Eligibility criteria
Issue: Recipient class defined by reference to an income threshold
Clause 29
Submissions
(Accessible Properties, Community Housing Aotearoa, Habitat for Humanity, Marlborough Sustainable Housing Trust, Queenstown Lakes Community Housing Trust)
The submissions are opposed to the income threshold being applied to determine the intended recipient class on the basis that they are too restrictive. They consider that the application of the current income threshold will exclude community housing entities that they believe are most in need of it. For example, Habitat for Humanity considers that the income threshold of some of its current clients would mean that they would exceed the income threshold based on the lower quartile of household income and therefore they would not be eligible for the proposed tax exemption.
The preferred approach put forward by these submissions is to apply tests on the community housing entity that would ensure its income, assets and profits are deployed solely towards the objects of its housing mission, and delivered through a non-profit structure. To enable pathways to independent living, this approach cannot require any further tests of income or assets of the class of recipient household for the purposes of confirming the tax-exempt status of the community housing entity.
If the proposed income threshold were retained, the tests should not be set by reference to the lower quartile of household income but rather 120 percent of the median household income, adjusted annually for inflation and set for each district or City Council jurisdiction throughout New Zealand.
A further related submission is concerned that community housing entities may lose their tax-exempt status if the assessment of the household income level must be observed even after the client has been initially considered eligible to receive housing assistance.
Comment
New section 225D of the Tax Administration Act 1994 permits the Governor-General to make regulations specifying people, or classes of people, who may be recipients of housing products or services offered by community housing entities.
The factors which may be used to determine a recipient may be any combination of the following:
- the person’s geographic location in New Zealand;
- the composition of the household a person lives in;
- the income of the person or household relative to a maximum set by taking into account the lower quartile of household income based on household economic survey data published by Statistics New Zealand, and adjusted by an appropriate economic factor (for example, cost of living); or
- the person’s assets relative to a maximum.
The Minister for Housing and the Minister of Revenue are jointly responsible for making recommendations on these factors.
Officials support the use of an income threshold to help determine the intended recipient class as it will ensure that the proposed exemption is effectively targeted. Furthermore, an income threshold is objective and can easily be applied in a self-assessment environment. We also acknowledge that an income threshold set by taking into account the lower quartile of household income may mean that some current community housing entities will not qualify for the proposed exemption.
The way in which the regulation-making provision in new section 225D is drafted means Ministers can dispense with any one of the factors in determining the intended recipient class. Therefore, there is some flexibility for Ministers to make recommendations on the overall scope of the recipient and to target the exemption accordingly.
In relation to the alternative proposal put forward by submissions, we note that 120 percent of the median household income nationwide in 2013 was $82,000.
We also note that the income threshold (and the asset test) is intended to be measured at the point a community housing entity is considering providing the housing assistance to a recipient, rather than continually measured over time. We can clarify this point in the regulation.
Recommendation
That the submissions be noted.
Issue: Provision of new housing criterion
Clause 29
Submissions
(Accessible Properties, Community Housing Aotearoa, Habitat for Humanity, Marlborough Sustainable Housing Trust)
The criterion that the proposed exemption applies to community housing entities that provide new houses is too narrow. The problem that the amendments are resolving relate to both existing community housing entities with portfolios of families living in shared ownership homes, as well as entities who are currently under contract for delivering shared ownership.
Comment
We agree that the criterion is too narrow. The amendments should apply to both existing and new housing products so long as the activities of the entity includes the provision of home-ownership products and services to low-income households and meet the other criteria.
Recommendation
That the submissions be accepted.
Issue: Reinvestment of profits criterion
Clause 29
Submissions
(Accessible Properties, Community Housing Aotearoa, Habitat for Humanity, Marlborough Sustainable Housing Trust, New Zealand Law Society, Queenstown Lakes Community Housing Trust)
The New Zealand Law Society queries whether the requirement that “all profit of the business is reinvested into the business” might preclude the distribution or application of the profit for community housing purposes that should be permitted – for example, a distribution or application of such profit to or for the benefit of a parent or beneficiary/client community housing entity. (New Zealand Law Society)
The criterion that requires housing profits to be reinvested in the housing activity of the community housing entity should be extended to allow distribution of housing profits to a parent entity that is itself a charitable organisation. (Accessible Properties, Community Housing Aotearoa, Habitat for Humanity, Marlborough Sustainable Housing Trust, Queenstown Lakes Community Housing Trust)
Comment
We support the submissions. Community housing entities should be able to distribute housing profits to a parent entity that is itself a charitable organisation on the basis that the profits would be used to further the charitable purposes of the parent entity. Additionally, community housing entities should be permitted to distribute profits to other related community housing entities as this is consistent with the requirement in new section CW 42B(1)(a).
Recommendation
That the submissions be accepted.
Issue: Registration with the new Regulatory Housing Authority criterion
Clause 29
Submissions
(Accessible Properties, Community Housing Aotearoa, Habitat for Humanity, Marlborough Sustainable Housing Trust, Queenstown Lakes Community Housing Trust)
The proposed amendments and the proposed registration framework for community housing entities should be properly aligned to ensure consistency. For example, currently there is a discrepancy between the definition of “community housing provider” for registration purposes and the proposed exemption criterion relating to the provision of new housing.
Comment
Officials agree with the submissions and the suggested change relating to “Issue: Provision of new housing criterion” should address the submission. We also note that all community housing providers are required to provide social rental products to be eligible to register with the new Regulatory Housing Authority.
Recommendation
That the submissions be accepted.