National's plan to sell state houses and provide income-related rent to tenants in private rentals will drive up rents and house prices, Opposition MPs say.
Prime Minister John Key said yesterday that the Government was looking to extend the income-related rent (IRR) subsidy, which caps rent at 25 per cent of income.
Until recently it was limited to tenants in state houses only, with those in private accommodation who needed help receiving the accommodation supplement.
Key said IRR for another 1000 people would cost the Government $12 million a year against a $500m bill to build 1000 state houses.
Labour housing spokesman Phil Twyford said there were three reasons why the Government plan was economically stupid.
"Subsidies for private landlords will drive up rents," he said.
"Vulnerable families will have to compete with other renters and first-home buyers, making an already difficult housing market even harder to get into.
"And subsidies have only a short-term effect, whereas a house is an asset that can support vulnerable families for decades."
Twyford said Key's plan was a win for landlords, because rent subsidies were a continuous transfer of wealth to private landlords.
Green housing spokesman Kevin Hague said shifting responsibility for housing from the Government to the private sector looked like a cynical attempt to enrich landlords.
"The Government paid out $1.2 billion via the accommodation supplement in the year to June 2014, a policy that is already credited with driving up rents," he said.
"Rents will be driven higher, and while families with rent subsidies may be assisted short-term, the Government will be on a treadmill to pay ever-higher subsidies as house price-related rents increase."
He said the Government should instead be increasing the stock of state houses.
The Government has indicated that over time it will sell about a third of the 69,000 Housing NZ homes as it moves to boost the non-government social housing sector.
Key said there was a legitimate question to ask about what happened to money from Housing NZ's balance sheet, from the sale of state houses, and if that would be reinvested in other housing initiatives.
"The answer is, we'll give you that answer very soon,'' he said.
Asked if the Government had flagged plans to sell thousands of state houses before the election, Key said it had said there would be reform of housing and the way it was delivered, and that was going to happen.
At the moment Housing NZ sold about 800 houses a year "as a matter of business".
The number of state houses sold over the next three years would be "less than the numbers being banded around" he said.