Free Market Solutions: In 1890, Jacob Riis, one the world's first 'photo-journalists', published How The Other Half Lives, depicting the lives of New York's slum-dwellers. This is what affordable housing for the poor looks like when the provision of this vital social need is left to the tender mercies of "the free market".
WHAT IS IT ABOUT the National Party and state housing? What is it about supplying safe, warm and affordable housing for the poorest New Zealanders that they do not understand? Are Bill English and Paula Bennett so wedded to the notion that ‘the market must decide’ that they are willing to live with the squalor it inevitably engenders?
All around us we see the consequences of allowing market forces to set New Zealand’s housing policy. Young, well-qualified Kiwis, holding down good jobs on good pay, cannot afford to buy a house. While young families, struggling to survive of a benefit, cannot even find one. Property developers and builders, responding to market signals, construct dwellings for those in search of large and expensive dwellings. The smaller, cheaper homes New Zealand so desperately needs exist only in the dreams of the homeless, and on the drawing-boards of progressive architects.
And what is the National Government’s response? To sell up to a third of the state houses entrusted to it by the wisdom and compassion of earlier generations of New Zealanders! When thousands of their fellow citizens are living in damp, over-crowded houses; or caravan parks; or their cars; Mr English and Ms Bennett are proposing to reduce the State’s stock of housing for the poor. Why in God’s name would they want to do that?
National’s comeback is that the provision of social housing is best left to religious, charitable, and other not-for-profit institutions. The State, they say, is a poor landlord. The country’s poorer citizens, they insist, will be better off in the care of the Salvation Army; or their local Iwi; or a city council.
From what possible source will the not-for-profit sector acquire the resources to construct social housing on a scale even remotely commensurate to the urgent need of the homeless? What bank is going to lend money to an institution whose prospective clients are required to endure the most precarious of living conditions? There are very good reasons why very poor people are refused mortgages. (As the whole world discovered in 2008, when the US and UK banks’ insane decision to lend money to people who couldn’t possibly pay it back triggered a global financial crisis.)
Nor is there the slightest historical justification for believing that the housing needs of the poor can in any way be satisfied by the charitable impulses of churches, individual philanthropists, or even – heresy of heresies! – by the good offices of the free market’s mysterious “invisible hand”.
We have all, at some time, used the expression “how the other half lives”. But how many of us realise that it has its origin in a scandal arising out of market-driven housing “solutions”? It was in 1890 that one of the world’s first “photo-journalists”, Jacob Riis, published How the Other Half Lives: Studies among the Tenements of New York, a collection of photographs depicting the horrendous living conditions of the city’s slum-dwellers. The free-market’s “solution” to New York’s ever-increasing demand for affordable housing was to construct gimcrack, windowless, disease-ridden, fire-traps where whole families were forced to eke out their sorry existence in a single, fetid room. To their credit, New York’s middle-classes were shocked into action. Their radical reforms owed little to market forces.
State Provided Solutions: A street of "State Houses" in New Zealand.
And neither did the radical reforms of the First Labour Government. Because, fundamentally, market failure was the problem. Daringly, Labour’s reformers borrowed the capital required to house the homeless casualties of the Great Depression from “NZ Inc”, in the form of Reserve Bank credit. We paid ourselves back out of the increased revenue generated by the housing programme itself (state houses were built, as a far as possible, out of local materials) and, over time, out of the rentals of the tenants themselves. (Being immortal entities, states can wait a long time for their loans to be repaid!)
Has the Government truly forgotten that there is NO non-squalid market-driven solution to a market-induced crisis in affordable housing? Mr English and Ms Bennett certainly haven’t forgotten. If you press them they will admit that their own government may end up lending the potential purchasers of state houses the money needed to acquire our long-ago amortised assets. Yes, that’s right, National’s “market-driven” solution to the housing crisis is to require taxpayers to heavily subsidise private investment in property they already own because the new owners’ “independence” from the State better qualifies them to manage the nation’s stock of social housing than the State itself.
But even if that were true, the State’s alleged indifference as a landlord is almost entirely attributable to the National Party’s longstanding antipathy to the idea that when it comes to putting a roof over people’s heads we are, and must remain, “our brothers’ keeper”. Ultimately, the Government’s market-driven alternative can only be achieved by squander and squalor.
This essay was originally published in The Press of Tuesday, 4 November 2014.