2007: John Key says Housing is in crisis
On 20 August 2007, National’s new leader, John Key, made a stirring speech to the Auckland branch of the New Zealand Contractors Federation. In it, he lambasted the then-Clark-led Labour government;
“Over the past few years a consensus has developed in New Zealand. We are facing a severe home affordability and ownership crisis. The crisis has reached dangerous levels in recent years and looks set to get worse.
This is an issue that should concern all New Zealanders. It threatens a fundamental part of our culture, it threatens our communities and, ultimately, it threatens our economy.
The good news is that we can turn the situation around. We can deal with the fundamental issues driving the home affordability crisis. Not just with rinky-dink schemes, but with sound long-term solutions to an issue that has long-term implications for New Zealand’s economy and society.
National has a plan for doing this and we will be resolute in our commitment to the goal of ensuring more young Kiwis can aspire to buy their own home.”
In 2007, Key described “home affordability and ownership” as a “crisis”.
2016: John Key says Housing is a more like a “challenge”
Almost exactly five years, one of my first blogposts involved the looming housing crisis. On 3 August, 2011, I wrote;
The shortage of state housing is a serious matter, though. This critical problem of decent, affordable housing is not helped by the fact that the Fourth National government (1996-1999) sold around 13,000 State Houses in the 1990s. These properties were supposedly made available to tenants – but actually went mostly to property speculators (who later sold them for tax-free capital gains).
When Labour was elected to power in November 1999, they immediatly placed a moratorium on the sale of state housing. According to HNZ, they currently ” own or manage more than 66,000 properties throughout the country, including about 1,500 homes used by community groups”
This government has re-instated the sale of state houses. It does not take rocket science to work out that selling of state housing reduces the availability of housing stock. Housing Minister Phil Heatley said that,
“… about 40,000 of the 69,000 state house stock will be available for sale,” but then added, “that the vast majority of tenants do not earn enough to be required to pay market rent means relatively few will be in a position to buy“. (Source.)
There seems to be nothing stopping tenants from buying their state house and immediatly on-selling it to a Third Party.
Is it any wonder that the shortage of state housing is not being addressed in any meaningful way?
That was five years ago.
The housing crisis appears to have only recent dawned on National ministers. As Social Housing Minister, Paula Bennett said on 25 May this year;
“Certainly what we’ve seen is it has been more acute in the last two years.”
It is most certainly not a recent problem. It is only “new” if you are a well-paid National minister, living in a tax-payer-funded residence.
In my blogpost five years ago, I offered a solution to the housing crisis confronting this country;
Solution: build more houses.
This may seem like a ‘flippant’ answer to a desperate problem – but it is not.
The building of 10,000 new state houses may seem an outrageously expensive idea. But it would address at least three pressing problems in our economy and society;
1. Persistantly high unemployment.
2. Low growth.
3. Inadequate housing for the poorest of our fellow New Zealanders.
At an average housing cost of $257,085 (calculated at DBH website @ $1,773/m for a 145 square metre, small house), the cost (excluding land) is $2.57 billion dollars, including GST (approximate estimate).
By contrast, the October 2010 tax cuts gave $2.5 billion to the top 10% of income earners.
For roughly the cost of last year’s tax cuts, we could have embarked on a crash building-programme to construct ten thousand new dwellings in this country. …]
It would be a boom-time, as two and a half billion dollars was spent on products and services.
Would it actually end up costing taxpayers $2.57 billion dollars? The answer is ‘no’. Government would actually re-coup much of that initial outlay through;
- other taxes
- reduced spending on welfare for unemployed
- and investment re-couped by rent paid for new rentals
Would it work?
Yes, it would. An NZIER survey expects a strong pick-up in 2013 when the rebuilding phase hits full-flight, with 3.9% annual growth predicted from a previous forecast of 2.6%.
There is no reason why a determined government cannot adopt a bold programme for economic growth.
Instead of borrowing to pay for tax cuts we can ill afford, we should be investing in jobs. The rest will almost invariably take care of itself.
We have the resources. We have the money. We have the demand for new housing. What else is missing?
The will to do it.
National has been half-hearted in it’s will to address this crisis. It has implemented a few lukewarm, ad hoc measures, but they are five years too late and too little.
Some of National’s announcements have been panic-driven;
At other times, National has indulged in it’s favourite past-time of “blame-gaming”;
By 2016, under Key’s watch, homelessness has increased; housing affordability has worsened, and home ownership has plummeted. Our esteemed Dear Leader no longer calls it a “crisis“. It is now just a “challenge“;
“I don’t think it’s a crisis, but prices are going up too quickly.”
“There are plenty of challenges in housing, and there have been for quite some time.”
Make no mistake, this is a direct consequence of National’s laissez-faire approach and an opportunistic reliance on mass immigration to keep the economy afloat at a time when dairying is no longer the main driver of economic growth.
By any definition, National’s “hands off” approach to housing – whether social housing for the poor or affordable housing for the Middle Classes – has been an abject failure.
The mood for change has never been as palpable since the dying days of the Shipley-led National government in 1999.
The Labour Response
On 10 July, Labour leader Andrew Little congratulated Labour on it’s 100th year birthday. He also put the boot firmly and fairly up National’s backside for it’s hopeless track record on housing.
If the supply of food were in short-supply and expensive as is housing for poor and middle-class New Zealanders, there would be rioting in the streets by now. By morning there would be a revolutionary government sitting in the Ninth Floor of the Beehive and Key and his ministerial cronies would be in hiding, exile, or under arrest.
Little began with a brief, but accurate refresher course in New Zealand history;
“We’re here to celebrate Labour’s creation of the welfare state, the achievements of widespread home ownership and the creation of state housing, a free health system and a free education system.
In short, we celebrate the building of a nation.
We celebrate and we remember the image of Michael Joseph Savage carrying the very first furniture into the very first state house.
Offering hope to people that the years of depression were over and there were brighter days ahead.
We’re here to celebrate the beginning of the reconciliation between Maori and Pakeha and the restoration of the mana of the Treaty of Waitangi.
We’re celebrating the decision to make New Zealand nuclear free. We celebrate the courage shown by thousands of New Zealanders who marched against the Springbok Tour.
We’re celebrating KiwiBank. Kiwisaver. Working for Families. The Cullen Fund.
We celebrate Homosexual Law Reform and we remember the scene of the packed galleries in Parliament rising in song after we passed Marriage Equality.
These are Labour achievements.
This is the legacy of our party.”
Little omitted Labour’s de-railing in the 1980s at the hands of a small cadre of Neo-liberal fifth columnists. They who delivered our country into the hands of global finance. They who were the authors of a failed economic experiment that caused generations of misery, and rewarded the top 10% with unearned wealth. They whose names will pass into history and be quietly forgotten.
This was a moment where Little – like his predecessor David Cunliffe – turned his back on neo-liberalism and announced to the country that the experiment was over. Labour would take back the reigns of responsibility for ensuring housing for all;
“After eight years, this government’s lost touch.
And nowhere, nowhere, is this government more out of touch and out of ideas than on housing.
Housing is at the core of a good life.
It provides security and stability.
It helps families put down roots in their communities and save for retirement
It is one of the most common sources of capital for people setting up their own small business.
The ambition of widespread homeownership sits at the heart of our social contract. It is at the heart of the Kiwi Dream.
The promise that if you work hard and do the right thing, you can earn a place of your own.”
A few salient statistics drove home the worsening crisis to anyone who needed convincing;
“Since 2008, when this government came to office, the average house price in Auckland has nearly doubled.
But over the same period, incomes have increased by only 24%.
In the last year, house prices in Auckland have increased by $2600 a week.
Twenty six hundred dollars a week.
It’s crazy. How on earth do you save enough to keep up with that?
The proportion of Auckland houses being bought by investors has now reached 46% – around twice the level of first home buyers.”
Little went on to explain how the housing crisis went in tandem with other worsening social indicators;
“And then there is the hard edge of the crisis.
The rising poverty and homelessness that National turns a blind eye to.
We’ve all heard the stories of Kiwi kids admitted to hospitals with respiratory illnesses because the cold damp homes they have to live in are making them sick.
We’ve all seen the awful media reports in the last few weeks about what life is like for those who can’t find any home at all.
Of the 42,000 people living in overcrowded conditions or in garages or in cars.
Of children sleeping under bushes in South Auckland.
We’ve seen the story of the 11 year old girl, whose mother has a job, but whose family spent months living in a van before they were taken in by Te Puea Marae.
She said that the hardest part is actually not being able to read in the van, because you don’t have space. And there’s not much light because it would waste the battery.”
These are matters raised that Labour’s opponants on the Right cannot easily dismiss or explain away. These are real events from real New Zealanders living under the currently all-too-real neo-liberal system.
Increasing child poverty; income/wealth disparity; and a worsening housing crisis – all of which are the spawn of thirty years of neo-liberalism.
Those who maintain that poverty has deepened because the “market” has not been sufficiently de-regulated, nor government reduced, nor taxes sufficiently cut, need to ask themselves; “At what point does an experiment that is showing no signs of positive improvement have to be concluded as an abject failure”?
As Little demanded from the party-faithful;
“When did this become the New Zealand we lived in?”
Little then laid out what he called Labour’s comprehensive plan to take to the election next year. He said that a Labour government would;
- …urgently address the shortage of emergency housing – with $60 million to provide 1400 new beds in emergency accommodation – enough for 5100 extra people a year. With the existing support that will take the number of people helped each year to over 8,000.
- …reform housing New Zealand – so that instead of being run like a corporation making a profit off the most vulnerable, we can invest hundreds of millions of dollars in building thousands of new, modern, high quality state houses instead.
- …will build 100,000 new affordable homes to be on sold to first home buyers.
- …will set up an Affordable Housing Authority to deliver ambitious new urban development projects, at scale and at pace. We are going to change the face of our towns and cities, and fix this housing crisis. The Authority will have a target to meet: 50% across all of the homes in its developments will have to be affordable. The Authority will look after the Government’s urban land holdings, and will make sure there is a pipeline of land for future needs – for housing, business, schools, parks and hospitals.
- …ban offshore buyers from the market unless they are willing to build a new home and add to the stock..
- …will extend the bright line test so that if you sell an investment property within five years, you’ll pay the full tax on it. That means the short term speculators won’t be able to get away tax free anymore. It means ending the tax incentives to speculate in short term property gains at the expense of families trying to get into a home.
- …will begin consulting on how to end the loop hole of negative gearing.
Perhaps Labour’s most audacious plan is to set up a new “Affordable Housing Authority”.
If one reads his speech a certain way, he is planning on reviving a newer, 21st century version of the old Ministry of Works (which was privatised by National in late 1996.) If so, it could be the most direct way to build houses for people in desperate need.
Considering that most of this country’s infra-structure was built by the old Ministry of Works (or similar state bodies), including the telecommunications systems being used to upload this blogpost onto this website, it would not be a far-stretch of the imagination that it could be done again.
If so, this wasn’t just a speech – it was a Manifesto for the Last Rites of Neo-liberalism.
Property Investors throw their toys out of the cot
The reactionary response from the NZ Property Investors Federation was utterly predictable. They were miffed. All of a sudden, their tax-free pot of gold was about to be denied to them
The Federation’s executive officer, Andrew King, bleated like a spoiled brat who had just been told to share his toys;
“In one part of his speech, he said there were homeless people and people living in overcrowded conditions and they wanted to do something about that. How does making it harder to provide rental homes to these people achieve it? Unbelievable.”
It may have escaped King’s somewhat narrow-attention, but homelessness and over-crowding has worsened during the time that his members have enjoyed spectacular tax-free gains. What were they doing in the last eight years?
He also compared businesses, shares, and farms with housing;
“No other investment is like that. If you do the same with a farm, with shares, with a business, all of those wouldn’t be affected, just rental properties – it’s just wrong.”
Generally speaking, people do not live in “shares”, “businesses”, or farm paddocks (yet). People live in houses. That is the critical difference.
On top of which, astronomical rents are directly contributing to homelessness and over-crowding;
So to whine that, all of a sudden, Labour’s housing policies will “ make it harder to provide rental homes to these [homeless] people” is contemptible.
His members should be held to account for their part in our housing crisis. The sooner that a capital gains tax is introduced at the same rate as New Zealand’s company tax (28 cents in the dollar), the better.
Mr King’s absurd “pity me” comments have crossed the borderline into territory commonly known as;
National discovers Problem & Solution!
Last year, as stories of homelessness; over-crowding; fewer available Housing NZ homes; and worsening housing affordability began to make headlines around the country, National was grabbing money from a government department tasked with caring for the most vulnerable people in our society;
In all, National has raked in over half a billion dollars from Housing NZ;
Housing NZ dividends under National
HNZ Annual Report 2009-10 – $132 million (p86)
HNZ Annual Report 2010-11 – $71 million (p66)
HNZ Annual Report 2011-12 – $68 million (p57)
HNZ Annual Report 2012-13 – $77 million (p47)
HNZ Annual Report 2013-14 – $90 million – (p37)
HNZ Annual Report 2014-15 – $108 million – (p33)
HNZ Statement of Performance Expectations 2015/16 – $118 million – (p12)
Total: $664 million (over seven years)
Labour took dividends as well, around a third of National’s figure. The difference between the two is that Labour builds State housing, whilst National continually flogs them off.
This amounts to looting a critical government organisation that is akin to thieving from a charity.
This year’s 2016 Budget indicated that Housing NZ would pay a dividend of $38 million and $54 million next year, for 2017.
Twenty four hours after Andrew Little gave his speech to the country, Housing NZ suddenly announced no dividends would be paid for the next two years;
Labour’s Grant Robertson offered his rationale for National’s policy U-Turn;
“The first we hear from National that they suddenly believe Housing New Zealand needs to retain that money to invest in state houses is the morning after an announcement by the Labour Party that Housing New Zealand will never be required [by Labour] to provide a dividend to the government.
This is not a coincidence, this is a panicked, desperate response from the government.
What we know is that National has extracted dividends from Housing New Zealand over recent years and it’s quite clear that National has seen Housing New Zealand as a cash cow in the past.”
Bill English refuted allegations that National was panicking over Labour’s housing announcement only 24 hours previously;
“It’s nothing to do with Labour and the Greens. This is a $20 billion entity – you don’t come up with capital plans for the next five years because Labour puts out a press release.”
He also denied that National was looting Housing NZ;
“We don’t accept that taking the dividend is stealing from state housing, because the dividend is not the constraint on what gets built…
…If there was less dividend, we’d just put in more capital – it’s not driven by the availability of the cash.”
National takes money in the form of dividends and taxes from Housing NZ – whilst non-government charities are tax-free? And he earnestly claims it is not “stealing”?!
English then issued the most ridiculous explanation ever heard, that the figures in this year’s May 26 Budget “appear to be based on older HNZ numbers dating from almost a year ago“.
Yeah, right, Bill.
Is the Finance Minister really expecting New Zealanders to believe that the government’s May 2016 budget was full of inaccurate figures?
What is really galling is that Bill English, Steven Joyce, and other National Ministers expect us – the public – to believe this rubbish. It is revealing just how stupid they think we are.
Who is in charge anyway?!
Whenever National implements unpopular legislative changes, they often point to Labour having carried out similar policies.
In 2014, National “borrowed” Labour’s policy by implementing free health-care for children under 13.
Last year, National raised benefits by $25 (to take effect this year) for people on welfare.
This year, having their ‘hand forced’ by Labour’s housing policy, the Nats have cancelled dividends from Housing NZ for the next two years.
National seems to be highly influence by Labour.
Which raises the question; who is actually setting policy and governing the country? Because it appears we almost have a de facto Labour Government pulling the strings.
A Cautionary Note for Labour
On TVNZ’s Q+A on 10 July, Corin Dann quizzed Andrew Little on Labour’s policy toward Housing NZ tenants. Corin Dann specifically asked Little about whether or not tenants should have state houses for life;
Corin Dann: You talk about state houses – an extra thousand state houses. Does Labour believe that someone should have a state house for life?
Andrew Little: I think we think when people are in circumstances where they can’t afford to buy their own home, can’t afford to rent, they’ve got to have a home. They’ve got to have a home, get their life on track, underway.
Corin Dann: Do they have it for life?
Andrew Little: If they’re at a point in their life where their circumstances have changed, and actually, they can afford to buy, my view is I would rather work with them to get them to buy that house so we could then release some funds to build the next state house.
Corin Dann: So you keen National’s policy? They don’t keep them for life?
Andrew Little: Well, I don’t agree with the policy that says we’ll target elderly people on fixed incomes in a state house and see if we can toss them out. That’s not a solution to anything. But what I would say is people who have gone into a state house early, got their lives sorted out,…
Corin Dann: They should move on if they can.
Andrew Little: …the circumstances are right, if we can sell that house to them, why wouldn’t we? And use the funds then to build the next state house for the next vulnerable person.
Selling State houses to tenants is text-book privatisation policy for National, and was a prime plank for the Bolger and Shipley-led governments in the 1990s.
It is a dangerous road for a Labour government to go down.
Selling a state house to a tenant may seem a kindly gesture from a benevolent left-wing government.
But eventually a National-led government will be elected back into power. Their track record on selling State houses is evident and they would have no hesitation in taking a Labour policy of selling State housing to tenants and expanding on it.
This is thin-edge-of-the-wedge, slippery-slope stuff.
This is mis-guided to the extreme, and will provide a future right-wing government a ready-made policy to act upon. And not in a nice way.
If Labour is serious in returning to it’s social democratic roots, it would do well to think carefully before embarking on such a naive policy.
Instead, it should consider the following;
Transience is one of the greatest problems affecting low-income, poverty-stricken families. Moving from one house to another is debilitating to such families – especially for children.
A government report states that transience for children can have extreme, negative impact on their learning;
Nearly 3,700 students were recognised as transient during the 2014 year. Māori students were more likely to be transient than students in other ethnic groups.
Students need stability in their schooling in order to experience continuity, belonging and support so that they stay interested and engaged in learning.
All schools face the constant challenge of ensuring that students feel they belong and are encouraged to participate at school. When students arrive at a school part-way through a term or school year, having been at another school with different routines, this challenge may become greater.
Students have better outcomes if they do not move school regularly. There is good evidence that student transience has a negative impact on student outcomes, both in New Zealand and overseas. Research suggests that students who move home or school frequently are more likely to underachieve in formal education when compared with students that have a more stable school life. A recent study found that school movement had an even stronger effect on educational success than residential movement.
There is also evidence that transience can have negative effects on student behaviour, and on short term social and health experience
Encouraging families to stay long-term in State housing not only creates a sense of community amongst tenants; stability for fragile, vulnerable families, but assists in the long-term stability and education of children.
Not only is a state house “for-life” fair, it provides real, tangible, long-term benefits.
 Guaranteed Tenancy
Low-income, vulnerable families in State housing must be given guaranteed, protected security-of-tenure.
Currently, tenants are exposed to the winds-of-change whenever there is a change in government. Their tenure is at the pleasure of right-wing governments, and mass-evictions have been commonplace under John Key’s administration;
A progressive government must do all within it’s power to protect such vulnerable families. Otherwise what is the point of throwing out right-wing regimes when their ideologically-driven policies no longer palatable, and well past their Use-By date?
Tenancies must be secured. Either by the use of long-term contracts, enforceable in Courts of law, or by some other means such as entrenched legislation.
Labour-led governments come and go.
But tenancies for our most vulnerable must be protected from the whims of others.
 State Housing Protected
As well as protection for tenants of state housing, state houses themselves must be entrenched and protected from the rapaciousness of right-wing governments.
In modern, First World societies, the power of contract is supposedly sacrosanct.
It should not be beyond a progressive government to use some means of contract-law to safe-guard state housing. Once this is accomplished, it should make it near-impossible for a right-wing regime to wreak havoc with the lives of the poor.
Perhaps it is time to look at how we can make the concept of contract-law work in the favour of those who have least wealth to lose.
There is much more work to be done.
Scoop media: Key – Speech to New Zealand Contractors Federation
theyworkforyou.co.nz: State Houses—Sale and Disposal
NZ History: Construction and sale of state houses, 1938-2002
Housing NZ Corporation: Rent, Buy or Own – overview (archived page)
Department of Building & Housing: Estimated building costs (archived page)
Dominion Post: Inequality report ignores tax cuts for rich – Goff
TVNZ News: NZ economic outlook grim until 2013 – NZIER (archived page)
Parliament Today: Housing NZ’s Woes Blamed on Labour
Otago Daily Times: Homelessness increasing in NZ
Fairfax media: NZ home ownership at lowest level in more than 60 years
Labour Party: Andrew Little’s Centenary policy speech
IRD: Company Tax Rate
Radio NZ: Housing NZ to pay Crown $118m dividend
National Business Review: Govt blames outdated Budget figures for Housing NZ dividend U-turn
NZDoctor.co.nz: Free care for the under-13s features in growth Budget
Radio NZ: Welfare increases – what $25 buys you
TVNZ: Q+A – Corin Dann and Andrew Little (video)
TVNZ: Q+A – Corin Dann and Andrew Little (transcript)
Te Ara NZ Encyclopedia: Housing and government – Total Housing Stock
Education Counts: Transient students
Dominion Post: Housing policy will destabilise life for children
Fairfax media: State tenants face ‘high need’ review
NZ Herald: State tenants to make way for workers
Previous related blogposts
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