Tuesday, April 8, 2014

Inconsistent rules about public housing tenants' assets

When it announced the amnesty for public housing tenants' undisclosed incomes and assets, Housing NSW also changed its policy about tenants who own an interest in real property. Now, tenants who own or part own (or whose spouses own or part own) a property 'that they could live in or sell' will be asked to vacate their public housing dwelling. (Some amnesty!)

This change makes more inconsistent the already inconsistent treatment of different assets in Housing NSW's rules. The inconsistency can be illustrated with the hypothetical case of three public housing tenants who each receive a bequest from the estate of their rich Uncle Pennybags.

To the first tenant, Ms Thimble, goes Uncle Pennybags' pride and joy: a Picasso painting ('Weeping Tenant'). It's valued at a cool $5 million. What effect does this asset (now hanging above Ms Thimble's mantlepiece) have on her housing? Under Housing NSW's 'Charging Rent Policy' and 'Tenancy Charges and Account Management Policy Supplement', paintings are a personal asset, and are not assessable for rent rebate purposes. So Ms Thimble remains eligible for a rent rebate, and the amount of her rebated rent is unchanged, as is her eligibility to remain in public housing.

The second tenant, Ms Barrow, receives $300 000, which she puts in a savings account at the bank. For Housing NSW's purposes, this is a financial asset. This means the first $5 000 is exempt from assessment, and the remaining $295 000 is subject to deeming rates (currently 2 per cent on the first $46 600, and 3.5 per cent on the remaining $248 400), which results in an additional $178.12 of assessable income per week. Assuming Ms Barrow's regular income is not high, she'll remain eligible for a rent rebate, but the amount she pays will increase by $44.50 per week. She also remains eligible to stay in public housing.

The third tenant, Ms Shoe, is given title to a vacant one-bedroom flat in an old strata scheme (an agent reckons it's worth $100 000). This asset is real property, which means Ms Shoe is ineligible for a rent rebate (it does not matter that the asset is not actually generating any income). Ms Shoe will have to pay market rent now – but not for long, because Housing NSW will ask her to vacate her public housing tenancy too.

This inconsistent treatment of assets produces unfair outcomes for tenants, particularly those who come into ownership of real property, which, as in our hypothetical, can happen accidentally.

A simpler and fairer approach would be to apply deeming rates on all assets – real property, financial assets, and others – above certain thresholds, with provision for certain assets to be excluded from assessment where that's reasonable (for example, where the flat is occupied by a family member with a disability).

1 comment:

  1. No I do not think any of the above three are entitled to public housing or rent assistance. They should be put in private rental.


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