Income-related rent will increase from next year as part of a social housing overhaul. Minister of Housing Chris Bishop says reforms are necessary to improve fairness, but social housing tenants say it puts a further strain on already struggling households. Gisborne Herald reporter Zoe Mills spoke with tenants who shared how they might feel the impact.
Rob is a beneficiary from Gisborne who is unable to work due to health issues.
His 74-year-old father, who has chronic lung issues, moved into a one-bedroom Kāinga Ora home last year.
For the past year, 54-year-old Rob has been sleeping on the floor of his father's home to support him as a caregiver.
The reforms came as a surprise to Rob, who called them "unfair".
"The elderly suffer enough, and especially for low-income families and everything like that ... you've got to fight for everything that you want now."
The reforms were announced last week by Minister of Housing Chris Bishop.
Income-related rent (IRR) for social housing tenants is to increase from 25% to 30% of the tenant's income. The changes will come into force on April 1, 2027.
The reforms are expected to save the Government $387.5m with $374.3m of that to be reinvested in increasing the accommodation supplement for tenants in private rentals.
But Rob said there were other hidden costs Kāinga Ora residents had that the Government may not be considering.
"Elderly still have to rely on being picked up or getting drop-offs, meals on wheels and everything like that. And, I mean, that all adds up. It really does."
1 – TAX CHANGES: FROM BANKS TO CHARITIES
Banks will face a new levy to fund their regulation, but the hit to profits will be minimal. Budget 2026 confirms a prudential levy on banks, insurers and other financial firms, expected to raise $209m over four years – less than 1% of big banks' profits. Finance Minister Nicola Willis said stronger measures lacked coalition support. The levy is due mid‑2027. Charities also face changes: tax-free income rises to $10,000, while donation claims are capped at $100,000. Other tweaks improve R&D credits, foreign investment rules and simplify fringe benefit tax.
2 – SNEAKY SURPLUS
The Government says New Zealand will return to surplus a year earlier than forecast – depending on the measure used. Using OBEGALx, which excludes ACC, a $2.6b surplus is forecast in 2028/29. Under the standard OBEGAL measure, surplus comes a year later. The improvement is driven by stronger tax revenue and a smaller Budget, though benefit costs have increased. Prime Minister Christopher Luxon says this reflects fiscal discipline, helping avoid higher debt, interest rates and taxes. Overall, it signals gradual improvement rather than a fiscal turnaround.
3 – WHAT'S BEING FORECAST?
Economic forecasts show a slow recovery followed by stronger growth. GDP is expected to rise 1.2% in 2026, peaking at 3.2% in 2028. Inflation will hit 4% this year before returning to the 1–3% range, partly due to higher fuel costs. Unemployment peaks at 5.5% before falling to 4.3% by 2030. Debt continues rising in dollar terms but stabilises relative to GDP. Treasury notes ongoing global uncertainty, but expects a steady medium-term recovery. The Government has also cut planned bond issuance by $6b.
4 – HOUSE PRICES TO GROW SLOWER
House price growth is expected to slow, with Treasury revising forecasts down. Prices are now projected to rise 3–4% annually, compared with 6–7% previously. The weaker outlook reflects low migration, softer economic momentum, the end of falling interest rates and policy changes boosting housing supply. Despite this, prices are still set to increase over time. Migration is expected to recover and stronger economic conditions should lift demand. The result is steadier growth, signalling a cooler housing market in the short term but ongoing pressure longer term.
5 – WHERE'S THE MONEY COMING FROM?
Budget 2026 includes $2.1b a year in new operating spending, made up of $3.8b in initiatives offset by $1.7b in savings. Health is the biggest winner, followed by education, defence, and law and order. Savings mainly come from education changes and welfare reforms. There are 191 new spending initiatives and 88 savings measures overall, alongside $1.96b in public service savings. Separately, $5.7b is allocated for capital projects like infrastructure. The Budget balances new spending with savings rather than significantly expanding overall costs.
6 – RAINY DAY FUND FOR FUEL CRISIS
The Government has set aside $450m as a contingency fund in case the global fuel crisis worsens. Finance Minister Nicola Willis described it as an emergency buffer amid uncertainty driven by Middle East conflict and oil supply risks. The fund adds to $150m for fuel storage and support measures, including temporary tax credit and mileage rate increases. Extra funding is allocated to sectors facing fuel-related cost pressures, including Corrections, Police, Health and Education. Treasury expects fuel prices to fall later this year but warns forecasts could change quickly.
7 – BUILDING MORE INFRASTRUCTURE
The Government is investing $5.7b in capital projects across health, transport, education and housing. Health projects include upgrades at Whangārei and regional hospitals, plus planning for a new South Auckland hospital. Transport funding includes $1.77b for the Waikato Expressway and $1.075b for rail upgrades. Education investment covers school redevelopments, new classrooms and land in growth areas. Additional projects include social housing, courts, police stations and defence facilities – supporting infrastructure upgrades and economic growth.
8 – HEALTH GETS THE CASH
Health receives the largest share of new spending, aimed at improving services and access. Funding is expected to deliver more treatments, including cancer care and planned procedures. New mothers will gain a legal right to stay up to three days in hospital after birth. Free bowel screening expands to people aged 56 and over. Cybersecurity gets a $153.6m boost, alongside $300m for digital upgrades. The package targets both immediate demand and long-term resilience across the health system.
9 – SECONDARY SCHOOL FUNDING
Education receives a $2.1b boost, focusing on secondary schooling and assessment reform. Funding includes $61m for new curriculum resources and $20m for teacher training. Vocational pathways expand, with support for new subjects and Trade Academy places rising to 20,000 by 2030. A further $90m goes to NZQA to roll out new qualifications replacing NCEA. Additional funding supports cost pressures, school operations and property upgrades, including a 2% increase in school operating grants.
10 – MORE PRISONERS
Rising prisoner numbers are driving a $487m boost for Corrections, including funding for more prison officers. Police receive $391m to support frontline services and replace their biometric identification system. Community safety groups also receive funding. Separately, $44.9m is allocated to implement the new Arms Act and create an independent firearms regulator. The funding reflects growing demand across policing, corrections and public safety, focusing on staffing, technology and support at both national and community levels.
The ministers for housing and social development were asked to comment on the concerns raised by Kāinga Ora tenants the Gisborne Herald spoke to.
Bishop's team responded with direction to a PowerPoint publicly available on the Beehive website.
A spokesperson for Louise Upston, Minister of Social Development (MSD), responded in a statement.
Social housing reforms were announced last week by ministers Chris Bishop and Louise Upston. Photo / Michael Craig
"MSD provides a range of other financial supports for people with specific costs," the statement said. "For example, support for costs of a disability can be provided through the Disability Allowance – and that can include travel costs and costs associated with prescriptions or medical appointments.
"Older people experiencing hardship are encouraged to contact Work and Income to check what they are entitled to receive."
Impact on single parents
John ( name changed for privacy reasons ) and his teenage son moved into a Gisborne Kāinga Ora home about two years ago. He's not working and receives a benefit as a solo parent. He said the move was a "blessing".
John had been living in a motel for two-and-a-half years before he moved into the Kāinga Ora home.
"I wouldn't put that on anyone, going through that for two-and-a-half years, anyway."
The move meant his son could have his own room and John could have some privacy.
He is concerned at how the reforms will affect his situation.
"They're just trying to make it harder for the lower-income people," John said.
"We're already finding it hard as it is … just trying to get by every week."
John's main costs are food and fuel. He often can't afford to drop his son to school due to rising fuel costs.
"They're just trying to make it worse for us. [We're] just trying to make ends meet with what we have now."
Income-related rent for social housing tenants is set to increase from 25% to 30% of a tenant's income. Photo / Kim Parkinson
Rob is uncertain as to how the reforms will affect his father's living situation and believes other solutions should be considered.
"Why not pick on the rich people? End of story. You know, all the millionaires who we've got in New Zealand, which we've got plenty of, so why can't they give them a bigger tax bracket?"
Shannon Soughtton, group general manager service improvement and delivery for MSD, encouraged social housing tenants who were impacted by the reforms to contact their housing provider or MSD for further support.
