Wednesday, 18 May 2016


New Zealand’s more than half-century of muddle on housing policy is finally catching up with us. Since the 1950s, successive governments have viewed housing through a very basic lens: maintaining a supply of public housing stock to meet the needs of low income families, and, until the 1990s, using government institutions like the old Post Office and the Housing Corporation (and its predecessor the State Advances Corporation) to finance low interest loans for young couples to buy their first homes.

The two were a simple policy that ensured a steady stock of basic style largely conformist homes would be available in the burgeoning suburbs. They all looked pretty much the same, and were designed to cater for the standard New Zealand family of the time. However, as the dynamics of what National in the 1950s and 1960s used to call our property-owning democracy began to change in terms of family structure, urban development, and lifestyle demands, the political parties were slow to adapt. For National, housing was still about the pursuit of the property-owning democracy, even if rising inflation in the 1970s and the boom in property prices since meant the dream was able to be shared by fewer and fewer people. For its part, Labour has remained trapped in the time warp of Michael Joseph Savage and colleagues shifting furniture into the first state house in 1937. State housing is still a badge of honour for Labour politicians – I recall feeling distinctly uncomfortable when I was a Labour MP that I could not join the boast of having been brought up in a state house!

So both main parties are hostage to their history when it comes to modern housing policy, as the current debate painfully shows. Spurious arguments between the two about whether people with foreign sounding names are to blame, or whether government agencies are up to the mark in meeting the needs of the genuinely homeless are just fiddling at the margins, and continually miss the fundamental point. Their past gives little confidence in their ability to develop the solutions we so desperately require.

Yet the problem is a simple one. We are not building enough houses to meet the needs of our growing population, be they immigrants, New Zealanders returning home, or whatever. And the shortage of available houses is pushing up their price, first and most dramatically in Auckland because that is where the biggest group of our population lives, but more latterly in other parts of the country as well. Nor is it restricted to buyers alone. Many people are discovering that as the equity in their home increases, it is increasingly attractive for them to leverage off that to acquire investment property, and the cost of servicing mortgages on those properties is in turn affecting the level of rents being charged. The consequent spiral seems upward and accelerating.

Some have proposed a capital gains tax as the silver bullet to resolve this logjam, but, in fact, such a measure would be likely to have precisely the opposite effect. It would slow up the property market to the point of gridlock, because no-one would be prepared to sell a property for fear of incurring the tax. No wonder both the major parties have now ruled out the idea.

So the only credible policy response is the simple but obvious one of building more houses. That means central and local government working more closely together to ensure more affordable and accessible land is freed up for development; it means more collaboration with the building industry and the banking sector to ensure house construction programmes are well-managed and that a boom-bust mentality does not take hold, and that young families can be financed into them. Part of that may include income related lending ratios overseen by the Reserve Bank. But the bottom line is pretty clear – we cannot go on with the muddle in housing policy we have now. The paradigms of the last 50 years have to change and rapidly. And if that means a few shibboleths have to be overturned, so be it.

However, that would remove the bones of sniping political contention and establish instead a focus on achieving real solutions. Unfortunately, based on the past 50 years, neither of the two main parties is likely to be that bold, or constructive.

 

 

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