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.

Is The Talented Mr Twyford Talented Enough?

The Man With The Plan: The “Housing Crisis” strikes at the core expectations of hundreds-of-thousands of New Zealanders. By promising to meet those expectations, the Labour-led government has made itself a hostage to the supremely-confident individual who insists that he alone has the political skills to end the crisis – Phil Twyford.

PHIL TWYFORD is an eye-roller. Not that there’s anything wrong with that. We all know eye-rollers: those guys (and gals) who consider themselves to be so incontestably “across” a subject that anyone offering a contrary viewpoint is dismissed with an exasperated roll of the eyes. All well and good, providing the subject under discussion is rugby, or the best way to cook a Christmas turkey. But, if the subject under scrutiny is housing: the issue upon which this government is positioned to either succeed or fail; well then, that’s not so good. Not so good at all.

It doesn’t help that the Minister of Housing and Transport, in addition to being an eye-roller, is also a chin-jutter. As anyone who’s ever watched him on television can attest, he is prone to sailing into political discussions like one of those Ancient Greek war-galleys: with his chin standing-in for the battering-ram! Unhelpfully, by positioning his head in this way, Phil is more-or-less required to look down his nose – which only makes things worse!

Eye-rolling superiority, coupled with chin-jutting belligerence, can sometimes work for a politician. Especially when they’re simply part of a much larger ensemble of intimidating behavioural gestures. Just think of Sir Robert Muldoon – or Donald Trump! On the other hand, if you’re determined to be Mean Mr Mustard, then there’s absolutely no point in you also attempting to be Sweet Baby James! Or Phil, for that matter.

All very personal. But, a politician’s personality is not something to be casually disregarded. As Jacinda Ardern has so spectacularly demonstrated, the ability to project a likeable personality can take a politician – and her party – a very long way indeed! By the same token, an irritating political persona can all-too-easily distract voters from their government’s core messages, or, even worse, impede the progress of its core policies.

There is no policy more critical to this Government’s political survival than housing. The availability and affordability of warm, dry houses for all New Zealanders was a key voter motivator in the 2017 election. For many working-class Kiwis, simply finding somewhere to live – at a rent they can afford – has become a relentless struggle. At the same time, young middle-class Kiwis are beginning to despair of ever being able to afford to buy a home of their own. The “Housing Crisis” thus strikes at the core expectations of hundreds-of-thousands of New Zealanders. By promising to meet those expectations, the Labour-led government has made itself a hostage to the supremely-confident individual who insists that he alone has the political skills to end the crisis – Phil Twyford.

No pressure, then, Phil.

Except, every day, the pressures bearing on just about every aspect of the housing crisis grow. Most seriously, doubts have been expressed within both the Reserve Bank and Treasury about the viability of Labour’s flagship housing programme, “KiwiBuild”.

Promising to build 100,000 “affordable houses” in ten years, KiwiBuild has stood at the centre of Labour’s housing policy since 2012: a flashy hand-me-down from the doomed leadership of David Shearer. Essentially, KiwiBuild was a feel-good policy, cobbled-together by the Labour Right to defuse an internal party crisis. It was a rickety concept five years ago and, unfortunately, it’s gotten no stronger.

The problem with KiwiBuild, along with Labour’s other big promise to build an additional 1,000 state houses per annum, is that there simply isn’t an agency of sufficient size and authority; with sufficient financial resources, labour and building materials; to turn Labour’s promises into actual houses in anything like the numbers promised. Regardless, Twyford refuses to countenance the socialistic methods adopted by the First Labour Government, preferring, instead, to rely upon “the market” for a construction effort unprecedented in 80 years.

Accordingly, KiwiBuild looks set to become one of the largest Public-Private-Partnerships in New Zealand history. At least as large as the partnership between the First Labour Government and James Fletcher’s state house construction firm. Unfortunately, this is not 1937: there is simply no slack in the building industry: everything, including its labour force, is fully stretched. Nevertheless, Twyford remains “confident” that the private sector will come to the KiwiBuild party. In the absence of substantial state subsidisation, however, that seems unlikely.

The only path to fulfilling Labour’s housing promises is via the creation of a massive state-directed, properly resourced and publicly-funded entity, driven forward with the same monomaniacal zeal displayed by New Zealand’s first housing “czar”, John A Lee. Jacinda Ardern erred in over-loading Twyford with two key portfolios: Transport and Housing. She should have given the whole Transport portfolio to the Greens’ Julie Anne Genter.

Twyford does not believe he is overburdened. Nor does he accept that his reliance on the private sector will ensure Kiwibuild becomes a fatal political failure. Suggest otherwise and he will simply jut out his chin, and roll his eyes.

This essay was originally published in The Press of Tuesday, 21 November 2017.