Bryce Edwards: Is it time for a programme of mass state house building?

Bryce Edwards: Is it time for a programme of mass state house building?

Call it “state housing”, “social housing” or this Government’s preference, “public housing” – it’s the accommodation solution that continues to be overlooked and neglected by both Labour and National governments. Sure, the current government might talk a lot about “public housing” and they might be building more state houses than the previous government, but it’s still on a piffling scale, leaving the housing crisis entirely unaffected. So, is it time for a programme of mass state house building?

There’s an argument that with KiwiBuild so utterly discredited as the Government’s flagship policy for this term in power, Labour should now be shifting quickly to something more radical and progressive. State provision of quality and cheap rental housing is still the best remedy for the problems of housing-related poverty and homelessness. Therefore, perhaps the state housing sector – which has largely been neglected not just by this government but previous National and Labour administrations – should become the focus of efforts under the new “housing reset” following last week’s Cabinet reshuffle.

This would effectively mean a shift to the left, which is what I argued last week is a possibility, given that Megan Woods might well be “the first genuine left-wing housing minister in ages” – see: Is the government now more serious about the housing crisis?

Responding to this, Chris Trotter has made the case for what a leftwing shift in housing and state housing policy would look like: “It would kick-off with the complete scrapping of KiwiBuild. In its place, a state-planned and executed programme of state house construction would be announced. Instead of 100,000 ‘affordable homes’ for the frustrated sons and daughters of the middle-class, Woods’ programme would commit to constructing 100,000 state houses for the nation’s poorest families to move into. A state-owned construction company would be required, along with state-owned prefabrication plants. Such a programme would necessitate casting aside practically all of the policy assumptions of the last 35 years” – see: If Megan Woods really is a left-wing housing minister, then pushing for a left-wing shift in housing policy is the last thing she will do.

Trotter goes further in explaining the theory of a leftwing state housing policy: “The construction of so many housing units, their rentals fixed at 25% of the tenant’s income, would very quickly impose massive downward pressure on rents. The business model of the ordinary property investor would be wrecked – forcing more and more of those landlords at the margins to sell-up and exit the market. With more and more properties being offered for sale, prices would plummet. The very people for whom KiwiBuild was originally created would now be able to purchase their first home at an affordable price. By placing its thumb firmly on the supply side of the market’s scales, the state would have solved the housing crisis. At least, that is how a “left-wing shift” in housing policy is supposed to work.”

However, Trotter doubts that the current administration would be bold enough to deliver such a traditional policy mechanism. Furthermore, they’d have to be willing to put up with a lot of negative reaction from the business community and Labour’s middle class voters etc.

Given the worsening housing crisis, it’s not only leftists calling for this Government to get serious about state housing. The OECD report out last week about the New Zealand economy and wellbeing was explicit in recommending that in the area of housing, the Government “should do more to focus on people on low incomes”, and that this meant they should “reallocate money from KiwiBuild to social housing” – see Jason Walls’ The OECD says the Government should make significant changes to its KiwiBuild policy.

Phil Twyford responded to this call for a shift from KiwiBuild to state housing by pointing out the key problem with this: “The idea of just transferring the KiwiBuild allocation across to public housing doesn’t really work because it costs a lot of money to build public housing, as you continue to own them.”

Nonetheless, the OECD report’s primary author, Andrew Barker, has pointed out that in New Zealand, “social housing supply is low by international comparison and there are poor outcomes for at-risk groups, including overcrowding, low quality housing and high homelessness” – see David Hargreaves’ OECD report notes lack of success of KiwiBuild programme and says Govt should focus more on low-income renters.

He also explained that resources directed at state housing would be more beneficial than being directed at more wealthy citizens, saying “Better targeting of government programmes (including KiwiBuild) through focussing more on low-income renters would enhance overall well-being”, and that “Further expansion of social housing in areas where there are shortages has the potential to deliver improvements across a number of well-being dimensions, including health, education and life satisfaction”.

Even on the political right there now seems to be a realisation that an increase in state houses needs to occur. For example, National’s Housing spokesperson Judith Collins is in favour of a greater public housing build.

And rightwing political commentator Matthew Hooton has long argued that the Government must think bigger about supplying housing than the limited and piecemeal approach of the Labour Party. Like Trotter, he suggests that instead of the 10,000 new state houses promised by the Government, this should be escalated to 100,000.

In his latest column on the matter, however, he adds a rightwing element to such a massive state house-building programme: “Better still, [Twyford] would have implemented KiwiBuild as the construction of 100,000 new state houses which would then be sold to tenants under a rent-to-buy scheme. While the Labour left would have whined about privatisation, such a scheme would be a beautiful fusing of the politics of Michael Joseph Savage and Margaret Thatcher” – see: Why Housing Minister Phil Twyford must go (paywalled).

Any sort of mass programme of state building is unlikely, according to Newsroom’s Bernard Hickey, who argues that the current government is just too obsessed with leaving the private sector to fix the housing crisis (even via KiwiBuild, which essentially relies on the private sector), because they don’t want to have to spend money – see: How Phil Twyford lost housing and why KiwiBuild failed.

According to Hickey, the Government is “mindlessly” stuck in the “dark days of late 1980s”, keeping to rightwing fiscal policy that is “horribly out of date” and is precluding them from properly investing in things like state housing.

Hickey says this conservative thinking from Ardern, Robertson and Twyford is having horrible consequences: “They fear an unknown and yet-to-exist crisis in the future when a very present and known crisis exists right now and is right in front of their noses: a massive shortage of affordable and healthy housing that has consigned 250,000 kids to such poverty that 40,000 of them get so sick each year with respiratory and skin conditions they end up in hospital. Their parents are mired in working or non-working poverty that is impossible to break out of without affordable and healthy housing.”

So why is the lack of state house building under the current Government not causing outrage? Perhaps it’s because many people actually mistakenly believe that a massive building programme is already underway. While it’s certainly true that Labour is delivering more than National – which is hardly a surprise or something that Labour supporters can really see as a triumph – it’s still on a tiny scale and one that is more in line with National’s efforts than with current needs.

To get a sense of the increased state housing build, see Henry Cooke’s article, While KiwiBuild falters, state house build rockets ahead with ninefold increase. This article explains how it’s possible that the Government can argue there has been a massive increase in state housing: “There are 2700 state homes under construction, with 1389 due for completion before July 2020. In June 2016 just 282 homes were under construction.”

Although the National Party might quibble with those figures – especially since many of the new builds are actually houses planned and consented by the previous government – there has definitely been an increase. The problem is, given the burgeoning population and greater need resulting from worsening affordability of home ownership, it’s a tiny increase.

Significantly, even under Labour, the proportion of state houses will remain at its lowest point since the early 1990s. Back then, there was one state house for every 50 citizens, and now there is only one for every 70 – for more on this, see my Newsroom column from late last year: Will state housing fix what KiwiBuild can’t?

And many of the new state houses are merely replacing older state houses that have been demolished, meaning that the net increase of state houses is somewhat less impressive than the Government likes to suggest. The new builds also tend to be much smaller than previous state houses.

What’s more, when Housing New Zealand demolishes state houses, the new developments that replace them often involve the sale of some of that state housing land to private developers and KiwiBuild homes – see Mike Treen’s Phil Twyford the privatiser of state assets.

Added to that, not all “new social housing” is actually new. The incorporation of community and council housing into “public housing” means that the increasing house number count might be much less than is presented to the public. For example, earlier in the year Isaac Davison reported: Only one in four of Government’s new public housing places in Auckland are new builds. In this, it is explained that a large proportion of the supply of “new public housing” is actually “redirects” in which properties sourced from the private sector or “non-government providers – like councils or charities – are moved on to government funding”.

The community housing sector is also critical of the way the Government is funding social housing provision, which they say is benefiting the private sector developers. Isaac Davison and Ben Leahy have reported on this, citing one community housing provider worrying that “that Government funding will be pocketed by private owners” – see: ‘Short-sighted’: Govt looks to developers to ramp up social housing – angering non-profit groups.

The community sector is also disappointed that the Government isn’t funding them to build more social housing. Todd Niall reports: “Social housing providers in Auckland say they are being restricted by the absence of capital funding, once provided by the Government. One of the largest said it would not be able to continue building new homes, once its current programme of 167 homes is completed. The body representing 21 Auckland providers said the Government appeared to now be ignoring them, at a time when they could do more for those needing affordable homes” – see: Auckland social housing developers say building will stop because of government funding vacuum.

Meanwhile the housing affordability crisis for those at the bottom just gets worse, as indicated by the official state housing waiting list, which has doubled over the last couple of years and is at its highest point for a decade – see Henry Cooke’s Public housing waitlist climbs to 11,655 as winter begins to bite. And in addition to the increased numbers waiting for housing, waiting times seem much longer.

The factors behind the increase in state housing demand are discussed in Katarina Williams’ article, How NZ’s social housing problem is expected to worsen before it gets better. This also explains why “1261 public houses across the country were sitting vacant at the end of March”. And Auckland Action Against Poverty coordinator Ricardo Menendez March is quoted saying “The Government needs to ramp up the target of state homes being built if it is serious about making a dent on the social housing waiting list”.

And while the proportion of state houses continues to shrink, the private sector just becomes more and more profitable, with landlords continuously putting up rents, turning the “housing crisis” into a “rental crisis”. The latest report on this, out today, says that rents in the capital are growing twice as fast as wages – see Julie Iles’ Wellington rent rises outstripping wages and it’s tipped to get worse.

Finally, the Government’s low ambitions on state housing are putting lives at risk. This is best illustrated in a harrowing RNZ Checkpoint story and interview by Lisa Owen – watch: Working poor: The long, excruciating wait for a state house. This follows the story of one family, on the waiting list for more than four years despite their youngest child recently having “meningitis, prompting a doctor at Middlemore Hospital to write a letter saying the family’s overcrowded conditions were putting the baby’s health at risk.”