Palmerston North narrowly keeps social housing rent cap

Palmerston North councillors' efforts to find about $16 million in savings over the next 10 years has seen them weigh up removing the rent cap for social housing tenants.

The vote was a tight seven to six in favour of continuing to cap the rent of tenants in Palmerston North City Council-owned units at 25% of their income, rather than removing the cap to generate more money for the 2027-37 Long Term Plan (LTP) budget.

"I appreciate the budget is tight this year but I'd rather see other increases or cuts then try and claw back some of the income we feel we need through the poorest and most vulnerable members of our community," councillor Lorna Johnson said at the meeting on Wednesday.

Johnson was joined in her support for keeping the cap by councillors Bonnie Kuru, Rachel Bowen, Billy Meehan, Brent Barrett, Lew Findlay, and Kaydee Zabelin.

Councillor Lew Findlay told the chambers he didn't support an increase because days before the meeting a council housing tenant called him "in tears".

Findlay said the Palmerston North resident was upset because not only could she not afford asparagus as a "treat from the supermarket", she couldn't even afford butter for her toast.

"Now she has to have toast for the next fortnight with no butter for dinner - she is our tenant - if you put her rent up she won't have any toast for dinner either," Findlay said.

The council met for its first official discussion on the 2027-37 LTP last week, revealing that residents could expect a large rates increase next year unless serious savings were made.

At this stage in the draft process, staff were predicting a total rates increase for the first year of the LTP of more than 10%.

The chief executive would return to council on December 9 with a list of proposed cuts across budgets to find around $16m of savings in the LTP. At this stage, a rent cap would be kept intact due to Wednesday's vote.

Council housing tenants were eligible for subsided rent if they had assets under $40,000, were over 65 years old with low income, or over 18 and receiving a relevant benefit from the Government.

Councillor William Wood said finding other ways to save costs could force financial stress "onto other people and pensioners in our community".

Wood and mayor Grant Smith supported officers looking into removing or reducing the rent cap, with Wood explaining that the council could have an exemption for "the handful" of tenants seriously financially impacted by such changes.

Wood suggested that certain Work and Income benefits would help lessen the blow for the council tenants.

Johnson said Wood didn't appreciate how the benefits worked, explaining that "every tenant would be affected" by a rent increase because the benefit didn't cover the whole proposed increase.

"We don't want to charge our tenants more than 25% of their income because that makes their life unaffordable," Johnson said.

People were only eligible for an accommodation supplement to support paying rent each week while still affording other essentials like food and power, if they had assets below $8000.

Council staff said there were very few tenants not eligible for the accommodation supplement.

The council's 2025/26 Annual Report found that 95-98% of the council's 444 social housing units were occupied, and their tenant priority wait-list had remained consistently high at 257 people.