Research report

Fiscal costs of different housing tenure groups: social renting to housing security independence

28 Feb 2017
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The purpose of this research was to estimate the impact on the New Zealand government's fiscal costs and revenues of transitioning households along the housing continuum; from social renting towards owner-occupancy.

This report details our estimations comparing the fiscal impact to the New Zealand government of people who live in a rented dwelling versus people who live in a dwelling that is owned by that household. Our estimations are focused on those living in Auckland. We make an additional distinction within the renters group and identify a sub-group depending on their landlord – i.e. Social renters, those who rent from a government agency such as Housing New Zealand or local government. We look at this group separately as the characteristics, demographics and so behavioural outcomes are noticeably different for the social renting sub-group. Our look at the fiscal impact focuses on three main costs to the government: corrections, health (hospitalisations) and benefit payments. We also examine the only source of revenue for which we have data: PAYE tax paid. Ministry of Social Development (MSD) Benefit payments impact included the unemployment/jobseeker, sole parent, and sickness/supported living categories, as well as accommodation supplement payments.

Further distinctions could be seen between the two different types of renters as well. Identifying and quantifying any differences between the tenure groups’ outcomes, and the resulting fiscal impact on the government of shifting people from one tenure type to another, could lead to potential changes or adjustments in policies and actions around renting versus ownership, or different renting types. This would require another level of detailed investigation but could potentially lead to significant impacts on tenure distribution across not only Auckland, but New Zealand. 

We hypothesised that there would be benefits in helping households in making this shift, based on the outcomes experienced by the individuals living in those households. We estimated per capita costs for people residing in Auckland under the three different tenure groups of social renting, renting, and owner-occupancy. We found that per capita costs across these categories for those with Renters were higher than those with Owner-Occupier tenure status. Further, per capita PAYE revenue from Renters were lower than from Owner-Occupiers. We applied our per capita costs to conclude that there are potential net savings to the government, in transitioning people from a (any) renting situation, to an owner-occupier situation. There are net savings of shifting people from both renting and social renting dwellings, to owner-occupied dwellings. However, the magnitude of net savings to the government is more pronounced when shifting people from social renting situations to owner-occupied tenure.

Overall, we find that there is indeed a link between tenure and outcomes across the health, corrections, and benefits payments components of fiscal expenditure, and also for PAYE revenue. The associated benefits of moving people towards housing independence can indeed provide better outcomes for the individuals in question which we show affects the fiscal accounts as well. 

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