Allocating housing assistance equitably

Abstract

In 1991, the National government introduced a package of reforms that fundamentally changed the nature of New Zealand's housing assistance. The actual reform implementation date was 1 July 1992. Assistance had been allocated through a mix of mortgage finance, 'in-kind assistance' Assistance is delivered “in-kind” if the final good or service is allocated rather than cash intended for the purchase of the good or service. in the form of income-related rents for state house tenants and a cash subsidy called the Accommodation Benefit (AB). The new regime abolished income-related rents for state house tenants and replaced the mixed system of assistance with a targeted cash subsidy known as the Accommodation Supplement (AS). This represented a fundamental break from a long tradition of a mixed approach to providing assistance. This did not mean the state stopped providing housing in-kind altogether, only that by setting rents to market levels they stopped providing assistance through the in-kind mechanism. In 2000, the new Labour government reintroduced income-related rents for state house tenants and resumed the earlier focus on increasing the supply of state housing. These comprehensive policy changes provide a testing ground for the central question of this thesis - whether it is more equitable to deliver housing assistance by providing cash income support, through in-kind measures targeted to certain groups, or a mix of both. The thesis does this by defining equity in terms of two kinds, horizontal and vertical equity, and investigating which approach to housing assistance best meets these criteria. Chapter two is devoted to sub-dividing equity into the two parts (vertical and horizontal), and establishing that a housing policy that successfully allocates assistance according to need will also satisfy both equity criteria. Horizontal equity, in the context of housing assistance is satisfied when equals are treated equally. Vertical equity is fulfilled when there is a meaningful differentiation (reflecting society's preference) between those that are not equal. These concepts are more rigorously defined in chapter 2.