Rates postponements

Possibly the most frequent criticism we hear of Land Value Rates is the idea of the pensioner on a small fixed income who has lived in the same house for thirty years and would be forced to sell if their rates went up. First and foremost, this criticism doesn’t make sense because switching to Land Value Rates would actually lower rates for the majority of Wellingtonians and especially those who are less wealthy. But it is true that rates forcing people to leave their family homes is a real issue, and it’s something we need to deal with regardless of whether the rates are levied based on land value or capital value.

One possible answer is a rates postponement scheme, whereby people in need can apply to have their rates payment delayed. The idea is that the rates are then repaid plus interest at some future date, or when the property changes owners. The good news is that Wellington City Council already has such a program. The bad news is, as recently pointed out by WCC candidate Lily Brown, the number of people currently taking advantage of this program is precisely zero. That is, the requirements are so stringent that no one is able to use it.

We think it may be a good idea to expand access to this program, by weakening the conditions necessary to receive a rates postponement. Such an expansion could work well alongside a switch to Land Value Rates, not because LVR is likely to force more pensioners out of their homes than the current system, but because it is a change and it’s important that we give people options to deal with that change and address their concerns around it, even though LVR is beneficial for ratepayers overall. 

One could look at this policy and see something that is not terribly progressive — the council is essentially subsiding homeowners by giving them a lower borrowing rate than they could otherwise access. But the cost would be small compared to overall council revenue, and the benefits of helping residents manage their rates burden are very real.

Overall, if your main concern is asset-rich, cash-poor homeowners (e.g. pensioners) being unable to afford their rates, it’s policies such as rates postponement and rates rebates that will make a difference, rather than the question of rating based on LV or CV. Household liquidity will still be an issue under either system. For our part, we continue to strongly support Land Value Rates because of all the benefits it will bring Wellington: more housing, fairer rates, and fewer empty lots.