TODAY'S HIGH PRICES MAKE STATE HOUSE TENANTS MUCH BETTER OFF THAN INDIVIDUAL HOME OWNERS

Bay of Plenty Beacon, Volume 14, Issue 41, 21 September 1949, Page 5

TODAY'S HIGH PRICES MAKE STATE HOUSE TENANTS MUCH BETTER OFF THAN INDIVIDUAL HOME OWNERS

A State house, where it is available, is let to the tenant at 27/6 weekly for a moderate sized house. This is the only payment required, the cost of rates, repairs, insurance, etc. being borne by the landlord, in this case the State.

The tenant cannot be dispossessed of the house except for flagrant breaches of the standard conditions. A citizen desiring to own his#own home may buy a section and erect a home. In all probability he has to raise a mortgage. In this case the owner has to meet all rates, interest on mortgage, insurance, and the cost of upkeep and repairs. In the course of 30 years, these may be considerable. Any home owner will realise how windows will break, rooms need repapering, painting needs doing every few years, the spouting needs renewing, the fences blow down, the water cylinder bursts, borer precautions must be paid for or else the ravages of the borer repaired, locks wear out, leaks develop in the roof, the drains block, and in 30 years even the electric stove may need replacement. For all these repairs the annual amount spent would be about £l6 10s per annum, although some would place the figure much higher. Painting alone if done at five yearly intervals at £4O per time would account for about half of this figure. Kates Commence It must be remembered also that in building a home, rates commence from the date the section is purchased, and interest commences from the time the first payment is made, although it will be months later before the house can be occupied. To build a home today equivalent to the type of State house which is now let at 27/6 weekly, would cost, it is said, £IBOO for house and section. A man with £3OO capital could raise a reducing mortgage of £ISOO to build his own home, and repay the principal sum over a period of 30 years. His weekly payments could be presumed to be as follows: — Interest and instalment of principal £1 12s 2d. Rates say 6s, Insurance say Is, Estimated cost of repairs 6s 4d. Total weekly outgo £2 5s 6d.

This sum represents 18s per week more than is paid for a State house, but we must remember that in this case the occupier actually owns the place after 30 years. We must not forget however that property depreciates. Two per cent per annum on the cost of the buildings only, is a reasonable figure and this would represent £3O per annum or 11s 6d per week, equalling £9OO, in 30 years. Figures issued by the National Savings Organisation show that Is weekly invested at 3 per cent compound interest for 30' years will produce £124 14s 3d. The best comparison would be to consider the effect of two men with

£3OO capital each, one of whom bdys a section for £3OO and builds a home costing £ISOO. We have presumed that the average weekly outgo in this case is £2 5s 6d weekly for 30 i years.

Same Outgo The other man invests his £3OO

in National Savings at 3 per cent interest, rents a State house at £1 7s 6d weekly and invests the difference amounting to 18s weekly in National Savings. In both cases the outgo is the same, £2 5s 6d weekly. The total payments over the period of 30 years would then be as follows:

Home Owner: Original deposit on home £3OO, Instalment of principal and interest £2628 15s, Rates for 30 years at £ls per annum £450, Repairs, etc. during 30 years at £l6 10s per annum £495, Insurance premiums for 30 years £7B. Total outgo for 30 years £3951 15s. This owner has enjoyed a comfortable home for 30 years, but it has cost him £3951 15s and he has now a clear title to the property which originally cost him £IBOO and has now depreciated to perhaps as low as £9O. Let us be liberal and say that the depreciation is less and the home is now worth £I2OO. The other man rented a State house but he invested the extra amount weekly in National Savings. He also has enjoyed a comfortable home for 30 years, and his financial position at the end of that

time is as follows: £3OO invested in National Savings- for 30 years at '3 per cent compound interest £725 8s 2d, 18s weekly invested for 30

It does not pay a man today to own his own home if he can become a tenant of a State house, according to a Whakatane resident, who has had experience with both types of homes. Costs for repairs, depreciation and, perhaps, a mortgage do not make it worth while. A State house tenant has none of these worries of the individual- owner but leaves it to the landlord.

years in National Savings £2244 16s 6d. Total savings in 30 years £2971 4s 9d.

From this it will be seen that while building costs remain near the present figure the decision seems to be in favour of the State house by about one thousand seven hundred pounds. Taxation on interest would reduce this sum somewhat but it is not possible to estimate what the taxation rate would be over the next thirty years. Social Security tax at the present rate, would reduce this amount by about £l3O over the 30 years but even allowing for this it would mean that the occupier of the State house, far from having nothing, would have a capital sum sufficient to enable him to pay cash for a stately mansion.