Friday 2 November 2018

KiwiBuild Should Be Targeting The Poor.

Lotto - Oops, I Mean KiwiBuild Ballot - Winners: Derryn Jayne and Fletcher Ross pose with Phil Twyford and Jacinda Ardern outside their new KiwiBuild property in Papakura. Twyford is willing to buy Labour’s promised houses straight off the property developers’ plans. At a stroke, bad financial bets are transformed into sure things. Phil’s happy. The developers are happy. The banks are happy. And the winners of KiwiBuild ballots are over the moon.

KIWIBUILD, Labour’s flagship housing policy promising first-home-buyers 100,000 affordable dwellings by 2028, is a dog. It started out as a political fix and has yet to mature into coherent policy. Nowhere are Labour’s ambitions for KiwiBuild matched by the resources needed to fulfil them. Worst of all, the people most in need of 100,000 extra dwellings – beneficiaries and the working poor – are not the scheme’s targets. KiwiBuild is a perverse mixture of corporate and middle-class welfare, offering a handsome subsidy to builders and a generous hand-up to young professionals.

KiwiBuild began its life as David Shearer’s answer to David Cunliffe. In November of 2012, convinced that the Labour Left was plotting to replace him, Shearer was casting about desperately for a political circuit-breaker. He needed something that would halt the ambitious Cunliffe in his tracks and reassure the party’s rank-and-file that he was a Labour man through-and-through. KiwiBuild was that something. His announcement that the next Labour government would build 100,000 affordable homes for young New Zealanders brought Labour’s 2012 annual conference to its feet. In the warm glow of the membership’s support, an emboldened Shearer banished Cunliffe to the back-benches.

Having served its purpose, KiwiBuild was filed and forgotten. The necessary detailed development work on how it would be implemented, by whom, and at what cost, never progressed much beyond the hurried sketch vouchsafed to conference delegates and the news media six years ago. The consequences of Labour’s failure to fill in the gaps are now embarrassingly clear.

A Labour Party with stronger connections to the world beyond Parliament would have identified much sooner the practical limitations of KiwiBuild. The people and the products required to build 10,000 dwellings every year for 10 years simply aren’t out there. New Zealand’s construction industry remains chronically short of labour. The private sector will struggle to meet its own deadlines – let alone the government’s.

Unlike the First Labour Government, Jacinda Ardern’s coalition is attempting to build thousands of additional new dwellings with a construction industry at full-stretch. John A. (Jack) Lee, the man who oversaw Labour’s massive state-house-building programme between 1935-1938 could summon thousands of unemployed carpenters, tilers, plumbers, electricians and other construction workers to the cause of housing the people. Idle factories could be reactivated to supply the required building materials. This is what made “The Houses That Jack Built” possible. The absence of such vital enabling factors explains the houses that Phil Twyford cannot build in 2018.

Six years ago, when KiwiBuild was born, the full extent of the housing crisis had yet to emerge. Back then, affordability was the issue. The near impossibility of young professionals getting their feet on the first rungs of the housing ladder. Fortuitously, these same young professionals just happened to be the Shearer-led Labour Party’s prime electoral targets. First and foremost, KiwiBuild was a political “solution” to a middle-class “problem”.

Six years on, and the focus has shifted to beneficiaries and the working-poor sleeping in their cars or shivering in the overcrowded garages of family and friends. Voters for Jacinda’s transformational “politics of kindness” they may be, but they’ve not been deemed worthy of 10,000 houses per year. For these, the working-class people in whose name Jack Lee built the “social housing” of 80 years ago, 6,000 new state houses, in total, is considered adequate.

The irony is that, at an estimated price of $650,000, KiwiBuild’s “affordable homes” are rapidly moving beyond the reach of all but the luckiest of middle-class offspring. Those to whom the Bank of Mum and Dad still happily provides a deposit. Those for whom the wills of Mum and Dad hold out the prospect of eventual relief.

Undeterred, the Housing Minister presses on. Treasury may have revised downwards its projection of the scheme’s contribution to residential investment – but what do those “kids” know? Twyford is willing to buy Labour’s promised houses straight off the property developers’ plans. At a stroke, bad financial bets are transformed into sure things. Phil’s happy. The developers are happy. The banks are happy. And the winners of KiwiBuild ballots are over the moon.

About the only people who aren’t happy are those who believe that publicly funded social interventions on the scale of KiwiBuild should be directed first to those most in need. Tragically, however, the Coalition Government is selling the poor a pup.

This essay was originally published in The Otago Daily Times and The Greymouth Star of Friday, 2 November 2018.


guerilla surgeon said...

Working for families 2.0 right? My son is working poor, has saved like buggery while living at home can't get anywhere near a kiwibuild home. Is now cynical about Labour. Their own damned fault if they never get his vote again.

Kat said...

From another perspective Kiwibuild could be viewed as a brilliant tactic to capture a chunk of the middle ground from National, build more houses for those who qualify for a mortgage while dampening house prices, especially in Auckland. A plan so cunning it completely outsmarts the "bleeding blue" weasels.

sumsuch said...

Soft hands in soft gloves, on the eve -- 10-15 years -- of a cataclysmic cliff. The hard slopes that required lifetimes to revolutionise our country. The approach is the difference.

Downside of democracy. Sanders, Corbyn and Gould (?) aside. Or any shouter? Soap-box orators willing to have chamber-pots emptied on them (well-deserved in the case of my g.grandfather in the Irish slums of Lancashire). Persuaders, truth talkers, rather than analysts like our currant politicians. Time is no longer endless like we grew up in, it has a very clear cut-off point. Why am I, among our rationalist stormtroopers, obliged to say God help us.

Anonymous said...

This along with fees free Univeristy fees tells us what a middle class Utopia Labour are bringing to us .. Its 1984 all over again

Anonymous said...

Middle class welfare

AB said...

You can't build homes that are genuinely affordable in the middle of a housing price bubble.

Kiwibuild is a mild market intervention that builds more homes in the lowest price quartile and ensures they go to first home buyers not 'investors' (speculators) or foreigners. It is targeted at the children of the middle-class who would have expected to be able to buy a home in the way their parents did. As Twyford has said, it is among this group that the rates of home ownership have fallen the most. The poor have always struggled to own houses, the bubble has just shifted it from very hard to impossible.

The $180k household gross income threshold for a $650k house is a ratio of 3.6 - and that is pretty much the ratio where genuinely affordable homes should sit.
But because of the bubble, houses at a ratio of 3.6 for low income families with a household income of $60-70k (i.e. houses under $250k) just don't exist.

A more courageous (or foolhardy) government that really wanted to make homes affordable for all would have done things to pop the bubble. They would be out on their necks after one term though. Herein lies the near-criminality of the Key government so gleefully inflating the bubble to make their supporters rich - it is extraordinarily hard to undo in a non-catastrophic fashion

Badu said...

This is a help to sell scheme. Richard Werner and Steve Keen are correct. It's aimed at people who purchased in 2010 for 450k who have a 1.3 million dollar home but don't have the willing buyers to service the debt. So bring In people who buy a kiwi build for 600k sell in 4 years and buy that 1.3 million dollar house. Then those people buy a 2 million dollar home and so on. It's how money is created and the theory of credit expansion.

If no house sales took place for 6 months the money supply would retract by 40 percent causing economic collapse. Most jobs created in the last 20 years have been from the wealth effect of theory of capital gains.

Patricia said...

Apparently Singapore has the answer. Its view is everyone should have a home and it’s Government subsidises the people to do so. I do think we have to think differently about how to get people into their own home.

Anonymous said...

Houses - COnsents Auckland last 20 years..

Tom Hunter said...

Worst of all, the people most in need of 100,000 extra dwellings – beneficiaries and the working poor – are not the scheme’s targets. KiwiBuild is a perverse mixture of corporate and middle-class welfare, offering a handsome subsidy to builders and a generous hand-up to young professionals.

In other news, water is wet.

Really. Why does this surprise you, Chris? Outrage you?

This was always going to happen because Labour and National really are Tweedledee and Tweedledum. I know that sounds trite but FFS it's the simple truth, revealed here in a way nobody can deny. Here's National...

And here's NickK unloading on an eerily similar National housing scheme in 2015: No Minister But Our Subsidies and Bureaucrats are Better:
Fantastic! The National Party is reducing unemployment by providing state subsidies and employing bureaucrats to administer them, but the subsidy has proved worthless! Brilliant! Whoever thought of that should be promoted to the front bench. And it only cost $435 million! Moreover, Nick Smith calls it "stunning".

That must be the most expensive no result ever.

Sadly, NickK's predictions also sound familar:
More awesomeness!

I mean if 2,000 means an expansion of bureaucrats imagine what 80,000 will do. We'll have full employment!

If we're lucky we'll get another government department out of it, and maybe a special ministerial portfolio.

Can't wait.

I've given up on politics in this country: National-led or Labour-led all I and my kids can look forward to is an endless stream of more rules, regulations and bureaucrats to enforce them. About the only thing I'll credit National MP's for is that they don't seem quite as stupid in micro-managing things, although being just as stupid on big visions rather cancels that out.

Tom Hunter said...

Oh - and this from the Otago Daily TImes:
The South Island’s much-heralded first foray into KiwiBuild home ownership has been a bit of a fizzer — at least so far.
So few prospective homebuyers have entered the ballot for 10 KiwiBuild house and land packages in the Northlake suburb of Wanaka that the developer has asked to extend the ballot period by 10 days.

The ballot was due to close on Thursday.

KiwiBuild senior media adviser Mark Hanson said yesterday 20 ballot entries had been received.

‘‘Some houses have received no entries
Four two-bedroom and six three-bedroom detached houses costing between $565,000 and $650,000 are in the ballot.

Clap...... clap...... clap.....

Antbee said...

I agree with the statement that “KiwiBuild should be targeting the poor”. The article unfortunately says nothing of how that can be achieved. Here is a bulletin point summary of my personal view of how this can be done:

1) The Government should not sell off state land. Instead lease it at 2.5 % of its marketable value over 99 years. Much cheaper than buying it at 5 % over 30 years. Do the maths and see what this impact is on a monthly cashflow when about 60% of the cost of owning a house is the land cost.

2) Buildoze older houses and build more high density on state land. Poorer people who only have to lease state land could afford to buy the house built on it. When selling, the only the house changes ownership, not the land. Develop new legislation that allows for one house to be owned by New Zealand residents on state leasehold land. Speculation bubble gone!

3) Develop a state land bank that offers reverse mortgages to existing property owners. This is a solution for the “asset rich cash poor” in NZ who would have an instant top up of the NZ Super. It is also a mechanism that could be used to return land to state ownership.

Sadly, there is no current political party with this land policy on the table.

sumsuch said...

Trump is the death knell on negotiating your way to power. It needs more elements of truth. The force of belief (about reality in the case of the Left).

This situation is more serious than all the challenges except putting food in our ancestors' stomachs. The Depression, the War, pale before it, but it is a sudden complete falling off of the most immense surplus in our species' record rather than those mounting slopes of challenges of much needier folk. We have to negotiate our rumps and tums. For this Greater Crusade. It is easier for the Rich with their shallower better financed expressions to activate people for the crisis they can see coming. A truth-speaker(s) would off-set all this (i.e. a politician/writer). We have more of a goal then our dear Democratic predecessors. To save/ salvage our NZ people.

Yes, my present stomach objects. Or, God help us. Or, our descendants, hopefully.

Anonymous said...

To AB. Under the previous Labour govt of nine years, I remember house prices nearly doubling (maybe more) - don't think the Key govt was the only one against whom the blame can lay.....

greywarbler said...

great points Kat and AB. I am thinking along the lines of tackling our domestic problems on a dual basis. On for the middle class, and one for those stuck at the end of the pirate's plank and trying hard not to fall.

For those there could be help to build a house of their own. They would work with suitable builders, as part of an apprenticeship. Or some would be anabled to buy a largeish caravan, with room to build an annexe onto it - a long lease on suitable land near services, for those willing to live a community, co-operative life enabling wellbeing at a budget level.

There could be a special tax on large landholders aimed at speculators, and government would offer to buy some of that land at market rents. Land will always be a good investment would be the answer to the active-government haters and financial theorists.

Have these on public transport paths, with those set in concrete and not open to the whims of private enterprise game-players.

Tiny house parks could also be established for rent to people who could manage a life in this close confinement requiring organisational and good housekeeping skills which need to be innate, and can't just be learned in a few months.

But real understanding of how having a home, our own place, and happiness of people are linked would be a good starting point. Then add on a desire to help people have a home and comfort would be a big step towards them feeling content with many happy moments. That is all that we can hope for in life; it is impossible to be happy all the time. I would like this government to aim for contentment and security of housing for NZ people.

Anonymous said...

Labour needs kicking in the teeth about this rort against poor people.
Phil Twyford is a rat.
The Trade Unions are quiet.
Jacinda is busy on her make up.
There's a rotten smell in the air.
In fact it's a stink.

Kat said...

"There's a rotten smell in the air.
In fact it's a stink"

Agree, hard to go anywhere near the National party offices these days without taking some smelling salts.

AB said...

To Anonymous at 11:33
Yes - I acknowledge that house prices went up under the Clark Government too - and I think that was one of their two main failings.
The other - which I think we will come to gradually in hindsight courtesy of Anne-Marie Brady, is the China FTA.

It may be my bias showing - but I think the Clark Govt failed to act out of timidity - it wasn't prepared politically to do the things needed to take the heat out of the demand side - like CGT, restrictions on bank lending etc.
Whereas the Key govt I see as deliberately fueling the bubble by hiking up immigration, pretending it was a supply problem only and vigorously attacking any move to address the demand side.
So I think there is an ethical difference between failing to stop something bad out of timidity, and actively encouraging something bad because your supporters benefit from it.

greywarbler said...

Anonymous at 4/11 11.13
It would help if instead of tossing in an opinion as if fact, you commenters actually offered some reliable source link. I think yours is from:

And a sector reviewer, more seasoned and thoughtful than you said:
Economist Shamubeel Eaqub agreed it would be incorrect to tie the fortunes of the housing market to the political leanings of the government.

"Government policy on housing has not changed markedly since the 1980s. The bigger drivers of house prices have been liberalisation of finance, falling cost of borrowing, and slow supply of housing. Correlation with government terms is spurious - conflating correlation with causation."

Here is an interesting one on rising house prices over time:

[PDF]New Zealand house prices: a historical perspective
Jan 1, 2016 - trended up over time, but the extent of the increase in this ratio since. 2009 is ... Over the past three years, house prices have increased 52 percent in ... divergence between house prices in Auckland and the rest of the country is ... charts and figures are up to and including the September quarter of 2015.

Charles E said...

Nasty comments abound from the left above which means you have hit the mark Chris.
Chris I think you got your analysis completely right. Just as it is, for sure.
Labour has surely now proven once again an for ever to all who care to see, not just my lot, their act that they care for the poor is yes, a act. A pure play to get the naïve, especially middle class women, the shallowest of all of us, to vote for them. Next they will hold up babies to show how cuddly they are.

sumsuch said...

Previous comment: 'Or, our descendants hopefully' was a cynicality. I'd rather their stomachs than mine. ' Intervening God'... or the despicable subjectivism that has landed us here ( though it brought us to the stomach state to begin with).