Housing under Neoliberalism

housing debt

Joel Cosgrove (Fightback/MANA Poneke).

It is a generally acknowledged political fact that housing is unaffordable. Within the awkward blame shuffling and finger pointing, MANA’s policy of building 10,000 well-built and insulated homes per year until demand for affordable housing was satisfied, was a good policy. The policy called for an expansion of state-housing. Yet the Internet MANA alliance also endorsed renting-to-own, a policy which maintains the need for private home ownership.

The nature of private home ownership

Why do people want to rent-to-own? In part because there is no surety now in state housing tenancies, with the National government revoking the right to lifetime tenancies, and the opposition Labour Party raising barely a whisper of opposition. The current alternatives to private home ownership are the vagaries and insecurity of private renting or the modern, run-down state housing ghettos, the product of budget cutting and under-maintenance by both National and Labour governments over the past thirty years.

The collapse of state housing as a serious alternative to private rentals makes for grim reading.  Currently, 3,700 of 68,460 current state houses are empty, with a majority ready to be immediately occupied.

The current situation has its origins in the massive attacks on workers’ conditions that were carried out in the early 90’s. The CTU estimates that if pay rates had kept up with productivity rates, the average wage would be $35.91 per hour as opposed to $28.20 currently, a gap of over 20%.

Alongside attacks on wages and benefits was a massive escalation of house prices and housing-based debt. According to the Reserve Bank, household debt has increased from around 60% of disposable income, to around 144%. Around 97% of that debt is in housing.

To a certain extent, as long as you were able to maintain ownership of a house, you could leverage the increasing value of housing (which is now 75% above its historical value), swimming on debt in the assumption that capital gains from the sale of the house would bring a tidy profit. In Auckland alone, average house prices have risen from $340,000 in 2004 to over $700,000 in 2014. Those with houses have profited mightily. Those without have had to weather continual rent increases.

With average national house prices having risen by over $30,000 in the last year, and average wages by only $1500, the gap between those who own houses and those who don’t is only increasing. The Dominion Post reported in August this year that investors who already own ten properties or more brought two out of every five homes on the market.

That the overwhelming amount of household debt is property-based further demonstrates the divide – those with property have potential access to hundreds of thousands, while those without are left with credit cards, overdrafts and loan sharks.

Stable living standards are increasingly tied to atomised individual asset ownership, as opposed to a collective process of winning wage increases in worksites. This is a departure from the historical period of Fordism, with large industrial worksites, with relatively clear identity, tied in part to collective work.

While speculation on properties increases, and rents increase, rents are (relatively) constrained by wage growth. This leaves a yawning gap between the going price of a property and what can be charged in rent for it.

We live in a country of abysmal housing, with the recent Housing Warrant of Fitness survey finding that 94% failed on at least one of 31 criteria that they were judged across. Criteria included weather-tightness, insulation and ventilation, lighting, heating, condition of appliances and general building safety. Yet the system of housing speculation specifically pushes people to provide the bare minimum to maintain their properties, as the point of houses is not primarily to be lived in, but to appreciate in value and make money for the owner.

Social base of the National Party

There was a lot of (important) talk of the missing million at the most recent election; non-voters uninspired by the options on offer, largely the most poor and marginal. Another million is also important, namely the million who have voted for the National Party over the past three elections.

National is favoured by business; however this is not the whole story. Ninety-seven percent of the 112 chief executives who responded to an NZ Herald ‘Mood of the Boardroom’ 2014 survey indicated support for National leader John Key. However, that only accounts for 108 votes all told.

Debt encumbered home owners, although being rich on paper, are nonetheless in a precarious position – one needs only to look at the sudden fall of Terry Serepisos – and this ties them to the status quo. This is a form of social pacification, binding people to a capitalist hegemony.[1]

Building state houses, until demand for affordable and safe housing is met, would cut at the base of a significant part of New Zealand society. Currently there are over 570,000 homes rented out, according to Statistics NZ. This is a question of billions of dollars in yearly rents and hundreds of billions in speculative value. The National Party allays the anxieties of a middle-class and other property owners operating on a speculative bubble.

Fighting for public housing

In seeking to reverse the upward redistribution of wealth, we call for more and better state houses.

A serious public-housing building programme would make a major difference to the overcrowding and poverty-related illnesses that currently exist within New Zealand. It would also undercut the dependence on speculation as a basis for security.

On one hand, there is something to be said for satisfying people’s desire for security in housing. On the other hand, by upholding private housing, there is a danger that those trying to challenge the situation end up being absorbed into the status quo. We need to be clear about the need for a public, collective solution to the housing crisis.

Whatever private home ownership might have meant in the 70’s, it increasingly serves class stratification. Those with access to property profit from those without.

The human need for shelter plays only a secondary role at best in this dynamic.

[1] ‘Hegemony’ refers to a situation where an oppressive social system is so entrenched that many consent to it, not requiring direct violent coercion.

Strike debt: Government and household debt in Aotearoa/NZ

Cancel All Debt: banner from Occupy Wall Street

Cancel All Debt: banner from Occupy Wall Street

Ian Anderson

Debt has received a lot of attention during the global financial crisis. Occupy sites abounded with theories about “debt slavery.” Governments, and international financial institutions, justify harsh austerity measures by pointing to government debt.

We must examine debt closer: what is its purpose? Who does it benefit? Is it necessary?

Fictitious capital: Necessary evil for capitalism

Debt is a form of “fictitious capital,” capital not generated by production. Mainstream economists define fictitious capital as the value of “future cash flow.” Given the present financial crisis, triggered by the collapse of loans that could not be paid back, defining debt as “future cash flow” seems a little optimistic.

Marxists argue rather that fictitious capital is a claim to property ownership, by the lender. A mortgage is a claim on property, and until it is paid back the bank owns the house. In The Limits to Capital, Marxist political economist David Harvey notes the strange importance and universality of fictitious capital:

 The money capitalist is indifferent (presumably) to the ultimate source of revenue and invests in government debt, mortgages, stocks and shares, commodity futures or whatever… [Marx] wishes to alert us to the insanity of a society in which investment in appropriation (rents, government debts, etc) appears just as important as investment in production (The Limits to Capital, David Harvey, p269).

However, Harvey also warns against drawing a simplistic line between finance and “real” production. While some (often anti-semitic) conspiracy theories suggest that bankers are perverting the natural course of capitalism, profitable financial institutions are necessary to generalised capitalist production. Banks centralise the means of exchange, and lend out the initial capital for private production:

When the system of exchange is relatively simple, the personal knowledge and trust of individual capitalists may guarantee the quality of debts incurred, but in a complex market system this cannot form an adequate foundation for the credit system. The bank seeks to institutionalize what was before a matter of personal trust and credibility (ibid, p247).

Banks and financial institutions must also make a profit – which means interest, predatory lending, speculation, incentives to gamble with workers’ savings as poker chips. Although they can be regulated or stabilised, predatory financial institutions are a necessary evil for capitalism. [Read more…]

Ireland country report

The following report was drawn up by the Irish Marxist group, Socialist Democracy

10 November 2010

I Introduction

The Irish State is one of the most globalised in the world and for nearly two decades was held up as a model of economic development across Europe and further afield.  Now it is in severe crisis and faces bankruptcy.  The Irish Government has applauded its ‘first mover’ advantage in its efforts to enforce austerity – that it was taking the steps that sooner or later all other states would be forced to take.  The small and weak character of the Irish State means that it often exaggerates trends that exist elsewhere.  For all these reasons the Irish experience is an important one for others to study.

[Read more…]

IMF Will Entrench the Economics of the Madhouse

The following article is by the Irish socialist-republican group, éirígí


ICTU Protest, Saturday November 27th, 12pm, Wood Quay, Dublin Budget Night Protest, March to Leinster House. Assemble 5.30pm, Tues December 7th, Wolfe Tone Monument, Stephen’s Green, Dublin Introducing the catastrophic €400 billion [£340 billion] blanket bank guarantee scheme in September 2008, Twenty-Six County finance minister Brian Lenihan was keen to offer reassurance to those genuinely fearful of the consequences of such economic recklessness.

Thousands demonstrate in Ireland against austerity measures

[Read more…]

Sussex University occupation

 Mike Kay

On 8 February, over 100 students at Sussex University in South East England marched up to the top floor of the university’s prestigious Bramber House conference centre and staged a “‘flash occupation”. They marched out 30 hours later, promising more actions to come in the future.

The occupation was part of the Defend Sussex Campaign, an ongoing fight by students and staff at Sussex against savage cuts that the university is planning. The cuts amount to £3 million this academic year, and £5 million next year, meaning course closures, job losses and fee increases.

However at the same time as proposing these cuts, the university administration is planning to spend £112 million on new buildings and refurbishments on campus, as well as raising the salaries of the top 14 managers to a combined £2.1 million per year. [Read more…]