Though loans for workers' houses had been available from the State Advances Office for many years, little had been done by Governments in providing rental houses. In 1936 the new Government planned the extensive construction of rental houses for those who were unable or unwilling to finance a property. Contracts for over 1,000 of these houses were let by mid-1937.
For some years these houses were financed by the use of Reserve Bank credit or Public Account balances at rates of interest varying from 1 to 4 per cent, but settling down towards 1 per cent. In 1941–42 the Reserve Bank supplied £5 million at 1 per cent and 15 million at 1 per cent. The pooling of all loan moneys in National Development Loans Account from 1 April 1942 brought to a head the question of what rate of interest the Housing Account should pay. It was decided that whereas other capital accounts would pay an average rate of 4 per cent on all funds supplied to date, the Housing Account would pay the 1941–42 rates of 1 and 1½ per cent, and rents would continue on that basis.
Although from 1 April 1956 the Housing Account was formally charged the same rate of interest as other accounts, this did nothing more than reveal the difference in interest, as no change was made in rents and the deficiency was written off.
In 1958 the rents of pre-1950 houses (except those occupied by pensioners) were brought into line with the rents of the more costly houses built since 1950; over the restricted field, the increase averaged 11s. per week. In 1961 there was a general increase averaging 15s. per week (again excepting pensioners) designed to enable the account to pay 3 per cent interest, with which it then became charged. This was the same rate as on State Advances housing loans to persons on small to moderate incomes.
Some multistorey blocks of flats have been built for letting, but the high cost means that even on a 3 per cent basis, rents are higher than many low-income tenants can afford. Local bodies have, however, been encouraged to erect blocks, with the help of 100 per cent State loans, at 3½–4 per cent interest and a higher income limit for tenants.
Following a change of Government in 1949, emphasis was placed on home ownership. Not only was construction of State houses reduced, but tenants were also encouraged to buy “their” houses on very favourable terms, with the help of State Advances loans. Many sales were made, with corresponding relief to the Government from local body rates and maintenance.
By 31 March 1965, over 65,000 rental units (houses or flats) had been built or purchased. Nearly 20,000 had been sold for £50 million. Tenancies at that date were over 46,000. Though applications on hand were still about 10,000, the urgent waiting list (primarily families) had ceased to be a national problem. In some places houses available for reletting were sufficient to cope with the urgent list and, generally, the prime need was no longer large houses for families but small units for pensioners and single persons. In fact, with the ageing of tenants, about one-sixth of State rental houses were occupied by pensioners.