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Trusts reduce home ownership measures

A discussion paper released today by the Reserve Bank shows that about one-fifth of household assets are held in trusts, and this has had the effect of lowering census measures of home ownership.

The paper looks at family trusts: who owns them, what they contain, and how trusts affect measurements of wealth, income, and home ownership.

The Household Savings Survey (HSS) was undertaken by Statistics New Zealand in 2001, and collected data on household wealth, including the assets and liabilities of family trusts. The paper re-examines the HSS data, finding that in 2001:

  • about 4 percent of individuals and 12 per cent of couples had trusts;
  • total holdings of trusts were $93 billion – around 19 percent of all household assets; and
  • the average amount held by a trust was $707,900, compared with an average $243,600 held by a household.

In the research, HSS data and data on the number of tax returns from private trusts was used to adjust figures on home ownership from the census. The adjusted numbers show that if trust dwellings are viewed as being owned, the home ownership rate in 2001 would have been closer to 70 per cent rather than 68 per cent as shown by the census.

Nevertheless, adjusted ownership rates still decline between 1991 and 2001, although not quite as sharply as the unadjusted rates.

Trust-owning couples with low incomes tended to have high trust holdings. One possible reason for this was that people in this low income group were retired and not earning, but their trusts had accumulated significant assets. Another possibility was that people in this group were those whose incomes are going to the trusts, rather than being received directly.

The paper concludes that trusts substantially affect measures of wealth in surveys such as the HSS. They can also affect reported income in such surveys, as well as affecting home ownership rates. The paper notes that researchers need to be aware of these effects, and take them into account in their analyses.

For further information contact:
Mike Hannah
Head of Communications
Ph 04 4713671, 021 497418, [email protected]