Rates postponement scheme poorly publicised
One in four Auckland homes is seeing its rates rise by 10 per cent or more.
They’ll be expecting something similar next year.
And many homeowners will start having to pay either road-user charges or new per-bin collection charges in the coming years.
This is the ‘‘steady as she goes’’ rates policy of Len Brown which has swept like a tidal wave of gloom among Auckland humanity.
People I speak to generally splutter with either the impotent rage of the well-to-do suburbs, which feel like ‘‘Red Len’’ is especially targeting them, or call foul over the financial pain of the middle and lower-income suburbs where wages rises have been muted.
I feel for both but not as badly as for senior citizens relying on New Zealand Super and their investments for their incomes.
They’d be forgiven for feeling as though Auckland is done with them and is pricing them out.
Because of that I predict that unless the spending plans of Auckland Council are slashed (there’s a whiff of rebellion in the air), there will be a sharp rise in older people opting to pay their rates from the equity in their homes.
Some are already doing it.
Auckland Council has a rates postponement scheme which gets virtually no publicity.
Other councils have similar schemes but not all, so if you are not in the super-city boundaries, you may not have the option.
A call to your local council will tell you.
So little-known is the super-city scheme that council call centre staff don’t know much about it and the information on the website is pretty limited.
What the scheme does is allows people who own homes to stop paying their rates and incur a debt to the council instead. To fund this debt, the council borrows a little bit more but really it is a drop in the mega-debt ocean the council now has.
This debt only has to be paid back on the ratepayer’s death, when they sell up their home, when they stop using the home as a residence or at the date they have agreed with the council.
There’s a $50 legal charge for using the scheme and each year the debt incurs an interest charge.
This year it is 2.5 per cent but that can move depending on the council’s cost of borrowing and the cost of running the scheme.
This is a reverse mortgage scheme, very much like that offered by Heartland Bank only much, much cheaper because the council isn’t running it as a for-profit scheme.
Despite that, financial advice is really needed before opting for it because the interest on the sum owed compounds.
And just because council borrowing costs are low now, does not mean they always will be.
The scheme is a bit cumbersome as you have to apply each year to postpone your rates ($50 fee each year), and it is only open to those who have 80 per cent or more equity in their own homes.
There’s nothing in the council literature to speak of it being of particular use for retirees but if rates rises continue the way they are going, then I predict application numbers will skyrocket.
I would also recommend those who are struggling to pay their rates call the council about whether they qualify for a rates rebate, a taxpayer-funded scheme which pays more than $50 million a year to help lower-income people pay rates.
The scheme is poorly advertised and massively under-used.