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Accommodation Supplement: High Expenditure, Low Efficacy

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In the 2020 budget, almost $2.4 billion was allocated to the provision of the Accommodation Supplement.

There have been substantial increases in Government expenditure on accommodation supplements over the last twenty-five years. Even so, many households in Aotearoa New Zealand face significant affordability problems. It is estimated that 361,000 households in 2019 were in housing affordability stress prior to any Government expenditure. Most (65%) households receiving an accommodation supplement are not owner occupiers and rent in the private rental market. Less than half (45%) have very low household incomes of $50,000 or less.

The accommodation supplement leaves unaddressed issues of crowding, poor quality housing and homelessness. A further $3.7 billion annually would be required for households in Aotearoa New Zealand to reduce housing costs to 30% of their household incomes. Of that, $2.4 billion would need to be directed to households with less than 80% of their regional median household incomes.

One pathway is through progressive home ownership products. For modest income households with unaffordable housing costs these provide a pathway out of insecure rental. For Government, they could expand the affordable housing stock and relieve pressure on rental supply and rents.

If the accommodation supplement directed to renting households with median or higher incomes relative to their regions, or households with household incomes more than $100,000, was used to support progressive home ownership products for a period of three years, a further $558 million could be redirected with the potential to deliver $1.6 billion of new, affordable homes.

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