Jacinda Ardern’s housing policy: Appear to be doing something, but don’t scare investors

By Ani White.

Written for Fightback’s upcoming magazine issue on housing. To subscribe to the magazine, click here.

In 2017, Jacinda Ardern led the New Zealand Labour Party to a surprise victory, with promises to address the housing crisis as a key plank of the new government’s mandate. In its fourth year of government, the party continues in its failure to substantively deliver on its promises. It seems the main aims of the government’s housing policy are: appear to be doing something to help renters and first-home buyers, but don’t scare capital or investors. However, the goals of helping renters and helping landlords are mutually incompatible. Therefore, Labour has consistently watered down its own proposals.

To set the scene, Aotearoa/New Zealand has a ridiculously inflated housing market, against a backdrop of steep inequality. New Zealand ranks number two in the international house price growth ranks, increasing 22.1% in the year to March 2021, while global house prices rose 7.3%. In contrast, New Zealand wage rates increased 1.6% in the year to March 2021. Rents increased 3% over the year ending April 2021. Stories such as the Upper Hutt pensioner whose rent was increased by $135 at once, from a starting point of $410 a week, are rife. The increase, to keep the flat in line with market rates, which did not violate recent regulations. In short, house prices and rents continue to surge, while incomes do not keep up. Homelessness is also the highest in the OECD, and 48% of housing applicants are Māori compared to 16.5% of the general population, on land that was appropriated from Māori by Pākehā (European-descended/non-Māori) capitalists.

The Ardern government’s first measure to address the housing crisis was to ban most foreign buyers, who made up only about 3% of homes bought nationwide. This was a symbolic populist measure by a party that had scapegoated foreign buyers during its period in opposition. A content analysis by the author found that Labour Party press releases during their time in opposition never identified groups such as ‘investors’, ‘speculators’, or ‘bankers’ per se as a negative influence, except when negatively coupling these terms with modifiers such as ‘foreign’ or ‘Chinese’. As we argued at the time, this diverts attention from the vast majority of landlords, speculators, and other profiteers who are Pākehā New Zealanders. Banning foreign buyers was also the only flagship housing policy that Labour delivered on. After this symbolic populist gesture, the unwillingness to confront the forces actually driving the housing crisis remained consistent in the ensuing 4 years.

The biggest symbol of the Labour Party’s failure to fulfil promises on housing is KiwiBuild. This was a policy to build 100,000 affordable homes in 10 years, a goal the government quickly fell behind on. The inadequacy of KiwiBuild has been attacked from the right, particularly by the opposition National Party. The hypocrisy here is breathtaking, after National spent its last two terms in office selling off public housing and doing nothing substantive to address supply issues. Yet the fact that Ardern’s government is attacked from the right should not stop us criticising them from the left. Although this big infrastructure project was portrayed by both supporters and critics as a return to social democratic public housing policy, Joel Cosgrove argued in Fightback at the time of the KiwiBuild policy’s launch that it sought to address the supply problem in a fashion compatible with continuing financialisation of housing assets. Instead of expanding public housing, the policy aimed to expand ‘affordable’ private housing in collaboration with the private sector, by a given value of ‘affordable.’ Fightback quoted prominent left-wing commentator John Minto highlighting the problems with this definition of ‘affordable’:

No low-income family will be able to afford $300,000. These families struggle from week to week and will never be able to save a deposit or meet the mortgage repayments required for home ownership. They are caught in the vicious squeeze between high private rental costs and the government’s impossible criteria for eligibility for a state house

This affordability problem has since been highlighted by Salvation Army head Campbell Roberts, who apparently was involved with a discussion the Labour Party based its policy on, but who considered the numbers the Labour Party generated unrealistic:

Those numbers were just not sustainable. There [weren’t] 100,000 people needing housing if you didn’t do anything about making them affordable.

As of February 2020, there were $26 million of unsold KiwiBuild houses on the government’s books. This would not be an issue if the investment was in public housing for those in need, rather than attempting to reconcile supply and demand on the terms of a warped market.

Another, far more modest yet no less controversial, policy the government has failed to deliver is the Capital Gains Tax. This tax on capital gains acquired through selling assets, such as housing, is not particularly radical (Australia and the USA both have CGTs). Yet given the aggressive entitlement of New Zealand’s property-owning class, and their unwillingness to accept even the smallest incursion on their profit margins, opponents of the policy launched a scaremongering campaign. Then-opposition leader Simon Bridges called it an “assault on the Kiwi way of life”. Ardern’s government dropped the policy in early 2019, ignoring the recommendation of the Tax Working Group the government had formed, citing lack of public mandate. Indeed, public opinion was divided – although a Horizon Poll found 44% for capital gains tax and 35% against, a Reid-Research poll found 39.1% for and 49.8% against (a number that was exaggerated by reporters focusing on answers to questions like whether superannuation should be taxed, or whether the policy should be a priority for the government, rather than simply whether people supported a CGT in general). Yet this was not a clear consensus against the policy as it was portrayed by the right, so much as a divided electorate, with polls turning up shifting results at the margins of that division. Moreover, public opinion shouldn’t be viewed outside the context of the sustained scaremongering campaign from the right, without a sustained pushback from supporters of the policy. Ardern’s unwillingness to take clear positions on contentious issues – as also illustrated by her refusal to disclose her vote in the cannabis referendum until both the referendum, and the election, had wrapped up – takes the conservatism of ‘the public’ for granted, and uses that perceived conservatism as an excuse. Yet public opinion does not form in a vacuum, it is formed through a process of contestation and coalition-forming. Every progressive win, however small, must be fought for. Jacinda Ardern’s Labour Party is not a fighting party, even when it comes to a tax measure that already exists in many neoliberal policies.

Many have praised the Ardern government’s response to COVID. Indeed the government has shown competence in a crisis, taking decisive action based on expert advice, and communicating its decisions clearly (a key reason for the success of lockdown measures is that they were widely understood and supported). Yet as Bronwen Beechey highlighted in a Fightback article at the time:

Although a reasonable effort was made to house rough sleepers in motels, many families spent the lockdown in overcrowded, cold, damp homes. High rents and decades of neglecting or selling off public housing have created a housing crisis. These conditions help coronavirus and other illnesses to spread.

Additionally, as Jacobin‘s Justine Sachs and economist Bernard Hickey highlighted, the government’s crisis response of lowering mortgage rates and pumping up asset values bailed out property owners and businesses while leaving renters in the cold.

Many have argued that Labour’s 2020 landslide victory gave the party a mandate to take stronger measures (particularly after losing the excuse of having to please conservative coalition partner New Zealand First). However, in a way, this electoral victory gave Ardern’s Labour stronger incentives to back away from any confrontation with investors and property owners. Labour was able to win over much of the traditional right’s base, for example winning 15 seats previously held by National. This was likely a reward for both the party’s competent crisis management, and its lack of radical policy measures on issues like housing and climate change. In her acceptance speech, Ardern underlined her commitment to national unity, to govern for “every New Zealander”, and to avoid polarisation:

[T]o those amongst you who may not have supported Labour before and the results tell me there were a few of you. To you I say thank you. We will not take your support for granted. And I can promise you, we will be a party that governs for every New Zealander. The governing for every New Zealander has never been so important more than it has been now. We are living in an increasingly polarised world, a place where more and more people have lost the ability to see one another’s point of view. I hope that this election, New Zealand has shown that this is not who we are.

These conciliatory words should be taken at face value: this is not a government willing to risk political polarisation, in other words, a deeply centrist government. As in most countries, the traditional right’s base is primarily white and wealthy, also one of the likeliest groups to vote. Winning over a swathe of wealthier voters gives the party even greater incentive to not tax wealth, or take any other measures that may alienate Labour’s new friends. If Labour took meaningful measures to address the crisis, such as directly taxing wealth or controlling rent, they would risk not only capital flight but voter flight. This is not to say that these policies are unpopular per se, but more specifically that they are unpopular with the prized white and wealthy supporters who Labour has managed to attract.

Labour’s March 2021 release of a new housing policy was typically underwhelming. The policy largely consisted of changes to the tax regime, although stopping short of straightforwardly taxing wealth and property, and instead attempting to incentivise behaviour like new builds. In an article for open-access academic website The Conversation, Public Finance Professor Norman Gemmell argued that these changes to tax policy were “incoherent”, and failed to address the supply problem head on:

If there are better alternatives, they do not lie in even more ad hoc fiddling with a coherent tax regime.

Instead, like the famous real estate mantra of “location, location, location”, the mantra for New Zealand housing policy should be “supply, supply, supply”

Ironically, reader responses to a Guardian callout for NZ readers’ takes on the policy tended to divide into either renters saying this would do nothing to help them, or investors/owners saying it might cut into their margins but was a reasonable compromise. Granted, this is representative of Guardian readers, a group predisposed toward leftish-liberalism, yet the class divide between investors accepting the policy and renters questioning its impact illustrates the compromised nature of the policy. In contrast, economists from major banks such as ANZ and Westpac warned of the impact on higher rent, showing an uncharacteristic concern for the plight of renters. Rent and property prices are already rising astronomically, so this warning seems both disingenuous and to simply suggest that the status quo will continue. Yet this convoluted tax policy is also a clear consequence of Labour backing away from blunter measures like taxing wealth and property in general.

In summary, New Zealand’s Labour government remains constitutionally unwilling to confront the forces driving the housing crisis. Instead, Labour seeks to square the circle of appearing to do something for renters and first-home buyers, but not scaring investors, property owners, and ‘middle voters’ with measures perceived as radical (such as directly taxing wealth, controlling prices, and substantially investing in public housing). As these imperatives cannot be reconciled, Labour has stepped back from substantive measures in favour of “ad hoc fiddling.”