Misunderstanding the investment approach

Stuff reports:

New Zealand’s neediest could miss out on taxpayer-funded homes under a proposal being put forward by Work and Income, an expert says.

The Ministry of Social Development is considering applying an “investment” approach to social as Labour claims state stocks are expected to drop by more than 2000 in the coming decade.

A similar “investment” approach, taken from the insurance industry, has already been adopted for beneficiaries to help target groups that are expected to cost the state big money in future and push them into work quickly.

MSD, through Work and Income, took over assessing rent subsidies from Housing NZ this year, as part of a push to get more private players involved in social housing.

MSD general manager Damian Edwards said it was early days in the switch and adopting the for housing was far from a done deal.

But Victoria University public policy professor Jonathan Boston said while it was “perfectly reasonable” for the Government to seek independent advice, using an insurance model for housing would produce “perverse incentives”.

If the Government was trying to minimise its long-term cost this could push them toward prioritising families and people in high incomes over lower incomes, undermining the whole purpose of state housing, he said.

“Those on higher incomes would be eligible for a smaller state subsidy, thus reducing public funding costs. Yet it is those on low incomes who have the greatest need for social housing.”

I think this is totally misunderstanding the investment approach. This approach doesn’t just look at direct spending, but looks at the long-term costs and benefits. Families most in need will get the most benefits from housing support – it can lead to better health and education outcomes for them. To suggest the investment approach would see state houses go to wealthy families is ridiculous.

In fact this Government has been saying that when a family is no longer poor, then they should give up their state house for a family that is more needy – a policy which incidentally is opposed by the opposition who think that once someone gets into a state house they should never ever be required to leave it – no matter their income.