Dawn chorus: Wellington's big rental squeeze
Wellington Council tenants squeezed by rising market rents and inability to get income related rent subsidies that state's tenants get; Woods cites Govt's fiscal limits; Bad insurers revealed
TLDR & TLDL: Wellington’s rents have risen the fastest and to the highest levels in the country in the last two years. That is now putting intense pressure on tenants in Council-owned social housing because the Wellington City Council doesn’t have access to the Income Related Rent subsidies that the state-owned Kāinga Ora can get from the Government.
The Council is passing on the higher market rents, forcing many poorer tenants to pay higher and higher portions of their disposable incomes in rents, effectively turning them into ‘second-class’ social housing tenants. This is all about a fight between the Council and the Government over who should pay for an income related rent subsidy that is now needed. The system was set up under the last National Government and rent subsidies were made available to Community Housing Providers, but not Councils. That decision is now coming home to roost.
Ethan Te Ora has two very good pieces in this morning’s Dominion Post (links below) detailing the issues, which could easily be solved by the Government simply using some of its $40b in cash reserves and rapidly-improving budget position to write the cheque. Yet Housing Minister Megan Woods is effectively crying poor, saying there was only enough money for Kāinga Ora to pay the rent related subsidy.
Here’s her comments:
Housing Minister Megan Woods said diverting IRRS funding to council tenants would result in a lower number of people being housed in the public housing programme.
Any decision to the change the policy would need to be “carefully weighed”.
“Because council tenants are already adequately housed, they do not fit the criteria for accessing IRRS, which is funded through the Budget process,” Woods said.
My view: The Council obviously wants to offload these costs and tenants to the Government to avoid the cost falling on other ratepayers, but the Government doesn’t want to pay. It can afford to pay. These tenants are being squeezed severely in a fight between Council and Government. It’s classic austerity thinking in the middle of a pandemic.
The only reason any funding needs ‘diverting’ is there’s a limit placed on the funds. There shouldn’t be for the basic human right of housing. The Council could try to offload its council housing to a CHP to access the income related rent subsidy or try to sell or hand over the houses to the Government. A faster and fairer solution would be to make the income related rent subsidies accessible to councils.
Either way, a solution is needed pronto.
Insurers rapped again by FMA
This is the other big new story this morning. The Financial Markets Authority has released a report this morning accusing general insurers of poor conduct, including instances requiring repayment.
The regulator wagged its finger again, as it did without much success it seems in 2019 in a joint review with the Reserve Bank, although the biggest insurer, IAG, seems to have cleaned up its act more than the rest.
“We have repeatedly made our expectations around conduct and culture clear. It is now time for the industry to take meaningful steps to improve or risk facing regulatory action. The vast majority of these insurers need to do much more work to meet our expectations and prepare for the new regime.” FMA Director of Banking and Insurance Clare Bolingford in the report.
Here’s the core of the report.
Several insurers now have large-scale remediation activity underway as a result of our reviews. Issues requiring remediation include pricing and multi- policy discounts not being applied, over-charging on the agreed premium amount, no-claims bonuses not being applied, late payment fees being charged without appropriate cause, customer data (eg date of birth) not being accurate, and out-of-date product features and benefits that are unlikely to ever be claimed.
While the remediation activity is good news for thousands of customers who will be receiving refunds, the issues themselves are possibly the most disappointing aspect of our review.
A new Financial Markets (Conduct of Institutions) Amendment Bill is going through Parliament now which licenses insurers and banks to ensure fair conduct.
My view: This is all part of the re-regulation of the economy after 30 years where (usually) private companies used the new freedoms gained in the deregulations post-1984 to take the proverbial in the name of profit and shareholder value.
What’s surprised me is how long this process of losing social license has gone on for, and how unrepentant or surprised many of the industry leaders are when they get regulated.
Scoops and other news breaking this morning
Signs o’ the times news
Other places I’ve written and spoken
Some fun things
Geoff Bennett @GeoffRBennettBezos says he thanks every "Amazon employee and every Amazon customer because you guys paid for all of this"
Ka Kite ano