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SPECIAL REPORT AND ANALYSIS – by Stephen Minto.

Housing affordability is more than a simple case of demand and supply; there are structural factors creating too much investor demand for residential housing.  Because of this, New Zealand can’t just build its way out of this crisis. And removing planning restrictions will delay intensification and the supply of affordable housing, the exact opposite of what its proponents claim. The structural forces, in which the property market functions, must be fixed.

To see this we need to understand three things:

1. How we got here, and where here is.
2. Our current trends and economic forces.
3. What direction do we want to go in and how (possible solutions).

Part 1: How we got to this crisis – the NZ economy is a one trick pony; residential housing

We all know:

• The ‘normal principles of taxation’ favour holding a relatively low-effort, non-productive asset – residential property. Especially because you could claim the mortgage interest paid as an expense.
• There was no capital gains tax.
• The banks want to lend on leveraged property as a relatively secure loan. They are risk adverse.
• You can have a holiday home and rent it out occasionally as a pretend business to subsidise having it.
• Huge tourism to New Zealand along with AirBNB and ‘bookabach’ etc have given a lucrative income stream in the short-term rental market.
• Mum and dad savers/investors learnt from the 1987, 1998, and 2008 economic crashes that property was the best at retaining its value.
• The renters pay your mortgage, so there is little drain on your ‘income’ or there is positive enhancement from rental losses.
• New Zealand has had positive migration flows.

All these factors have been in place for many years making residential housing a fantastic investment, or superannuation scheme, or wealth–gain mechanism. It’s not clever to invest in residential property, it’s stupid not to.

But wait there’s more – the neo-liberal economic crisis

Commentators don’t talk about the neo-liberal structural changes in New Zealand and other first world economies from 1980 that have collapsed alternative investment opportunities.

The world economy was opened up on the mistaken belief that the great growth years of capitalism were made in an environment of little regulation and tax. A mantra to free up the private suppliers of goods and services (supply side economics) from laws, labour, and taxes was said to lead to an economic boom.

We all know there has been no boom for working or middle class people. There has been a boom for financial capitalism, technology, and billionaires.

What happened was skilled manufacturing and industrial jobs were exported to countries like China, Vietnam, and India. Many high income jobs evaporated in New Zealand leading to fewer people being able to save house deposits or save capital to start a business. Yes we got lower cost imports to match lower incomes, but we also got a throw away society with so much rubbish brought in.

Also, lower taxes and a smaller government meant the main source of apprenticeships, from Ministry of Works, Railways, Defence etc., dried up, leaving New Zealand small businesses without a source of trained and qualified people. They now had  to pay to train them. We now have to import skilled people. We have fewer skilled people to build houses. Fewer apprenticeships means fewer people to set up their own businesses meaning fewer opportunities for those wanting to strike out on their own. Fewer new businesses means fewer medium-sized businesses, which could be an investment option for those wanting to invest.

The above reality is compounded due to the absence of a capital gains tax as business owners have an incentive to take an easy-life option and sell up to overseas buyers. These overseas owners contribute tax and labour costs but they often do their best to avoid these. Businesses listed on the sharemarket are often sold overseas and pulled out of our sharemarket. We now have a thin share market. Profits from New Zealand assets are exported overseas. Most investment capital is not being invested back into growing the New Zealand economy, instead huge amounts of New Zealand’s investment capital is going to non-productive assets, such as residential property. These are all structural problems significantly damaging the ability of the New Zealand economy to grow.

New Zealand is now a service based economy but business set-ups in New Zealand are often for overseas franchises with low margins and wages. In fast food our small shop owners struggle. Retail as a business model is struggling because consumers have less disposable income because of high rents. High rents, and other utilities like power, suck money out of other areas of the economy. Our overall economy is being damaged by being skewed to the non-productive asset, residential property.

This is where the New Zealand economy is today; there is almost nowhere in New Zealand to invest except in residential property. Neo-liberal policies have shrunk our domestic economy and removed opportunities for investment. Entrepreneurs are risk averse – they minimise risk and buy property.

Is there a property bubble?

Yes. High house prices mean loans are beyond the ability of borrowers to ever repay. But that is still profitable for banks. The loans help push house prices higher, which rewards investment in property, and so it continues. But like the 25 July 2021 Radio NZ article ‘The problem with economists forecasts’, many have predicted a bubble burst but all have failed. Why? It’s obvious. The structural problems and incentives to buy residential housing are all still in place. Where else can the investors go? The economic signals from a dysfunctional economy trap investors in residential property. (ref. Radio New Zealand; July 25, 2021)

The property bubble can’t deflate until there is a functioning economy with alternative low-risk options for investment.

There are ways out of this, which is covered in Part 4 of this four part series.

Part 2: The current trends and economic forces shaping housing affordability

New Zealand can’t just build its way out of the affordable housing crisis. Previously I noted the ‘normal principles of taxation’ and the legacy of the neo-liberal experiment are skewing the economy to trap investors into holding residential housing as investments.  This part looks at the recent developing economic trends that now trap middle and working class people into renting for life and why that is bad for our economy.

Trends – big business residential renting

The New Zealand situation sits along with a trend in the United States where large corporations, e.g. the Koch brothers, have been investing in new rental properties because the returns on rentals are so strong. This is because house prices in the US, like NZ, are high. This shuts out most young middle- and working-class buyers. These people then become a captive market of renters as they are wealthy enough to pay high rents. And the high rents in turn make it almost impossible for renters to save a deposit to buy a home, and the captivity continues. The returns and prospects for business are great.

Over time, the rental investor market is moving away from mum and dad investors as they surrender their houses to pay for retirement homes or to release capital to live comfortably. Big business will take up a lot of that divestment; they can leverage far more and so are able to pay and sustain high prices for residential houses. They will also be buyers of older homes to redevelop into more ‘productive’ new builds. Banks will feel secure to lend to a large business with captive renters.

This means the future of housing is evolving into a big business ‘build to rent’ model, which means not ‘generation rent’ but ‘generations of rent’.

And this is bad for the economy. One of the ways it is bad is it leaves people with little capital to borrow against to take up a business option. It traps people as employees. And people renting won’t be able to build equity because there are fewer other investments options and those other options aren’t performing as well as residential property because all the investment capital to grow those other options is being sucked into residential property. And the chances of saving to build equity are low because rents are high. More reasons are given in the next trend (see below).

Some governments have also undermined social housing, which has exacerbated the problem, but that failure did not create the affordable housing crisis.

At this point, some people who own lots of properties will say, ‘So what?’

• Nothing is wrong with people renting.
• Nothing is wrong with high rent if the market is willing to pay it.
• The critics are all anti-business.

My response is this:

• Yes, it is wrong if there is no choice.
• People are not willing to pay high rents – they have to pay them.
• Redirecting investment to the productive economy (exports, innovation, producing goods and services) is good for business.

All businesses will benefit from a shift to investment in the productive economy except the types of business based on highly leveraged rental property. The property investor landlords that are not based on highly leveraged property will carry on renting.

Trends – high price houses and rents are here to stay.

In theory, increasing housing supply will bring down house prices, but that is not so in the economy we have.

For renters, the high prices paid for housing purchases are used to justify charging high rents. Also, big business is very keen on making sure there is a good rate of return on capital, so there’s an incentive to keep rents high.

Supply of housing and the rental price is not really linked. Pricing is about how much ‘consumer surplus’ the seller believes they can extract. It is not about the costs of the business so much as what they think the renter can pay e.g. linked to area, what others are charging in that area for that size of house. What the renter thinks the rent should be is not really relevant. Business costs do not really matter for price e.g. as a landlord pays down their mortgage on a rental property they do not reduce the rent on the property. Cost and supply do not drive rent prices.

The easiest example to see how supply and price is not linked is the car market (used and new). There are a huge number of cars in New Zealand and it is presented to the consumer as a myriad of choices about car style and performance, ‘why do you want the car?’. Each choice means it becomes a smaller range of cars to choose from. Every ‘extra’ feature is a way to distinguish one car from the hundreds of other cars; to push price up, or help hold it up.  This is what will happen with the housing market. The business model market will have a deliberate desire to push choice and variety up to push, or keep, the price up.

So for the ‘build to rent’ business model we will see tiny studio apartments marketed as the affordable option, which really primarily just suits a very young guy on his own, or short-term stays. As the size increases it will exponentially get more expensive. The business model will run that tried and true for-profit strategy. They will start organising your loans to make the purchase so they can get a commission.

Supply is only one of the many factors (e.g. location, quality, number of rooms), to set a rental price. Too many people are talking as if supply will fix the problem of affordability and this is a mistake. For example, a ‘tradie’ did a job at a rental house (almost $700 a week for a whole house in an outer suburb) there were several people home (a Polynesian extended family) and the rental owner, in casual conversation with the tradie, said as there were more people in the house than they thought, they would raise the rent, i.e. they can charge more. This is an insight to price setting. The idea, that people can just go somewhere else if rents rise, is silly. People want continuity with where they live, especially if they have children at schools. Also, demand to rent a property would generally be seen as inelastic, i.e. you need a place to live so you have to pay what is asked for. If you negotiate a rent reduction it tends to be by quite small amounts. (I’m sure there are anecdotes of some large reductions but clearly that is not the norm from the Trade me site or as renters report).

This shows cost, and supply, is not what primarily drives rent prices and this business model will work counter to the government’s, and most voters’ objectives, of ensuring there is affordable housing for our families, children and grandchildren.

Trend – a business ownership model versus a home ownership model

Residential housing is currently being repurposed into a very strong and profitable business model either with long term renting, or short term renting (Airbnb, book a bach etc) for tourism – when tourism returns – the previous model being high levels of home ownership. These business models will further push out home buyers unless they can pay a very high price. Therefore an affordable housing shortage will persist due to New Zealand’s lack of building resource capacity and a positive net migration. This is the nature of the private market and it has already shown it can’t deliver affordable housing. It needs a push, and help, to deliver affordable housing.

With a move to big business running more rentals, the chances of rents being lowered by supply are slimmer than if it was lots of mum and dads running the rental market. A large business will hold many properties and can carry empty property more easily as tax deductions can still be made against the property. High rents on some properties can cover for vacant periods on other properties.

Also the concept of ‘affordable’ is a monetary concept but housing is a qualitative experience. The economic/profit drive for business will be what is market ‘affordable‘ – e.g. those apartments that are south facing and that do not get any direct light, or they look onto a concrete wall. More planning rather than less will be needed to avoid these sort of outcomes.

The private rental market is not conducive to lower rents. For example, one rental comes onto the market and the fact that 10 or 100 people applied for that one new flat is taken as a signal to all the other people holding rentals (with that rental service company) to raise the prices on their other rentals. The private market tends to quickly inflate the impacts of scarcity. But when one rental takes a long time to rent there is no rush to drop their prices on their other rental properties. Private markets tend to hold prices high. So housing supply, if held in the private business model market, will not necessarily bring down rental prices. Anecdotally, I am personally aware of many houses in New Zealand’s capital city Wellington, that are not occupied. Ideally, this housing stock would be used for housing supply if done up, restored, renovated, or simply rented out. Some supply currently exists but is not being utilised. This is the scourge of land banking.

Rents are high now and deflation is only generally associated with economic crashes. There is nothing identifiable yet that would indicate rental prices will decrease. The whole discussion, about increasing the supply being the solution to the housing affordability crisis, is just magic thinking. If left alone, the economic forces at work will prevent increasing supply being able to have a positive impact.

Former BNZ economist (and now an independent economist) Tony Alexander made a point in a NZME bulletin that getting tough on landlords will just drive up rental prices. However, I argue, prices not quality have been rising anyway. Therefore, now is the perfect time to remove interest deductibility from residential rental property, particularly as interest rates are currently low. Nobody is getting tough on landlords, rather investor demand is being dampened and investment capital gently directed away to the productive economy. (ref. Youtube, NZHerald.co.nz; March 1, 2021)

I repeat increased supply and intensification definitely needs to happen but it is not going to launch a huge reduction in house prices or rent as the forces driving investor demand will still be in place. And supply is still a long way off.

But there are things that can be done to free renters and house buyers from high prices by making the market work better. See solutions in Part 4 of this four part series.

Trend – Government as the good quality high paying tenant

The outlook for investors in the rental business is getting even better if rent is made to beneficiaries as the rents are paid direct to the landlord by the government. If there is an overloaded or not properly funded bureaucracy any complaints about the quality of the rental may be slow for the government to follow up on, but the rent continues to be passed through directly to landlords. Business loves it as it is a very secure income stream. If government has to pay repairs for damage it may be a more reliable payer than a private tenant.

On rental price settings that impact government, it was strongly anecdotally reported that with the Government’s first budget, where the accomodation allowance was raised by $50 a person, rents increased correspondingly. This showed the rental business market’s true colours. The rental rise was not based on costs but on the ability to extract the money as the government had declared it available. This shows the government therefore will become trapped in a cycle of paying for high rents by leaving so much of the rental market in this growing private business model.

Trend – business model housing is bad for the economy.

This is bad for the New Zealand economy. High rents, or mortgages (and for other utilities) means less disposable income for renters/mortgagees which leads to less stimulus into the rest of the economy. More disposable income could mean more people seek education, experience the arts, take up exercise, domestic travel, etc. All these are NZ based service industries that are struggling at the moment. But landlords in particular have a captive inelastic market where they can continue to raise rental prices even though interest rates are at a record low.

As said before, high house or rental prices prevent/slows people developing capital on which to create a business opportunity and/or push an innovation they may have developed.

As bad if not worse is the diversion of so much of New Zealand’s investment capital into a non-productive asset, residential housing. We need that investment capital to go into innovation projects and/or producing things for export, or for the services industries that our economy employs most of our people in. The housing market, built on a business model, is not a service industry we want to encourage.

And once the ‘build to rent’ companies take over and they are big enough they might list on the stock market and then the chances of it being sold overseas – with all the rental profits going overseas – becomes very real.

New Zealand will not get wealthy selling houses to each other.

No business representative group should be upset about this redirection of investment into the productive sector of the economy. It will benefit most businesses. It is only those rental businesses built on being highly debt leveraged that will have to change.

There are solutions to high housing prices and the affordability crisis outside a big business rental model, I talk about some solutions in Part 4 of this four part series.

Part 3 – The problems that come from a supply fixation as a solution to housing affordability

The government is aware of complexity in dealing with the housing affordability crisis so it wants to include the private market as part of the solution. They have reflected this in the Urban Growth Agenda. It encourages changes to relax planning rules to facilitate residential development and intensification. This means developers can force their dreams and vision through, rather than a community’s visions of a city being realised. History shows this will inevitably result in conflict and a firestorm will come down on the government and councils as the private market will not deliver affordable housing. Again, inevitably, government and councils will be blamed for damaging the cities as developers will insist they are simply following the rules. And, in turn, opposition political parties can exploit that conflict. The places where these ideas arose from is as follows.

Alternative ideas on affordability

Tony Alexander in the YouTube clip ‘When will house prices cool down/Cooking the books’ from March 1, 2021 says house prices won’t go down because low interest rates are what is driving the high prices. This is a factor because it makes it easier to borrow and leverage a property. But pressed for his suggestion to solve the housing crisis, it is not to raise interest rates (I agree with him) but to remove planning restrictions. This solution is linked to the defective increase supply argument as explained previously. He expresses sympathy for first home buyers and has a great analysis but overall he is passive about most of the factors driving affordability, they just exist for him. Using the metaphor of climate change, I think his analysis is more as a weather forecaster looking at the factors of the day but not as a climate scientist looking at what is underlying and driving the factors.

Alexander’s suggestion on planning is to relax the rules so that six story buildings can be built beside single story buildings. To take Wellington as an example, when this sort of absence of rules existed back in the 1950’s and 1960’s, huge amounts of heritage (for example in central Wellington, Te Aro flats and into Thorndon and Mount Victoria) were destroyed in an ugly way. This is why protection rules were introduced.

Alexander also critiques actions that impact the landlord/investor as being counter productive as any costs placed on them will just be passed on in rents. But even without any government actions rent prices are unaffordable. Fatalism, or perhaps a desire for defeatism, pervades his argument. Because if the actions were successful and investors are less active in the market there would be less demand and less push for prices to rise. And the New Zealand Property Council has said actions on removing the deductibility of interest would dampen investor demand.

• Can planning laws alone fix supply?

The answer is no because of the structural problems created by the ‘normal principles of taxation’ and the neo-liberal economic legacy that encourages excessive investor demand and that will hold housing values up – which holds up rents as well. Planning laws are needed to drive intensification which I fully support, but not at a cost to the historic character and liveability of a city. However, it appears the policy ideas Alexander supports are being listened to by the government.

Urban Growth Agenda – right idea, wrongly executed

For those on the left, the government’s recently developed Urban Growth Agenda is a neo liberal’s dream come true. Why? It is predicated on giving ‘permission’ to private developers to disregard the needs and wants of the existing local communities so the developer can build a six story build right beside one story houses meaning they will loose their sun and privacy with no chance to complain. The developer’s dream or plan (to make money) will come first and be forced through.

The Urban Growth Agenda does not have urban planning as its primary focus. It does have a vision of urban growth intensification which I fully support, but it is not ‘urban planning’. It has a feature Housing Infrastructure Fund which is money set aside to pay for infrastructure to support the private developer’s vision. This fund could cover parks, play areas, but it could also cover drains and water etc. But that is not urban planning for the local community. The risk is the fund will just be mitigation after an eyesore is built and the damage done to the house values of surrounding private home owners – the result: one group is allowed to make money over another group.

Some developers may not care if large buildings are built beside their properties as they can put one up beside it and each building can look into each other. The private developer sector’s vision is bounded by the constraints of; – I have this bit of land here and I need to maximise the profit from it so I stay comfortably in business. Even allowing for ideas like stunning new architecture it is still bounded by those facts. And those facts are not transformative urban planning in a positive community-led way.

The Urban Growth Agenda  also has the Housing Acceleration Fund which provides for government directed as well as private developments. Why should it include private developments when these companies already have access to funds through debt leveraging, which banks seem quite happy to do? Our current housing experience in Auckland already shows private developers are not building affordable housing. They advertise studio apartments for $600,000. This suits short term rentals (Airbnb) investments, or young men looking for a bolthole to call their own. And if a studio costing $600K is rented out, the rent will be high, it will not be affordable.

The history of private developers conflicting with the Resource Management Act is simply their vision conflicting with others who are also stakeholders in the community. A simple way to fix this problem is for there to be an earlier process to identify needs in the city, a proper urban plan of what the housing should approximately look like in this or that area or site, and then for developers bidding or volunteering to be part of that development. The current connect of development and ownership of random pieces of land and then developers trying to impose their vision on that piece of land is causing conflict. Urban development should be more planned. Areas should change as part of a process that is well signalled and worked towards over time. In many areas of central Wellington for example, this can be done quickly as there is so much low intensity commercial use.

The current Urban Growth Agenda is not urban planning but a one sided urban permission to build. The plan too much takes the side of the developers’ interests. Once high rises are built there will be community reactions. Developers will then say we are just doing what we are allowed to within the rules. The public will then turn on the rules makers (the government and council). It is a recipe for anger and conflict which is generally not good long term politics.

There are many ideas to fix the affordable housing crisis while increasing intensification which I fully support. I cover these in Part 4 of this four part series.

Wellington City – an example of planning relaxation that will not lead to intensification and affordable housing supply

Presumably following the Urban Growth Agenda the current Wellington City Council has gone zombie-logic against historic suburbs in the mistaken belief that this is the cause of a lack of intensification in the central city where more people want to live. But a simple glance across the city shows there is lots of low-level commercial buildings and plenty of land on which to intensively build (e.g. Te Aro), and there is little heritage over large parts. Huge fields of carparks cover large amounts of Te Aro. So intensification is not happening in the non-heritage areas, which indicates that heritage is not the cause of a lack of intensification.

There is simply no economic push to intensity which is why intensification hasn’t happened. And reducing the planning rules to increase the amount of land that could be available to intensify (which is what the council has done) will actually reduce the drive to intensify in the central areas.  The issue is simply not about heritage holding back intensification, and counterintuitively, is not about relaxing planning restrictions to increase the supply of land.

There needs to be some scarcity and an economic push to intensify (profit is a good one but that won’t make for affordable housing), and not just a council or government planning rule ‘we want to intensify’ and a permission ‘you can’. Developers will be screaming at this point ‘there is scarcity now!’ Okay? So what is causing that scarcity for their development ideas? Landbanking.

Developers have their little pieces of land they want to develop but they can’t get central city pieces of land because others own it and are just holding it for huge capital gains, (and possibly a lack of finance, or ideas, or ability, or desire). As an example; Wellington City is underdeveloped for central city living because of previous lax misguided neo-liberal councils and in part caused by reducing rates on commercial ratepayers and shifting (the cost of commercial rates reductions) onto residential taxpayers as part of the user pays philosophy. With lower land/rates costs businesses can afford to sprawl and underutilise land. Land banking is more cost effective with low costs. This has encouraged a lack of intensification of land use in the central city and encouraged suburban sprawl up the coast and Hutt Valley to get affordable housing.

The Wellington City council is currently allowing several developments of low level townhouses in the city, (car yards in Taranaki Street, and near Vivian Street between Willis and Victoria streets). The obvious question ‘why aren’t these semi industrial/commercial areas (car yards and carparks) developed into quality high-rise intensified living areas? The owners likely answer is – that low level two story builds are lower-cost to build compared to multi-storey builds, and therefore profit is maximised. But the real answer is nobody is demanding they build up or else. Developers should be instructed that as this site/area is slated for medium to high density housing, therefore they must comply and build it that way. And, if they are unwilling to do so, then perhaps somebody else will.

Another example to demonstrate this lack of push to build up, is car parks in Wellington. Carparks used to be many stories high. Now Te Aro has many sprawling field carparks. Parking provides enough income to business to cover costs. There is no drive for central city landowners to intensify and make the most of their land, so they do not. Council has listened and responded to developers who argued about planning issues, because that is what developers see. But what residents see is liveability with heritage. There are plenty of other areas to build affordable housing without destroying heritage.

The new Wellington Spatial Plan, which has significantly relaxed planning rules, is a disaster for heritage housing in central Wellington and the liveability of the city for all ratepayers. Heritage brings tourism and is one of the main factors that makes a place special and gives it character. Successful central cities have gardens and trees connected to history that allow views and sun. For those who have lived in and hated dilapidated heritage houses; that fault lies with the landowners who are land banking and exploiting people. That is what needs to stop.  Heritage housing can easily be renovated and restored to a modern exciting excellent standard.

To those who say heritage is a poor use of land which is not permitting inner city development to occur so as to accomodate an increase in inner city residents; and people come first. Heritage is people coming first. The brand new two story no parking townhouses in Taranaki Street are no more effective at housing than low level heritage. Yes more people will live there than before (it was a car yard) but what about the long term opportunity cost of not having medium to high density intensification on those sites. More importantly these are crammed in with little outlook or privacy. The chances of them being subject to an urban ‘Vicious cycle’ is quite high, i.e. good residents move out as the units are too cramped/not private/noisy from wooden frames, ergo; rents drop, maintenance drops, those with little means arrive, poverty can drive overcrowding, meaning more people move out, repeat.

But even if we destroy all heritage and built residential Burj Khalifi towers over every block in Wellington, a time will come when all space will be used with a maximum possible number of people – then what for the people who still want to come? My point; there is a limit to the number of people who can live central. New York did not destroy Central Park to allow more people to live central. Beijing didn’t destroy the Forbidden city to allow more people to live central. Wellington should not destroy its heritage either.

Heritage (pre-1930’s houses) is a very finite and dwindling resource that is critical to the Wellington economy, i.e. tourism, including domestic tourism. It is also critical for the liveability of all residents. And unfortunately New Zealand history can’t just be corralled to a few tiny zones as proposed in the plan because historic houses in Wellington have not been corralled previously, so they are mixed in with other buildings, that is the nature of history. The problems arise as though the buildings do not mind a big new six story building beside it, the people living there do, and they vote.

Relaxing planning rules on heritage is not the solution to drive intensification of the residential housing supply.  More planning and direct requirements on developers is needed, not less. But their projects can be supported when they accord or are adapted to fit with the community’s vision of the city. It could be that a developer may have land in an unsuitable location for their desired project but there may be land in another location, held by council, or government, or somebody else that could fit with that development. So it could be supported by a land transfer or some such vision.

I put forward several solutions to the housing affordability crisis and the need for intensification in Part 4 of this four part series.

I also suggest that Wellington City councillors roll back their Spatial Plan before the next local body election as there is already talk about councillors being challenged. It is a political gift to an opposition when large buildings are built in low level residential areas. Councillors want affordable housing and intensification like I do, but the roll back of planning restrictions is the empowerment of big business to force through changes they want without direct community involvement. You are facilitating the old neo-liberal ideas that have failed. (So Ironic that Nicola Young didn’t vote for less planning rules. Good on her.) On affordability you are saying to developers ‘you do it, build it, save us’. But that is simply not how they operate. They are attracted by the high prices for high rewards. But the high prices can’t deliver the affordable rents as they must have a sufficient return on capital. Your permission to developers to ignore the community is going to come back and bite you.

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Part 4. Solutions – What can we do to fix the housing affordability crisis

SOLUTIONS: We first need to acknowledge there is an affordable housing crisis. Also, it is not a political issue but a fact that needs action to be taken to address it. The current actions will not fix it because the underlying economic forces are still in place that trap investors in the housing market and an increasing number of renters will be trapped renting, with long term equity consequences for the New Zealand economy. That is the basis for the following suggestions. It is the crisis that means we must look at things that may previously have been unthinkable for many.

No political party should be upset about redirecting investment into the productive economy for innovation and exports. No political party should want to stop voters, the average New Zealander, having the chance to build some equity through owning a house, and possibly create business opportunities for their family and for the rest of society from that equity. Those on the conservative side might reflect on the fact that homeowners have traditionally been more conservative. Voters who are eternal renters may be less conservative than you would like.  Tough confronting solutions have to be looked at; it is a crisis.

The following areas of action are needed:

1. ‘The normal principles of taxation’ are overdue for a reset – not just for housing, but in regards to how it directs and shapes the economy, and supports tax avoidance. If done right, it can lead to a less growth oriented economic model but a more sustainable one. Less chance of boom/bust, with more economic activity that benefits smaller entrepreneurs and NZ based businesses. If we don’t do this the lack of affordable housing will remain a problem for New Zealand as the principles are twisted in our economic environment and it will continue to push money into housing that is not affordable. I have developed a submission that reduces tax avoidance, and by shutting down some behaviours it redirects investment capital into innovation, exports, technology, and small local businesses.
2. Provide councils, communities and government with the tools to urban plan more forcefully and directly. These can then be used to ramp up affordable housing much more quickly. The current idea with reduced planning rules is to give that ‘force’ to private developers.
3. Ensure the current housing stock is available and being used to reduce the affordable housing crisis.  This is a cheaper and quicker option than building new, especially compared with intensification projects.
4. Create secure, profitable, alternative investment options other than housing.

Government must take the lead

To build an affordable housing market there is no escaping the fact that the government must take the lead. It must be government projects first. The recent trends show private enterprise does not deliver affordable housing. The burden must be on private developers to prove otherwise.

How can the Government build affordable housing?

The government is best placed to provide affordable housing but is constrained by not having much control over urban land on which to build and intensify housing. And it needs to be fiscally prudent to prevent inflation so it must be careful about borrowing. So as the need for social housing is in crisis, the government should take some or all of the following steps to get hold of existing residential housing.

• Trade in house for investment security – mum and dad investors with one or two rentals may be willing to trade the rentals in for a long term Government ‘term deposit’ paying a high rate of interest that is sufficient to compensate for loss of the rental revenue. This means government gets a house it can provide instantly to a family or person in social need (displacement of demand by another renter occurs but it is for a higher need).
• Public Works Act acquisition – we do it for roads so let’s use it for affordable housing. Sites close to transport could be taken if they were identified for development. From my understanding the Act is actually generous and some people dream of the cash injection from having some rural land taken. A question to consider is; should it be this generous? (In the Netherlands and Germany such acquisitions for housing are normally made at existing land use cost – I’ve not researched what happens in New Zealand).
• Trade up a home for a home – If an intensive development is going to occur but some local houses are needed for that development then perhaps they should be invited to choose one of the brand new houses at no cost to surrender their existing house. This policy would need to consider how much mortgage there is to pay. Should some of that mortgage be paid as well?
• Low intensity land use swap – a developer may have a vision for urban housing intensification and can think of a site where it would be good but does not own the land. In such a situation, a process could be initiated to evaluate the desirability of the low intensity land use versus the quality ‘affordable’ development, and whether the two could be integrated e.g. business on a lower level with apartments above. Once a decision is made, a swap of land could be enforced and perhaps a small compensation paid. Exemptions for historic buildings can be made for low intensity use. Other factors would need to be considered. The same could also apply for the government or local council around transport hubs where they have a desire for housing intensification, or other urban planning objectives, like parks that would support intensified housing.
• Reverse mortgages for house acquisition – the government eyeing up future development sites or as a more general service, could enter the reverse mortgage market with lower fees and protections for these people. A purpose in this is that the house could eventually become an asset for affordable housing.  It should allow transfers from other entities that hold reverse mortgages. These mortgages are generally not good for home owners in rising markets.

Several of these options are relatively low cost to the government or a council. There is a cost layout but the asset (house and land) will be on the government’s/council’s books.

Once land is accumulated the process may be the government/council create a site, designing and planning its function and then inviting tenders to build it. If land is going to ancillary services or activities attached to it e.g shops, there may be the possibility of a joint cost or build. It could be that a site or area is identified and developers are invited to make proposals and tenders for development of that site.

Redirecting investment from housing.

• Trade in house for investment security – The first bullet above is a key component for redirecting investment. In some ways it is similar to a mum and dad rental investors who pay a property company to handle dealing with the rental (maintenance and monitoring etc) and the renters. So they don’t really see the rental house. This option would have to be developed and promoted.
• Micro private/public partnership – The government can also rethink the private/public partnership model which is heavily centred on cooperation with large corporate enterprises. The government could trial a descale down to individual New Zealand investors. A series of infrastructure projects (e.g. transport, housing, education, research, stadium) could be announced  and people could choose to sign up to invest in the ones they want to. Their capital could be used to support the construction and then they would get some sort of reward over time as the asset is used. It means New Zealanders can use their capital to back New Zealand projects and they can see the result. The government would have to ensure there is not too much exposure to risk, just like they do with a big business.

Other options to deliver affordable housing sooner.

• Requiring maintenance of historic houses – For historic houses (pre 1930’s) the local council should have the power, whether the building is rented or not, to require the owner to bring the house up to a modern or restored excellent standard of housing. A house cannot be left to become dilapidated even if the owner chooses to do that, because it is an asset for the city and future generations. It is also a little piece of carbon capture. But as importantly the community must ensure a person living there is not at a health, fire, or safety risk to themselves or others.  If the house is rented then the renting standards should apply – there should be no slum landlords. But the local council or government (perhaps administered by Heritage New Zealand) must decide if any action is to be taken. Should the owner not be financially able to update the house professionally, then the council/government should undertake the work and the amount spent becomes a low interest loan that is secured over the property. They should not be permitted to do the work themselves unless it is professionally being done and checked. Timeframes would be established. When the person sells or dies the loan can be collected from the house sale/disposal, or the house can move into the council’s or government’s stock of affordable housing assets with any balance in value paid out to the estate.
• An ‘empty home tax’. This is a tax in Vancouver as I understand. Anecdotally around Wellington there are lots of empty houses that could be rented but aren’t. Such houses should be sold if the person doesn’t want to do it up. Neighbours could be one of the main way this is identified. Obviously more work needs to be done to investigate and establish how this would work before it is applied.
• If a house has no occupier, then the house must be required to be rented – this is similar to an historic houses requirement and an empty home tax. If the house is in need of repair so it can then be rented, the council can undertake the work (contract in) and the cost of the work becomes a loan (normal interest) secured against the house. In Wellington for example there is anecdotally many empty houses that are a little rough but could quickly and easily be brought up to an excellent standard for rental. If the house is still not rented then the ‘empty home tax’ would apply. Details to stop delaying tactics would all need to be worked out.

These options would all generate local work and open opportunities for apprenticeships. They are quicker than new builds to increase the housing supply.

How should the government/council treat housing ownership when built through schemes it leads or looks after

The ownership model for affordable residential housing is open.

• Government ownership with rotating occupancy as people move on (Traditional state housing occupiers and rents).
• Rent to buy with financial support schemes from government to make this viable.
• Government (creates and builds affordable housing) on sells. The price will vary according to each development. Price would be influenced by market but pushed down to make affordability possible.
• Government owns houses but rentals not targeted to any economic group, rents capped at affordability for the renter. e.g. 20% of income. As income rises so does the rent.

A mix of the above is possible, and there may well be others. e.g. below – rent capped.

Rent capped?

According to some economists there should be no need to buy a house but just rent which gives social/economic mobility if people need to move for work or there’s a change in family circumstances. I do not support this model but it is not without some merit. If this was the case most housing should be owned by government or other entities and rent capped according to an ‘affordability’ concept. e.g. 20% of income. Some push back may occur if private entities complain about the ability to maintain property, or to get a sufficient return on capital.

You can clearly see the housing investment sector is currently in a holding pattern due to the government announcements on removing interest deductibility and the Inland Revenue discussion document that holds out the prospect of options to get around the restrictions. But if this rent cap was required by government now, it would certainly create a very quick and immediate reaction in the rental and housing sectors. It is not something I would recommend but excess investor demand would dry up almost instantly.

In summary

The New Zealand economy is a one horse pony based on residential housing. Excessive investor demand, driven by ‘the normal principles of taxation’, leveraging, and a lack of safe alternative investor options is holding up prices leading to a housing affordability crisis. High prices shut out working and middle class people from buying, and make saving deposits impossible as high prices mean high rents. Even if banks make huge loans for people to buy, this strips disposable income out of the economy just as high rents do. This leads to less demand through all other sectors of the New Zealand economy, e.g. education, arts, domestic tourism, hospitality, the ‘trades’. As importantly it leads to less chance for a person to build equity, to one day take up a business opportunity of their own making, which in turn could employ others and turn into a medium sized business that further benefits New Zealand.

New Zealand has had almost forty years of a private business model focus on housing and it has not delivered affordable housing but rather the opposite. It can not deliver supply to meet demand. The new ‘build to rent’ model is driven off the current system and the prospect of good profit, not affordability.  But we cannot build our way to sufficient quality affordable houses because all the drivers of excess demand remain in place, so prices will remain high. We need to make a collective effort, not just our private effort, and use the strength of government for; tax reform, overhaul existing housing stock, and building.

The affordable housing crisis is not just about the low quality of the lives of New Zealanders now and the problems from low levels of disposable incomes. It is now about the strength of the economic future of New Zealand, for our children’s and grandchildren’s sake.

EDITOR’S NOTE: Stephen Minto lives in Wellington with his two children. He worked for New Zealand Inland Revenue Department for approximately 33 years and is now enjoying no longer being bound by public service etiquette of being non-political.

I was encouraged to hear Nicola Willis, National Party’s spokesperson on housing, make the key point that the central problem in New Zealand’s housing crisis is that of people being squeezed out of the private rental market. I made this point and more in detail earlier this year (Solving the Housing Crisis: Making Homes, 30 March). Note that being ‘squeezed out’ need not mean an eviction or a discontinuation of a tenancy; it could refer to people being squeezed out from entering the market in the first place, squeezed out by city land hoarders refusing to supply the market for rental houses.

Like other people asking and answering questions on this issue, Ms Willis didn’t venture down the obvious path, which is to question what is happening to the houses that people are being squeezed out of.

Clearly, if houses are being retenanted to other families, or purchased and occupied by other families, then this is not a societal problem (though it may be a problem for the affected tenant). What is a problem is the growing mass of ‘unrented rentals’ (an oxymoron, but most commentators continue to call untenanted houses ‘rentals’). Unrented rentals are in fact hoarded properties, and their owners – inappropriately called ‘investors’ – are ‘property hoarders’. While hoarders sometime ‘flip’ their properties, the incentives in place today are for ongoing hoarding.

The authorities refuse to count unrented rentals, let alone formulate policies to eliminate the problem of hoarders hoarding unrented rentals.

The solution to the whole problem is quite simple, although not politically palatable to the political class who are themselves a large part of the problem. Essentially, the hoarding of unrented rentals needs to be banned.

All residential houses should be either: rented to their owners (ie owner-occupied), rented to other households, or (eg some houses in coastal resorts) exempted (eg as holiday homes) through a publicly transparent process (and listed on a publicly accessible exemption register). All unexempted unrented houses need to be (by law) sold by their owners within a short (but practical timeframe), and auctioned (as if a mortgagee sale) if that timeframe is not met. If not sold, they need to be acquired by the public housing authority at a below-market price.

New Zealanders are largely ignorant of their country’s history. In the 1890s, a law was passed allowing for the compulsory purchase of hoarded land; indeed, it was the defining legislation of the Seddon government. (This followed on from land taxes introduced by John Ballance, Richard Seddon’s predecessor.) The compulsory purchase provision of land from speculators was not actually performed very often; the speculators understood, and acting in the shadow of the law, they subdivided and sold their properties to people who went on to make appropriate economic use of these lands. This was a liberal Liberal government, which strongly believed in private property rights; rights that were expected to be exercised responsibly. This was not Communism!

While New Zealand does need more newly fabricated houses and apartments, the construction of new homes should not be little more than an offset to the increase in unrented rentals that Nicola Willis spoke about.

Keith Rankin, trained as an economic historian, is a retired lecturer in Economics and Statistics. He lives in Auckland, New Zealand.

contact: keith at rankin.nz

The Government has been widely panned over its major announcement yesterday on housing. There are a few positive takes on the “reset”, but generally it has been viewed as an embarrassing backdown at best, or at worst a sell-out of those needing the housing crisis addressed. One political journalist has even branded yesterday’s announcement as “easily the worst day politically” for the Labour-led Government so far.

This criticism isn’t just politicking from conservatives or the right. The most severe criticism has come from progressives and the left. This isn’t really surprising because – as with Jacinda Ardern’s capitulation on the capital gains tax – the announcement suggests the Government has essentially given up on bringing transformational change to the housing crisis. Many of those who might be sympathetic or supportive of the Government are those most deeply disappointed with what Housing Minister Megan Woods is now doing with KiwiBuild.

To get an idea of critical reaction from the political left, it’s worth reading the No Right Turn blogpost: Not impressed. He calls the reset a “broken promise” and is disappointing about the tinkering announcements, suggesting they might actually make the housing crisis worse.

He concludes that the reset shows Labour, as with other political parties, simply isn’t interested in solving the housing problem: “while the obvious policy we need is a mass house-building programme of state and affordable homes, to crash both house prices and rents, the property owning class – which includes almost every MP – don’t want that, because it would devalue their assets and their landleach income-streams. So instead we get this sort of bullshit, spending billions on producing the impression of action, while actually doing nothing much”.

It’s not only leftwing bloggers who are unimpressed. For a scathing assessment of yesterday’s announcement see Newsroom editor Bernard Hickey’s latest column, Young renters just got double toasted, in which he argues those suffering from the housing crisis have now been abandoned by this government.

Hickey argues that the jettisoning of the basic KiwiBuild promise was entirely unnecessary: “to abandon the entire target for the entire 10 years is simply silly because the first year’s target was missed. Urgent and large scale action by the Government could have cleared the way for a 100,000 house build over the next 10 years. Labour just gave up at the first hint of trouble”.

As to all the minor announcements made yesterday, Hickey thinks they’re a “distraction” meant to help sell the capitulation to the public: “It also tried to dress the broken promise by making it easier to use more KiwiSaver money for home deposits and to be able to borrow more to buy a first home. Neither will sweeten this dead rat much. It’s more of a rotting and hairy cat.”

Hickey says the conclusion we can draw from the KiwiBuild reset is that Ardern’s reputation is now settled, and it goes to “prove she is just another transactional smile-and-wave politician who believes she is better at wielding the status quo than the other lot. She has now forfeited any right she had to talk about being transformational and claiming ownership of a generation’s dream.”

Similarly, in an opinion piece for RNZ, I’ve argued that Labour and its coalition partners now risk losing support from their core supporters who were relying on seeing real progress on the housing crisis, and those struggling with housing might legitimately feel “ripped off” – see: Government should be held to their 100,000 KiwiBuild promise.

Here’s my conclusion: “much like the CGT backdown – the government’s other key policy to deal with the housing crisis – it will shake the confidence of supporters who are wanting to see the transformational change promised. The Year of Delivery becomes an empty slogan for those depending on real change. When it comes to next year’s election, the governing parties might find their lack of courage leads to fewer of their supporters being mobilised to vote… Having won power in 2017 on the basis of promises like KiwiBuild, it would be apt if the Labour-led government lost that power in 2020 because of their failure to deliver.”

RNZ’s Tim Watkin points out that this failure of delivery and ambition is what Labour used to criticise the last National Government for: “Twyford was famous for mocking previous Minister Nick Smith by saying ‘you can’t live in a consent’. Truth is, you can’t live in a reset either” – see: You can’t live in a reset.

Watkin labels yesterday’s announcement a “disaster”, saying “amidst the announcements came the smell of burning rubber as the government preformed some of the biggest political u-turns you’ve ever seen.” Green co-leader Marama Davidson was also at the announcement, claiming the KiwiBuild reset put housing “back within the realm of lower income people”, but Watkin says “It’s hard to see how.”

Political journalists have also been damning in their reports. Henry Cooke, who has probably written more on KiwiBuild than any other journalist in recent years, says: “KiwiBuild is now a shadow of the huge promise it once was” and that the reset was a “serious humiliation for the Government” – see: KiwiBuild emerges from nine months in the shop a shadow of its former self.

He disputes many of the claims of the Housing Minister. For example, on the notion that the Government is still delivering a significant house ownership programme, he says: “that’s like selling someone a car and delivering a scooter. They both serve the same purpose, but the product is not what was said on the tin.”

As to Megan Woods’ new mantra that “KiwiBuild is a lever, not an outcome”, Cooke says: “That’s fine and good if you’re looking at the housing market from the perspective of a minister, but if you’re a young buyer who thought with 100,000 homes there was sure to be one for you in the mix, KiwiBuild sure as hell was the outcome, and an outcome you wanted. Bad luck.”

Cooke also outlines how the Government is failing to deliver in other areas of housing. And some of the new announcements seem half-baked at this stage – for example, “the fact this progressive home ownership plan has still not gone to Cabinet beggars belief.” And he says that the changes to eligibility will not “change the problems with KiwiBuild thus far.”

As to cancelling the 100,000 house target, and the refusal to replace it with anything new, Cooke says: “Every Government breaks promises made during elections. But few break ones this big and this specific.”

This broken promise will come to haunt Labour in the future, according to Claire Trevett: “it has given Labour a credibility problem. This will cause Labour problems in future elections when they put up similarly ambitious policies. Ambitious is a kind way of saying unbelievable. It gives voters greater cause to doubt whether they can actually deliver. It has, in short, become Labour’s folly” – see: The lesson of KiwiBuild, the Little Engine that couldn’t (paywalled).

The failure to adopt a new target is also a problem for accountability she says: “The 100,000 figure was replaced by the rather more nebulous ‘as many homes as we can’. That is far less pithy – but also much harder to hold the Government to account for.”

This nebulous promise is highlighted by Herald political editor Audrey Young who says: “It is not a line that would be acceptable in many other policy areas. Imagine the farmers saying: ‘We will lower methane emissions as much as we can, as quickly as we can'” – see: KiwiBuild reset – Megan Woods gives masterclass in surrendering to failure (paywalled).

Young says this abandonment of targets is confusing, because in other policy areas Labour is adamant about the importance of such goals – for example: “It is clear the Government can’t make up its mind about targets. It’s good for child poverty reduction to have an overall target and short-term targets, so much so that it is now a statutory requirement to set targets.”

She also marvels at the chutzpah of the new Minister of Housing in selling such negative news as being so positive: “Woods gave a masterclass today in political communication that should impress not only her hapless predecessor, Phil Twyford, but every other member of the Cabinet that could be prone to trouble. Let’s not call it a reset. It was backdown to behold, a political surrender painted as showing courage and honesty to voters.”

Little attention has been directed, so far, at the logic of stripping a fifth off the KiwiBuild budget and putting it into a separate programme for the Greens’ nebulous “rent-to-own” scheme. But Newsroom’s Marc Daalder covers this in his article, KiwiBuild reset shows how badly policy was bungled.

Here’s his main point, questioning the scheme: “the Government concedes that only 4,000 people are expected to benefit from this. That’s 20 percent of the KiwiBuild budget put towards helping put people in just 4 percent of the now-scrapped 100,000 homes. While that money will eventually be paid back to the Government and recycled into KiwiBuild, that could take years. This raises the question: wouldn’t the money be better spent on state housing?”

In terms of Megan Woods’ decision to scrap plans to continue with hundreds of KiwiBuild houses and sell them on the open market, Daalder says: “the entire situation underscores how significantly the Government’s flagship policy was bungled.”

For economist Gareth Kiernan the reset was a missed opportunity, and he laments the “sticking-plaster solutions” that were announced – see: KiwiBuild reset proves Government still doesn’t get it. One preferred solution, he says, would have been to focus more on state housing supply: “the Government has missed the chance to shift its building programme from the middle-class welfare of KiwiBuild to concentrate on social housing, where the needs are evident.”

Kiernan also suggests that other more fundamental problems remain in the housing market, which he argues the Government are not grappling with – especially partnering KiwiBuild with mass construction technologies.

It’s not all bad for the Government. Some commentators have been supportive of the KiwiBuild reset. For example, today Newstalk ZB’s Mike Hosking says the Housing Minister has been sensible – see: New KiwiBuild Minister Megan Wood showing signs of common sense.

Today’s very congratulatory editorial in the Dominion Post makes the argument that modern governments aren’t equipped to make significant market interventions like KiwiBuild, and therefore Megan Woods is to be commended for recognising this and abandoning “unrealistic” goals – see: After the fantasy, Woods restores some sense in KiwiBuild.

The editorial points out the gist of the new KiwiBuild approach: “The reset KiwiBuild will help fund buyers into new homes, rather than build those houses for them.” Therefore: “The rethink is less a reset and more of a recognition that modern governments no longer have all the answers. Nor the means. They have steadily withdrawn from the many markets and industries they once controlled and must use greater wisdom to understand what they can change, and how to go about it.”

Former CEO of the Property Institute of New Zealand, Ashley Church, awards the Government with a 10 out 10 mark for scrapping the Kiwibuild targets, and a 10 out of 10 for making it easier for buyers with smaller savings to get together a deposit to buy houses on the open market – see: 5% deposits for first home buyers will remedy housing travesty.

Church says Woods “has delivered. The main features of her near-total rewrite of the previous policy have rendered it virtually unrecognisable – but the changes are mostly pragmatic and bring KiwiBuild more into line with the commercial and cyclical realities of the market.”

Finally, for humour about the reset, see The Civilian’s parody news report: Government says it will now build just one really nice home.

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.”

by Dr Bryce Edwards

Is the National Party’s latest online advert deliberately designed to provoke a backlash from liberal opponents? And is National trying to feed the fire of a growing culture war in New Zealand? It’s seems so, and the party’s desired result is being achieved.

The taxpayer-funded 30-second video was launched on social media on Wednesday. You can see the ad about KiwiBuild here on Twitter: They’re all sizzle, no sausage. So far, it’s had 48,800 views on this single tweet.

The piece of advertising propaganda was immediately attacked by opponents as being sexist, particularly because it incorporated some backward gender stereotypes, with a young woman being lectured to about the failures of KiwiBuild by a young man being condescending. Some labelled it “man-splaining”.

Most prominently, Prime Minister Jacinda Ardern correctly pointed out that the ads looked like they came from the 1970s, referring to their backward nature. But she was careful not to take too much of the bait, saying “I think if people see the ad they can make their own judgement on it”.

Others have been readier to express condemnation and even outrage. For example, the Minister of Women’s Affairs, Julie-Anne Genter attacked it as a portrayal of a gullible woman being mansplained to by two patronising males.

Plenty of other commentators have condemned the ad – today the Herald’s Damien Venuto wrote about how the woman in the ad was “the literal embodiment of every dated blonde joke ever told” – see: The mistake National keeps making in its terrible ads. He warns the party that they are stepping “into a giant advertising turd by belittling a large portion of the voting public: namely women.”

Venuto predicts that the ads will backfire, giving Labour an electoral advantage: “These ads reinforce the notion that National is the old, rich party, looking to maintain the power dynamics that have long existed in New Zealand society. If anything, it gives Labour further impetus to reinvigorate the smart unifying message delivered in its previous election campaign.”

There has been widespread criticism. Linda Clark tweeted sarcastically, “Policy is complicated. I needed a man to help me understand it”. Another posted: “I am actually in furious tears over how sexist that National ad is. Blatantly, explicitly, intentionally sexist. How are we meant to move away from a culture of violence towards women when our political rhetoric expressly permits this?” – see: National Party’s KiwiBuild attack ad comes under fire as sexist and incorrect.

But was all this negative reaction actually exactly what the National Party was seeking? Commentator Danyl Mclauchlan admits that it might be a “grand conspiracy theory”, but that this is “exactly what they wanted to happen”. He wrote an article yesterday arguing “Progressives are actually the primary target for this ad and it is designed to offend them. Offense and controversy makes things newsworthy and earns you coverage in the mainstream media, thus potentially reaching a far greater number of viewers” – see: Notes towards a grand unified theory of the terrible National Party sausage ad.

Quite clearly the strategy has worked, with National’s ad gaining huge amounts of media coverage. In this regard, Mclauchlan argues that it’s a clever attack advertising strategy, which has some parallels with the operating style of the US President: “This is Trump’s great innovation in political marketing: you don’t need to pay for advertising you just repeatedly outrage progressives, especially those who work in the media, and they’ll give you all the free coverage you could hope for.”

Mclauchlan concludes: “Presumably there will be more: maybe the next shocking thing will be the next National Party ad, giving online progressives the chance to spend the whole year furiously amplifying National’s talking points.”

Could National’s strategy actually therefore be primarily designed – not just to get more attention, as Mclaughlan argues – but also to push the party’s liberal opponents into furthering their reputation as being obsessed by being “politically correct” or “woke”?

This is what I argued this morning on Newstalk ZB, saying “Most supporters of National will just see this ad and think ‘oh National is criticising KiwiBuild’, whereas National’s opponents read much more into it, they’ve seen it and been provoked by it and fallen into the trap” – see: People outraged over ‘sexist’ National attack ad have ‘fallen into trap’.

Essentially National’s strategy is a highly cynical attempt at a type of “reverse dog whistle politics” – because their own base and the voters they are trying to win over don’t pick up on any underlying offensiveness of the advertisement, but opponents do and they react accordingly. As I explain on Newstalk ZB, “Many others fell into the trap, gave it publicity and called it out and for a lot of New Zealanders they would have seen the ad and thought it just seems like a silly ad and thought the complaints about it… were a bit over the top.”

Therefore, a “cringe-worthy and clumsy” ad manages to feed into, and thrive off, the growing culture wars in New Zealand. Because the context in which National has launched this ad is one of 1) heightened sensitivity towards social justice, sexism, and gender politics, and 2) a reaction against such “woke” politics, with a lot of frustration and abhorrence at social justice progressives and their outrage.

Hence, National Party deputy leader, Paula Bennett has been able to come out and defend the ads, strongly positioning her party as in opposition to “outrage culture”. She has been reported as saying that “it’s easy to find offence if you’re looking for it”, and people need to “lighten up”.

On RNZ, Bennett “was asked if she thought young, blonde women need government policy explained to them by men” and she responded: “Oh, no more than fat brown ones or any other male that I might know or anyone else. It’s got nothing to do with gender it’s got nothing to do with hair colour it’s got nothing to do with any of that sort of thing” – see: Paula Bennett defends ‘no sausage’ mansplaining ad on KiwiBuild.

This article also points out that National’s male MPs were being put under pressure in Parliament and by the media, essentially being quizzed as to whether they are sexist and whether they “mansplained”. National was probably quite happy about this narrative of their MPs being under attack.

And if they were any doubt that this “woke-provoking” strategy was being used, then it’s worth noting that National’s pollster David Farrar blogged to say: “National will be delighted that woke activists on Twitter are so stupid they managed to get all this free publicity for the advertisement” – see: Woke activists fall into trap.

Newstalk ZB’s political editor Barry Soper has also viewed National’s ad as being designed to provoke a strong reaction from opponents: “Today it’s the talk of the town, mainly because these days everyone’s so politically sensitive, careful about what they say for fear of causing offence and National knows it. Which is why the ad’s had the impact it has” – see: National’s Kiwibuild ad the talk of the town. On National’s strategy, Soper says “It’s brilliant and it’s had the desired effect: getting everyone fired up and the public talking.”

Also at Newstalk ZB, Heather du Plessis-Allan has come out strongly against the ad, saying “it’s a clever ad. But it’s disappointing” – see: Make no mistake, National’s BBQ attack ad is sexist.

Not only does du Plessis-Allan draw attention to the backward gender stereotypes in the ad and the “mansplaining”, but also to the apparent use of sausages in the ad as a putdown of the Labour Party and Jacinda Ardern: “The sausage is a phallic symbol FYI. If that sounds too conspiratorial to you, you’re being naive. This is an effective political ad and effective political ads almost always contain some sort of subtle dog-whistle. And very little in such an ad is an accident. The sausage is deliberate.”

Nonetheless, the impact seems to be working – with a backlash building against the advert complainants. The Herald reports the following readers’ comments with examples of people cheering on the ads: “PC gone mad”, “Bloody brilliant” and “People need to get over themselves” – see: ‘People need to get over themselves’: Swell of support for National’s ‘sexist’ BBQ ad.

Finally, National’s attack conjures up memories of other attack ads run by the party in the past, and the classic to watch is their 1975 Dancing Cossacks video.

by Dr Bryce Edwards

Given the ongoing problems with the Government’s flagship housing policy, it seems inevitable that a major change of direction is required for KiwiBuild. A consensus is growing that the policy either needs to be revamped or replaced with something more effective and ambitious.

Today the New Zealand Herald has called for the Government to “think again about KiwiBuild” – see its editorial: KiwiBuild not only weapon in armoury. The newspaper emphasises that there are other options for dealing with the housing crisis, some of which the Government has already been successfully utilising: “Tax proposals, tenancy laws, banning foreign buyers, state house building and infrastructure bonds were all just as important.”

The problem with KiwiBuild lies at its very core, as it has not been well thought out: “Not much market research appears to have been done before KiwiBuild was adopted. Some should be done if the Government is determined to press on with the programme.”

For the most rigorous and important ideas about fixing KiwiBuild, it’s worth looking at what economist Shamubeel Eaqub proposes. He wrote the original book, “Generation Rent”, about the housing crisis, and especially how it’s impacting on those at the bottom. Two days ago, his strong views about how “KiwiBuild is not fit for purpose” were published in Catherine Harris and Bonnie Flaws’ article, Kiwibuild should build more rental properties economist Shamubeel Eaqub says.

Eaqub argues that it’s time for the government to shift to building rental properties – and perhaps even more state housing. He claims that KiwiBuild’s core focus on increasing home ownership is simply misguided, especially given that the Labour-led Government isn’t willing to adequately fund the programme. The economist says that even if KiwiBuild meets its target of 100,000 houses, and if the private market also builds 250,000 homes, New Zealand will still be short of 200,000 homes. So however you look at it, the Government’s current plans are inadequate: “Not only are we not keeping up with population growth we are not even meeting current need. We need to much more ambitious about scaling it up massively.”

Rental housing has traditionally been the best way to deal with a housing crisis according to Eaqub: “The reason why I think build to rent has to be the answer is because that is how they solved the housing crisis post-war in Europe.”

To achieve a big increase in rental housing, the Government has to go beyond the current KiwiBuild plans: “Eaqub said that the problem is too big to be able to fix with $2 billion, the size of KiwiBuild’s fund. Instead he said we could partner with institutional investors to build rental properties or use the deep pool of money in Kiwisaver.”

Back in December, Eaqub also made the case for the Government to move more into providing rental accommodation rather than the less-affordable KiwiBuild houses, saying that the market doesn’t have the capacity to provide much social housing: “At the moment there is no one who can really do that, but if the Government says we’re in the market to essentially procure X thousand units of ‘build to rents,’ and we’re going to underwrite the rent at some kind of indexation, the stuff would be built” – see Catherine Harris’ Kiwibuild could ‘underwrite rental and social housing’.

For further critiques of KiwiBuild by Eaqub, see Dan Satherley’s KiwiBuild: Government ‘recalibrating’ targets for under-fire housing scheme. In this, the economist argues that KiwiBuild is currently the wrong solution to the problem. He says it was “never going to fix the underlying problems of the housing market”, which include “planning rules, infrastructure and funding for local government”.

He reiterates that just trying to get prospective homeowners into brand new houses is the wrong approach: “The new houses are expensive. In reality, what we really want to do is increase the supply of rental stock. That’s what New Zealand desperately needs – good quality rental stock that’s owned by institutions and well-managed.”

Also questioning the focus on brand new houses is Massey University economist Oscar Lau, who says: “why do the homes have to be brand sparkling new? New properties inevitably attract high bids and poorer families who just want to own a modest home will miss out. Instead of building new homes, the Government could buy a wide range of existing properties of different sizes, ages and in different neighbourhoods – and auction them off to qualified buyers” – see: An alternative to KiwiBuild that makes economic sense.

Therefore, KiwiBuild could be selling existing homes rather than building new ones, and leave the expensive new homes to the private market. Lau explains further: “This way the Government doesn’t need to meddle in property development. It doesn’t need to struggle with construction schedules. To avoid exciting the market, it would need to buy gradually and orderly, rather than splurge. More importantly, it could release some KiwiBuild land to the market for development, so new supply will balance its purchases.”

If the Government is determined to focus on home ownership, then it’s going to have to get more ambitious, and find some bigger and better ways of delivering. One such way is to use mass prefabrication, which the Government has so far been reluctant to invest in with KiwiBuild, probably because of the initial cost outlays.

Other countries have, however, successfully used mass prefabrication to solve housing crises. For the best outline of this, see Catherine Harris’ The key to Sweden’s million houses target – and Kiwibuild’s.

Here’s the key part of the article: “If you think the Government’s KiwiBuild target to fix the housing shortage is overly ambitious, just look at Sweden. In 1965, with a population of 8 million, the Nordic country began its ‘Million Homes’ plan to build 10 times as many houses as New Zealand’s target within 10 years. By the end of 1974, it had exceeded its target by 6000… How did they do it? Largely through prefabrication.”

In this story Harris says, “Research suggests offsite manufacturing can slash 15 per cent off the cost of building and speed up the time it takes by 60 per cent.”

One person with an interest in this is Warehouse founder Stephen Tindall, who says “You can construct houses for almost half the price that they cost here” – see the Herald’s If anyone can bring house prices down, it’s him: REINZ welcomes Tindall’s KiwiBuild interest.

According to this story, “The Real Estate Institute has backed Warehouse founder Sir Stephen Tindall’s interest in KiwiBuild, indicating that if anyone can bring down house prices in this country, it’s him. Bindi Norwell, REINZ chief executive, welcomed Tindall’s announcement that he was assisting one of the 102 off-site manufacturing KiwiBuild tender parties”.

Perhaps, therefore, the Government just needs to contract one big company to progress KiwiBuild. This is the view of “construction industry expert” John Tookey, who is reported as arguing that KiwiBuild “would have been more efficient to award a large scale contract to one company” – see Emma Hatton’s Building industry not surprised KiwiBuild won’t hit target.

The same article also suggests that the current KiwiBuild bureaucratic processes need streamlining. Property Council chief executive Leonie Freeman is reported explaining why developers haven’t been more involved in KiwiBuild: “Some of the feedback we’ve received is that from then on the process has been slow and very bureaucratic.”

Others in the construction industry are forecasting some big changes to KiwiBuild. For example, Property Institute chief executive Ashley Church outlines expected alterations: “This will take the form of changes to eligibility criteria, a coordinated Government ‘charm offensive’ to private developers, or some form of state subsidisation or delayed payment, or any combination of these” – see Catherine Harris and Bonnie Flaws’ article, Kiwibuild should build more rental properties economist Shamubeel Eaqub says.

The same article also draws attention to the Government’s progress on establishing Urban Development Authorities (“UDAs have the power like the NZ Transport Authority to use the Public Works Act if necessary to confiscate land”), and the promise to establish some sort of “shared equity scheme” for new home buyers.

In terms of possible rent-to-own schemes, it’s worth reading Stephen Forbes’ The Labour-Greens confidence & supply agreement promotes ‘progressive’ housing ownership models.

Here’s the key part: “Under the confidence and supply agreement between the Greens and Labour, both parties agreed to develop a rent-to-own scheme, or a similar progressive ownership model, as part of the KiwiBuild programme. Despite comments from minister for housing and urban development Phil Twyford last year that the Government was looking at the feasibility of shared equity housing, no details have been officially announced to date.”

But is the problem of the housing affordability crisis even one of supply? This is apparently what KiwiBuild is predicated on, and Peter Lyons challenges this in his column, Housing issue more complex than Govt might have thought.

Finally, is the Labour-led Government even inclined to fix KiwiBuild? Chris Trotter has written an extensive and insightful column about how the KiwiBuild scheme was created specifically within Labour to uphold neoliberal or conservative policy settings, and therefore there will be little appetite amongst the “Labour right” to bring about a housing programme based on “transformation” or “kindness” – see: On how middle class housing subsidies overwhelmed the social housing priorities of the Labour Party’s rank-and-file members.

by Dr Bryce Edwards

Is the Labour-led Government “disconnected from reality” over its fledgling house-building programme? KiwiBuild minister, Phil Twyford, says he is “pretty gutted” by his realisation that the house building agenda will fail to get anywhere near its targets this year. 

It’s merely the latest in a long-line of bad publicity, stuff-ups, and questions for the Kiwibuild scheme. And this will have many voters and aspiring home-owners losing confidence in the Government’s housing plans. And inevitably KiwiBuild is once again picking up new nicknames – such as “KiwiBusted”, “KiwiFraud”, or Simon Bridges’ chosen term, “KiwiFlop”.

Disconnected from reality?

It was only a few months ago that Phil Twyford was laying into critics and even government officials who suggested KiwiBuild might not deliver the promised number of houses on time. For example, when Treasury forecast that Kiwibuild was only going to have half its forecast impact on construction, Twyford rebuked the officials, saying “Some of these kids in Treasury are fresh out of university, and they are completely disconnected from reality”.

Now Twyford has had his own reality check, and yesterday told media that he wasn’t going to be able to deliver on promised Kiwibuild numbers for this year. While the Government is promising 100,000 affordable KiwiBuild houses, the target for July of this year is only 1000, of which only 33 appear to have eventuated.

This is all best covered by Henry Cooke in his news report, Phil Twyford says only 300 KiwiBuild homes are due to be finished by July, which quotes the minister saying “It’s clear now that we won’t meet our first year target, and that’s a real disappointment to me… It’s been tougher than we expected for the first year.”

In this story, Opposition spokesperson Judith Collins is trenchant in holding Twyford to account: “He clearly cannot do the job. He’s been a minister since November of 2017 and delivered 33 homes – in that same time the private sector has built 35200… He’s got no excuse because he had this portfolio in opposition for over six years. He should have worked out how hard it is to have interventions in the property market.”

Although the Government has promised 1000 houses by July of this year, Twyford isn’t confident enough that they will even deliver 500, according to Jenna Lynch, who also reveals that some KiwiBuild houses aren’t selling to first home buyers and are being released onto the market, “defeating the whole point of the programme” – see: KiwiBuild houses might not end up with first home buyers.

Twyford has been joined by both Prime Minister Jacinda Ardern and Finance Minister Grant Robertson in conceding defeat on the KiwiBuild numbers, but Acting Prime Minister Winston Peters isn’t giving up – see Jason Walls’ Deputy Prime Minister Winston Peters still thinks 1000 KiwiBuild houses can be built by July.

Having been asked about the targets, Peters told reporters today: “We’re not giving up at all – we’ve got six months to wind this up as fast as we can, and practically we will.” He added: “We’re going to recommit ourselves in our first Cabinet meeting to getting this thing back on track.”

Ongoing problems with KiwiBuild

In explaining KiwiBuild’s failure to reach its targets, Phil Twyford appears to be pointing the finger at the construction industry and developers. He said yesterday that “It’s been more difficult than we expected to really shift developers off their existing business model which is about getting a return on capital from small numbers of mid to high end homes.”

The Minister also talked about this last year in an interview with Newsroom’s Thomas Coughlan, in which he characterised setbacks as merely “teething problems” – see: Twyford on his hopes for 2019. Apparently, Twyford “believes the teething issues have come from the state of the residential construction sector, which is dominated by small firms, with low productivity, who are incentivised to build expensive rather than affordable homes.”

There are some other problems with the KiwiBuild scheme. Anne Gibson, for example, looks at some of the figures listed on KiwiBuild’s official website and finds that although 46,807 people registered as being interested in KiwiBuild, only 267 have actually become “pre-qualified” to purchase a house – see: KiwiBuild monitor: 33 complete, 967 to go by July, Twyford says target ‘tough’.

In response to the low numbers of eligible buyers, Mike Hosking wrote last year about these figures: “You would have heard of the thousands that applied, of course. The Government wanted you to hear that. The thousands that signed up for the updates, the thousands that showed an interest. But an interest isn’t a deposit, it isn’t a deal, and it certainly isn’t a sale” – see: So where’s all the KiwiBuild buyers then?

Hosking has also written earlier this week on the housing programme, summing up the alleged failings of the scheme, so far: “the homes that aren’t built, the homes that don’t sell, the tenders that don’t attract bidders, the prices that are too high, the locations that don’t parent right, the sizes that don’t suit” – see: New Year, same old KiwiBuild stuff-ups.

In this column Hosking looks at the mystery surrounding ex-KiwiBuild CEO Stephen Barclay, who has resigned. He comments: “yet another cock-up in a long line of cock-ups that’s plagued this grandiose farce since day one.” And he complains that “no one is fronting in terms of just what has gone wrong”.

There is plenty of speculation about why Barclay has stepped down. For the most plausible, see economist Gareth Kiernan’s article, Resignation another step to KiwiBuild failure. He suggests that perhaps Barclay had his “wings clipped” with the organisational re-configuration that happened last year in the KiwiBuild programme. And if so, “the prospects of getting a new head of KiwiBuild with the initiative to turn Phil Twyford’s dreams into reality seem slimmer than ever”.

What happens next?

Given the apparent mess that the KiwiBuild programme is in, should it be scrapped? Should the Government go back to the drawing board? Or should the Minister responsible be sacked?

Unsurprisingly, Judith Collins is calling for Twyford to go. She was on TVNZ’s Breakfast today giving advice to the Prime Minister: “I would say to Jacinda Ardern, a bit of advice for someone who has been in politics a little bit longer, to shift Phil at her next reshuffle because if she doesn’t I’m going to have so much fun over the next year” – see: Judith Collins: Ardern should dump Twyford over KiwiBuild – ‘If she doesn’t, I’m going to have fun’. Collins also forecasts KiwiBuild’s “demise inside 12 months”.

On The AM Show, Duncan Garner suggested Twyford needed to go, saying “you’ve flopped Phil… In any other world, Phil Twyford would be dog-tucker, out” – see: Duncan Garner lets rip on ‘toxic’ KiwiBuild not hitting targets. But, despite the “poisonous” failure of KiwiBuild, he says that Twyford will be “protected for now”.

Garner also suggests that the Labour-led Government needs to look again at the whole KiwiBuild programme: “Freeze this policy, rethink it, even ditch it, it’s been changed so much anyway who knows what it even stands for now.”

Over on Newstalk ZB, Mike Hosking declared that the minister is “deluded” and “so far out of their depth it’s dangerous” – see: KiwiBuild fiasco is far from over.

But there’s also a fair bit of praise for Twyford: “I tell you what I do admire about Phil Twyford, the embattled, bewildered Housing Minister: At least he fronts. He fronted with me yesterday, and took a pasting because you can’t hide or argue your way around the cluster or calamity of facts and the avalanche of bad news that’s fallen down on top of him. But at least he is there to actually fight his corner. Many people these days run and hide. I also admire him for bulldozing over the Unitary Plans in places, like Auckland, where for years councils have refused to make enough land available for building.”

So, should Twyford be sacked? The Spinoff’s Alex Braee writes about the issue today, and he agrees that the Minister deserves to be fired, pointing out that Twyford’s mistakes are worse than those of sacked minister Clare Curran: “This failure is vastly more serious, both in political perception terms, and in terms of how much of a real world impact it has” – see: Kiwibuild set to fail at first hurdle.

Yet Braae declares that it is better that Twyford stays: “Perhaps a more fitting punishment for Mr Twyford, after presiding over a horrendous botch of one of the government’s most important policies, would be that he has no choice but to continue. Then again, there’s a cabinet reshuffle expected early this year, so someone else might find themselves with the nightmare job of fixing this.”

Finally, despite all the criticism and pessimism about Kiwibuild, there are still some enthusiasts pointing out the arguments in its favour. For the best effort, see Barnaby Bennett’s What almost everyone is missing about KiwiBuild.

By Rahul Bhattarai

A housing trust chief executive has condemned the government for taking “short cuts” to tackle New Zealand’s housing crisis.

“We need to stop pulling rabbits out of hats and looking for quick fixes,” said Bernie Smith, CEO of Monte Cecilia Housing Trust.

Speaking at the annual Bruce Jesson Foundation lecture in Auckland on the topic “housing crisis – a smoking gun with no silver bullet”, he soundly criticised the government for not doing enough to provide affordable housing.

“A bit dramatic but I am known to be dramatic from time to time.”

READ MORE: Tūhoe leader’s address to deliver ‘hard truths’ about New Zealand

He said that there were no short-cuts to building affordable housing.

-Partners-

Smith has 40 years of experience in various forms of leadership in state and local government and not-for-profit sector.

The lecture has been delivered in previous years by prominent figures such as investigative journalist Nicky Hager and a former prime minister, David Lange, in honour of the late journalist and political thinker Bruce Jesson.

Bernie Smith … “We need to stop the blame game, we need to stop thinking central or local government will resolve this issue.” Image: Rahul Bhattarai/PMC

Work together
To resolve the housing crisis, Smith said the government and bureaucrats needed to work together and have a generational housing strategy that “builds strong housing communities for the present and the future generations”.

The coalition has been in government for 11 months and it has been “claiming all the issues that we are confronted with today are solely due to previous government”, he said.

“We need to stop the blame game, we need to stop thinking central or local government will resolve this issue, that housing first or some other programme is a quick fix,” he said.

Barry Wilson, president of Auckland Council for Civil Liberties, said that the political parties should be working together to “house the homeless in a comfortable secure condition”.

“There should be some unified political approach, it’s not productive every time they change the government,” Wilson said.

Long term strategy
New Zealand needs a 25 to 30-year-long housing strategy “that every political party agrees and signs to”, Smith said

“Labour has a plan that National is trying to drag down. What they should do is be working together on a long-term plan, not one that depends on the three-year election cycle,” Wilson said.

New Zealand housing strategy should be created not by the politicians or bureaucrats, rather by the people from the community, who have lived with experience, like the homeless, the renters, community housing providers, and people form wide ethnic communities including Māori or Pasifika, Smith said.

“A strategy that looks at the whole of the continuum and recognises into generational living affordable rentals, affordable home ownership, does not forget a strategy that includes building strong healthy and safe communities with clear mile stones and targets,” he said.

Smith said the country needed to have a strategy that is housing community “value” focused rather than the housing “volume” focused.

Community value was focused when each and every individual is seen as equal no matter their housing option, either state housing, private renter, or an owner-occupier.

Overcrowded households
In Auckland there are 92,000 households living in unaffordable rental situations spending more than the 30 percent of their net income on rent.

“Thirty six thousand households living in overcrowded conditions.”

In Auckland alone, there is 20,300 homeless people, where the Māori population is five times and Pasifika 10 times more disproportionately affected.

Kiwi Build was not an affordable housing solution to many New Zealanders as it was only affordable to middle class people with higher household incomes, Smith said.

Smith said it was noted at a recent Kiwi Build Affordability meeting with Auckland city mayor Phil Goff:

“Auckland Council’s chief economist stated in July that to buy a 3-bedroom Kiwi Build house at $650,000 they will need either an income of $106,000 with a $130k (20 percent) deposit or an income of $120,000 and a $65,000 (10 percent deposit) for the household to affordably purchase a Kiwi Build home (and that is with debt servicing ratio of 35 percent.

“This means that Kiwi Build houses are only affordable for the top 40 percent of Auckland’s households.”

• Housing issue not just ethnic – Pākehā leaders have ‘failed’, says author
• Pasifika voters want ‘hand-ups, not hand-outs’ in NZ housing crisis

The Auckland housing continuum. Image: Rahul Bhattarai/PMC

Article by AsiaPacificReport.nz