State Housing a Joke

Gareth MorganTax and Welfare

Not a bad view from a state house

Not a bad view from a state house

Here is a classic illustration of how stuffed the welfare system is.

Housing New Zealand (HNZ) allocates it’s low-rent properties to people based on their income and savings.

Ms Bella Bowden easily qualified on all their criteria – a working person on very low pay – and has been a tenant at one property for over 11 years.

HNZ want to sell the house and offered her the chance to buy it – for $1 million give or take a few thousand.

Ms Bowden apparently has a good relationship with her extended family who decided to chip in and get the money together for her.

Her offer to buy the house set NZ staff reeling (which, as an aside, raises a huge question mark over the sincerity of their sale offer to tenants).

HNZ had no idea their tenant had access to such wealth and, after investigating further, are now threatening to throw her off their books as a tenant.

This situation is ridiculous on so many levels.

Government agencies like HNZ try to target help to people.

But in order to target assistance they have to have some view of what is ‘normal’.

In their eyes, it is ‘normal’ to assume people only have their own income or savings to rely on, and so they only look at that when deciding eligibility. But these rigid rules don’t work.

They don’t get support to where it is needed. This is because family life is so enormously varied.

The reported relationship between Ms Bowden and her wider family will resonate with many. Research shows that many people provide and receive financial support from family members who don’t live with them, and this is particularly true of Maori and Pasifika.

How is a welfare system supposed to accommodate the great variety in support that people have access to from their wider network of friends and family?

Do we want HNZ staff to get affidavits from every cousin and Aunty to say they won’t provide financial help?

Does HNZ interview every friend?

Do we want to foot the bill for this work?

Or do we just turn a blind eye to the support people have access to from friends and family, or the support they provide, in effect saying it counts for nought.

In other words, we are indifferent as to the circumstances of someone who has no meaningful support from family and friends and someone who has heaps. Surely not.

The current system of targeting support also provides incentives for people to pull back from being self-reliant.

In this case, the extended family evidently care about Ms Bowden but had no incentive to pool together to help her buy a house earlier, even though it looks like they probably could have.

Why would they, when she was happily housed by HNZ?

The lesson we can learn from this is that the sooner we give up trying to target welfare support the better.

Far better to use the welfare system to provide a basic floor of income to everyone (an ‘unconditional basic income’ or ‘UBI’) which they can then supplement with paid work and any financial or other support offered by friends and family.

Such a system wouldn’t eliminate inequality because we all differ in terms of what we can earn and the nature of our relationships with family and friends.

But it would mean that people have every incentive to be self-reliant and if the UBI was set at an adequate level even those without paid work or a strong network of friends and family would nevertheless have a socially acceptable standard of living.

We would have achieved this outcome without spending the vast sums that are currently absorbed interviewing and assessing applicants.

For more about the UBI see the book The Big Kahuna.

State Housing a Joke was last modified: December 15th, 2015 by Gareth Morgan
About the Author

Gareth Morgan

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Gareth Morgan is a New Zealand economist and commentator on public policy who in previous lives has been in business as an economic consultant, funds manager, and professional company director. He is also a motorcycle adventurer and philanthropist. Gareth and his wife Joanne have a charitable foundation, the Morgan Foundation, which has three main stands of philanthropic endeavour – public interest research, conservation and social investment.