Aotearoa/NZ: Socialist solutions needed to address housing crisis

The following article by CWI reporters in Aotearoa/New Zealand first appeared in the Australian magazine The Socialist.

New Zealand is in the midst of a housing crisis. This crisis was created by decades of neo-liberal policy including the deregulation of housing consent and planning, the sell-off of state housing stock, and the failure to close tax loop-holes. These loop-holes have enabled a thin layer of people to create wealth out of property speculation while others struggle to meet rental payments in substandard housing.

The absence of a capital gains tax has led many investors to see property as a means to make easy profits. This has exacerbated inequality with a smaller number of people owning an increasing number of property assets to the exclusion of others.

An OECD 2011 report on New Zealand noted that: “Wealth is concentrated to a greater extent in property compared to most other OECD countries…Supply rigidities and tax incentives that bias savings decisions towards property investment have amplified the increase in house prices, widening wealth inequalities in the form of larger homes for those who can afford them, but deteriorating affordability for the rest of the population.”

The gaps in the tax system have helped create a boom in the property sector. This has left many young families unable to purchase a home. Between 1991 and 2012 home ownership fell to a 50 year low and is forecast to continue falling.

Since 1991 the government’s main intervention in the housing market has been the provision of the Accommodation Supplement to low income earners. This payment effectively operates as a landlord-subsidy ensuring landlords continue to gain a profit from their property investments. At the same time it sends a message to employers that they do not have to pay a living wage. Since 1991, the growth of this subsidy has been enormous and yet it does nothing to treat the underlying reasons for why housing is unaffordable for so many families.

The privatisation of state housing

In 1991, with the incoming National government, New Zealand saw the “mother of all budgets” which included the selling-off of state housing and the introduction of market rents for state housing.

While the policy of market rents was eventually reversed with the introduction of Income Rent Subsidies, New Zealand continues to live with the legacy of a severely depleted state housing stock. State housing is now seen as only an option for the poorest families – only those classed as “high priority” are placed on waiting lists.

According to the Housing New Zealand Annual Report 2011/2012: “Under the new criteria, only new applicants with high-priority needs are eligible for state rentals, with moderate and low-priority applicants no longer being placed on the waiting list.”

The government has meanwhile earmarked $46.8 million during 2015/16 and 2016/17 for Housing New Zealand to provide additional rent subsidies for those tenants forced to move into market rentals.

The most recent legislation to pass on state housing does nothing to address the housing short fall. Instead it allows private organisations to bid for tenders to provide social housing. This will only make access to affordable housing more difficult. The false idea being pushed is that the ‘market’ is the best mechanism to deliver social services. The truth is it’s an attempt to open new areas of the economy for exploitation.

Recently Housing New Zealand has also been through a process of “reconfiguring its portfolio”. This is code for selling off properties which have increased in value. In Auckland this has occurred most controversially in Glenn Innes under the “The Tamaki Transformation Project”.

Under the plan, Housing New Zealand has been evicting tenants and selling properties which have increased in value. State assets are not immune to the imperative that they deliver a profit, or as Housing New Zealand put it, an “acceptable return to the Crown”.

The Tamaki Redevelopment Company has been formed as a joint Council/Government agency to oversee the development of the remaining properties into one of Auckland’s largest housing projects. Under the plan, houses will be built under public-private partnerships, with a mix of state and market housing. The purpose of the Tamaki Redevelopment Company is to oversee the transfer of assets away from Housing New Zealand and to implement the management of them by private organisations. Essentially this is a stage of further privatising state housing.

Market rents

While the government is intent on pushing more families out of state housing and into market rentals, current laws provide little security for renters. There are very few provisions to address tenure security and housing that meets health standards and the differing mobility requirements of tenants.

The Child Poverty Action Group (CPAG) notes that despite the well-documented relationship between health problems and housing quality, there has been complete neglect from the government on ensuring dwellings meet basic standards.

While the government has committed an additional $102 million over the next four years on housing, none of it will go towards improving rental conditions. Most of this expenditure is needed to cover the increased demand for the Income Rent Subsidy and Accommodation Supplement.

Auckland housing issues even more acute

In Auckland there is an estimated shortfall of 15,000 dwellings and this is expected to worsen. The Auckland City Council is acting at the behest of property developers and is pushing for deregulated zoning and size restrictions so that developers can build more dwellings on less land. While there are increased rules around some visual aspects, such as how developments will fit with the heritage values of an area, they do not address the most serious problems around low-quality unsafe housing.

The Salvation Army’s 2012 report on Auckland housing is damning, not just on the lack of government response to the crisis, but it also points to the governments role in facilitating the crisis through bad legislation that has benefited property speculators and developers above families forced to live in increasingly unaffordable and unhealthy housing.

The report said: “We have developed, supported and nurtured systems that have sustained and even expanded inequality. These systems have allowed some Aucklanders to grow rich through property speculation and have allowed some Aucklanders to develop poor-quality housing that not only leaks, but is ugly and unliveable. These systems have allowed some Aucklanders to occupy larger and larger houses, while other Aucklanders live in more crowded houses and in sheds, garages and caravans. These systems have biased our tax system so that not only are house prices excessively inflated but now higher and higher public subsidies are required for modest-income households to be able to afford any housing”

Socialists fight for immediate reforms to provide some relief to people suffering from housing stress and to address the root causes of the crisis.

We call for:

-Housing to be provided to all as a basic human right -A massive public works program to build thousands of new state homes to wipe out the waiting lists and create much needed construction jobs -Tax reform that will eliminate the ability of speculators to make profits out of housing -The introduction of strict regulation for rental properties that requires all housing to meet standards on liveability, mobility, health and safety – A cap on private rents to limit landlords profiteering

A lasting solution

The commodification of housing is a perversity. We should not have a situation where some profit and others struggle to find a decent affordable place to live. The only way to change this once and for all is to change the profit driven system that creates this scenario. A socialist system based on public ownership, democratic control and sustainable planning would prioritise people’s needs and ensure that the basics of life, like a roof over your head, were provided to all.

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Comments

  1. land tax, capital tax, lending restrictions, deregulation of building controls, free market in building materials and government building program.

    Current economic policy around the world mandates central banks must achieve 2% inflation this inflation is created by debt creation and asset inflation not wage growth.

    What may work is a decrease in money printing to inflate assets by banks e.g lending for housing offset partially by government money printing to build housing and transport as governments have lower borrowing cost.

    The central bank should manage inflation at 0 to 1% so borrowing cost would be high and there would be a cost to the government for spending to much on waste so their focus would be on real assets to the economy.

    The high interest would attract and reward savers and any investment would be seen in light of real returns not capital growth funded by more ponzi lending.

    Having excessive land controls just benefits people with land assets who hold them and reap large gains. the cost of land should be low and the business built on the land should be what increases the value.

    finally the reason housing has been commodified is the need for endless growth. banks need to grow and investors need growth all to beat the 2% inflation.

    I started off writing this about housing but I got side tracked

    Limits to economic growth and lifestyle possibly occurred in the 1970s and since then outward growth slowed so this turned inward like a body devouring it’s self in starvation. productivity is up but wage growth goes down. Debt was increased as a means of production so people were encouraged to borrow to fund lifestyles to the benefit of banks who have few lending options in the current world but to help bid up assets and taking their cut.

    It is highly likely we have overshot our actual ability to support ourselves especially with the global economy allowing wage arbitrage, interest arbitrage and currency manipulation but no debt reduction.

    This is why a gold standard would be of some use as interest rates would not be set by central banks but actual banks and the flow of money would rely on actual wealth not debt which is future wealth consumed today.

    The housing crisis is just a symptom of a structural problem which will eventually play out overtime at great cost to most people involved.

    sorry for the ramble

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