Taking Stock: Is the Government Doing Enough to End the Housing Crisis?

A Fading Dream: “The past 25 years have seen the gradual demise of the so-called Kiwi Dream – a place where home ownership and the economic independence which this offers, was within reach of most working families. Home ownership rates have fallen to a 60-year low and could fall further. These falls have been alongside rapid house price inflation in many parts of New Zealand and, with this, deteriorating affordability. We are quickly becoming a society divided by the ownership of housing and its related wealth and recent housing and tax policy settings appear to have exacerbated this division.” - Stocktake of New Zealand's Housing, 12 February 2018.

THE FULL MAGNITUDE of the housing crisis confronting the new government stands revealed in its Stocktake of New Zealand’s Housing. Released this morning, the document paints a far worse picture of the situation than even the parties now in government presented to voters from the opposition benches.

In the words of the three authors of the stocktake, Alan Johnson of the Salvation Army, Otago Public Health Professor Philippa Howden-Chapman and economist Shamubeel Eaqub:

“The past 25 years have seen the gradual demise of the so-called Kiwi Dream – a place where home ownership and the economic independence which this offers, was within reach of most working families. Home ownership rates have fallen to a 60-year low and could fall further. These falls have been alongside rapid house price inflation in many parts of New Zealand and, with this, deteriorating affordability. We are quickly becoming a society divided by the ownership of housing and its related wealth and recent housing and tax policy settings appear to have exacerbated this division.”

The policies advanced by the Labour-NZF-Green government in response to New Zealand’s housing crisis – most particularly Labour’s KiwiBuild initiative – no longer impress informed observers as either bold or comprehensive enough to bring about a speedy resolution of the crisis. On the contrary, they seem doomed to fail: there being neither the material, nor the human, resources required to make them succeed.

One has only to look back at the first great wave of state-initiated and funded house construction to appreciate the full scale of the difficulties confronting the new government.

Between 1936 and 1949 the first Labour government was responsible for the construction of 30,000 state houses. In other words, over a period of 13 years, the Department of Housing Construction and its private sector contractors were able to build fewer than a third of the number of dwellings which the present government has promised to build in ten!

What’s more, those 30,000 state houses were built at a time when the New Zealand economy was awash with unemployed labour and underutilised resources impatient to be set to work. Labour’s state housing programme was the New Zealand equivalent of US President Franklin Roosevelt’s “New Deal”: a massive public works programme designed to both enhance the nation’s quality of life and provide steady and well-paid employment for its people.

One of the ways the First Labour Government accomplished these goals was by mandating the use of local materials in state house construction. This decision gave an immediate and massive boost to all those businesses ancillary to the construction industry. To help the private sector keep pace with the state-induced demand, the Department of Housing Construction established two publicly-owned factories dedicated to producing the standardised joinery used in state house interiors.

The present government’s chief promoter of the CPTPP, David Parker, might pause to consider that such a policy of buying and using only Kiwi-made and sourced materials is expressly forbidden in practically all of the free-trade agreements New Zealand has signed since 1984 – including the CPTPP.

The state housing programme of 1936-1949 involved an unprecedented mobilisation of New Zealand’s human and material resources to construct a total of 30,000 dwellings. Even allowing for the fact that New Zealand’s population has more than doubled in size, how likely is it that Labour’s Phil Twyford is going to out-build Jack Lee’s Department of Housing Construction by a factor of 3 – in just 10 years?

Is it even remotely feasible that: from a tight labour market already suffering serious skill shortages; and from a construction sector already running at full-tilt; this government will be able to elicit an average of 10,000 additional houses per year?

Because, just to be clear, that total of 30,000 state houses constructed between 1936 and 1949 was over-and-above the normal total of dwellings commissioned and constructed by and for private companies and individuals. It is not yet clear whether Twyford’s promise of 100,000 “affordable homes” between 2017 and 2027 is on-top-of, or included-in, the output of private house construction.

It is important to remind ourselves at this point that Twyford’s “affordable” KiwiBuild homes are expected to sell for between $500,000 and $600,000 – a price completely beyond the reach of the tens-of-thousands of New Zealanders who possess neither a home of their own, nor a secure tenancy in somebody else’s.

For these: the working-poor on rock-bottom wages; Kiwis struggling to survive on a benefit; and, increasingly, for pensioners without a freehold home of their own; the Labour-NZF-Green government is promising to build just 1,000 state houses a year.

With the findings from the Stocktake of New Zealand’s Housing in their hands. With their heads chock-full of data showing how desperate New Zealand’s housing situation has become, Mr Twyford and his colleagues are proposing to build 1,307 fewer state houses than Jack Lee and the First Labour Government managed to build in a little country laid flat by the greatest depression in human history – eighty years ago.

This essay was posted simultaneously on Bowalley Road and The Daily Blog of Tuesday, 13 February 2018.