Housing Minister Chris Bishop said the Government is open to changing the way housing benefits work including introducing a graduated system to help people leave public housing and get back into the private rental market.

Speaking during a select committee hearing during scrutiny week at Parliament, Housing Minister Chris Bishop said the Government was reviewing all housing support.

He said it was thinking laterally about a “graduated” system that would look to fix issues created by what has been called a “cliff” between the relatively generous support received by people in Income-Related Rent Subsidy public housing and the far less generous support received by people on accommodation supplement.

“Once you open your mind to the ways in which the system is problematic and you think more laterally about solutions - that is what we are looking at,” Bishop said.

Currently, there are two main social welfare supports for people who find themselves in housing strife: getting in a public house (often called a state house) or receiving the accommodation supplement, a payment to help a household meet their rent or the cost of owning a home.

Multiple reviews of the public housing system in New Zealand have pointed to the fact that the current structure of housing support tends to direct people into the public housing system, where they receive the most generous support. Once someone receives a public housing place, there is little incentive to leave it.

Former Prime Minister Bill English, who recently published a review of housing agency, Kāinga Ora, described this problem as a “cliff edge” in the housing sector. The Government is now reviewing all housing supports in the wake of that review.

This means there is a massive “cliff” between people who receive the relatively generous support provided to people in a public house, equating to about $18,443 a year, which goes to support the roughly 80,000 households in public housing. This compares unfavourably with the roughly $5812 that goes to supporting 360,000 recipients renting private housing. The incentive to stay in public housing is so strong it puts pressure on the government to build more public housing rather than try their luck on the private market.

“There’s clearly an issue there and the last Government’s attempt was a small fund called the Affordable Housing Fund to try and build rentals that offer rents at 80 per cent of the market which is in the middle between market rent and income-related rent,” Bishop said.

“There’s clearly a public policy problem there. So we’re just having a look about at that issue, but it’s part of our wider review of the way in which the government funds all of the different housing funds across the spectrum,” he said.

“You’re looking at something that would sit between a public housing place and the private market,” he said.

Bishop said he did not want to get ahead of the review.

Bishop said the Government was spending $2.4 billion on accommodation assistance.

“That’s two Transmission Gully motorways,” Bishop said.

He said his comments did not mean accommodation supplement would be cut, but that the money spent on housing support could be better used to provide support.

Bishop was asked by Labour’s Housing Spokesman Kieran McAnulty and former Housing Minister Megan Woods whether he would transfer houses from Kāinga Ora to Community Housing Providers.

People who live in what is commonly called a “state house” live in a house owned by the Government through Kāinga Ora or a Community Housing Provider (CHP), which are privately owned largely non-profit providers of housing.

Both houses owned by Kāinga Ora and houses owned by CHPs receive publicly-funded Income-Related Rent Subsidy (IRRS) to pay for the cost of providing that house.

Bishop would not rule out transferring some houses from Kāinga Ora, and therefore public-ownership, to CHPs, which would mean that the houses were still available for public housing tenants, but they would no longer be owned by the Government.

“I’m not going to rule out transferring state houses owned by Kāinga Ora currently to the community housing sector.

“I am not ruling it out but I am not ruling it in,” he said.

McAnulty asked Bishop to rule out the “mass transfer” of houses to CHPs, defining “mass transfer” as approximately 10,000 houses being transferred.

“I’m not ruling out transferring some houses to CHPs.

“I’m not ruling out transferring Kāinga Ora houses to the Community Housing sector,” he said.

Thomas Coughlan is Deputy Political Editor and covers politics from Parliament. He has worked for the Herald since 2021 and has worked in the press gallery since 2018.