair and sustainable long-term."

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