​Lifting children out of poverty – why definitions matter

Photo- Newstalk ZB

Take a look at the technical note in the Treasury release. There is an opportunity for Government to look at the definition of the households covered by the policy, stated as: “Defined as living in a household with an income less than 50% of the median equivalised household income before deducting housing costs” . We’ve underlined the last bit to test “why?”

A key aspect of ending childhood poverty is ensuring that families with children have adequate housing that is affordable to them, and which leaves enough income to pay for food, transport, and the basket of goods called life. Here’s an example:

Household Median income: say $70,000 per year. 30% of that allocated to rent or mortgage repayments = $21,000 per year, or $404 per week. This leaves the family with around $30,000 per year for everything else, after tax.

Now, a family earning 50% of the median income – $35,000 per year, paying the same 30% of their income towards housing – $10,500 per year or $202 per week – has only about $1,000 per year to pay for every thing else after tax. If they are lucky, the accommodation supplement increases may get them closer to paying the other $202 per week needed just to pay a rent of $404 per week. But it does nothing to fill the gap between the reality of only having $11,000 per year to pay for everything else life requires, where the median income household has nearly three times as much available.

The Accommodation Supplement does not in itself ensure that housing is affordable – it’s not tied to the cost of housing faced by the family. It should be. And that is a bigger reform that we have not yet heard about.

So we argue for a fresh look at this. Let’s really see our children, and families with children, flourish. There is more than just a calculation error at stake. Wellington City Council is exploring a ‘basket of goods’ approach, as discussed in their 7 December City Strategy Committee report. It’s worth a look and may be one of the ways to bridge this gap.

What do you think?