Massive Rates Rise: Does Council care and is this OUR fate?

Independent Grey Power research into the Cost of Living shows that Rates/Rent and Energy are the two largest financial concerns for pensioner households. This is not surprising given that a single superannuant earns $30,090 a year (less TAX). As housing affordability is often viewed as a house price that is 3x income1 this would equate to a house that costs less than 100,000 to buy for a pensioner. If anyone can find such a home, (tin shed, shoebox on a reasonable piece of land), for sale in Hamilton please let me know. Even using the much higher ratio or 6x this is still a home or unit for less that $200,000. 

Rent is viewed as affordable if it makes up 30% of your gross income. So for a single pensioner this would equate to a rent of $173 per week. In Hamilton, in an online search there are currently no properties I could find at this price.

A superannuant Couple earn $45,738 (less TAX). At 6x this translates to a house purchase of $274,500 or Rent of $264 per week. In Hamilton, there was currently just one apartment available.

Of course, for Superannuants if their incomes increase by inflation then this will fix the problem? Actually, inflation adjusted incomes are a great thing for those on high incomes, but for those on low incomes, if essentials (like rates) go up faster than the average rates of inflation they are left behind:

Superannuants	Income	3% Increase	7% Increase
Single on Super	$30,090	$902	$2,106
Couple on Super	$45,738	$1,372	$3,201
Decision Makers
Hamilton Mayor	$180,000	$5,400	$12,600
Hamilton Councilor	$80,000	$2,400	$5,600
Hamilton CEO	$330,000	$9,900	$23,100

1. This begs the question: How does a rates decision maker earning over $80,000 for a part time council job relate to the cost of living crisis for pensioners?

2. Does the cost of a tomato change in relation to the additional income? NO

Rate Impact Example

Hamilton Rates Decision Makers are proposing 25.5% next year, followed by 12.9% and then 8.7%. TOTAL 54%.

Example 2023 Rate	25.5% Increase	12.9% Increase	8.7% Increase	Total Increase 54%
$3,486	$4,375	$4,939	$5,368	$1,883

This three-year rate increase alone will wipe out almost a full year of any potential 7% pension increase for a single person, and almost 2/3rds of an increase for a couple. For many pensioners and other low income households this council proposal sends a signal ‘They do not care’ or worse ‘ go sleep under a bridge’.

There is a Solution: The Fix

The Council has maps out 5 Priority Groups of work. Looking at these ‘priorities’ there appears to be plenty of room for savings. We suggest you look at the details around the council spending priorities, and make up your own mind in terms those priorities. However, in my opinion the following approach to either cancelling non-essential projects, or transferring the rating burden to the project developers, would provide some relief to the rate payer and rental sector:

Check out suggested Project priorities to reduce costs on the 2021 Plan

There is a lot to make sense of in these documents and this makes it difficult for most ratepayers. We will endeavour to provide more detail in the coming months. However, there is certainly a lot of talk out there in relation to the proposal for a very, very expensive new walking bridge across the river 2. The word on the street ‘NO RIVER CROSSING WALKING/CYCLING BRIDGE’. It is nuts……..

Although Council have thrown some budgeted numbers at the projects (over $27m), history tells us that doubling the number will probably be closer to the final truth. We also have to remember that every 3 to 6 years we hear that there is another Council money crisis, demanding rate increases well above inflation. It is little wonder superannuants are suffering.

The people making these decisions do not have their shirt at risk, and are only accountable for the continual project cost increases, or the massive increase in staff and consultants, at the ballot box. The bottom line is – do we trust them? – sadly given past experience for many the answer is No. Every year there appears, what could be referred to as more vanity projects, added to the list. These projects divert funds from essential works and/or put up rates and debt.

There is arguably also a history of destroying community paid assets and providing financial relief to developers that rate payers fund. It would seem that in many cases elected members are making decisions on matters that they do not have skills or experience to apply? I am concerned, if you are concerned also concerned, please feel free to get in touch.

1 Sep 24th 2023 1 News, “Willis on house price-income ratio: 'Targeted to be much lower”, https://www.1news.co.nz/2023/09/24/willis-on-house-price-income-ratio-targeted-to-be-much-lower/#:~:text=The%20house%2Dprice%2Dto%2D,Willis%20and%20Robertson%20agreed%20on.