NZ POLITICS DAILY: Housing boost – significant but underwhelming

Until yesterday, housing was one of the major points of difference between Labour and National. Labour had its Kiwibuild policy of building 100,000 new houses over the next ten years – 50,000 of them in Auckland – and selling them at “affordable” prices, while National was keeping to its strategy of simply trying to change the planning rules to encourage the private sector to meet the increased public demand for housing.

Suddenly the National government has gone somewhat “socialist,” announcing it will embark on a bigger programme of house production under its Crown Building Project. So, why the sudden change of heart? Clearly, rising concerns about the housing crisis were threatening the government’s chances of re-election. And maybe the government realised that the market simply wasn’t capable of delivering the much-needed housing.

Unambitious for New Zealand?
There will be few voters or commentators questioning whether the National government was right to announce a new state housing build programme. The question is simply whether the programme goes far enough.

And of course, every opposition party has bemoaned the announcement being “too little, too late.” This even extended to National’s support partner on its political right: the Act Party’s David Seymour said “If the goal is to close the housing shortfall, this is a step in the right direction but it won’t be enough. The proposal will add 25,000 homes when what we need is another 500,000.”

The most common reaction to the announcement was nicely summed up in Corazon Miller’s NZ Herald article, Is National's housing policy enough? In this, the increased housing figure put forward by the government is broken down to get a more realistic idea of what real change is occurring: “Taking into account the 8275 that will be demolished to make way for these new builds; this would see a net gain to the Auckland market of 25,936, of which Adams estimated between 5000 to 6000 would be social housing. However, these figures fall far short of what the SuperCity will likely need as population growth and net migration put greater pressure on the housing market. Auckland has an estimated shortage of around 35,000 homes.”

This article even quotes Property Institute chief executive Ashley Church expressing concern about whether the figures announced are enough to keep up with demand in Auckland: "That's not to be sneezed at – but it's a long way short of the 40,000 we need right now."

And the headline in today’s New Zealand Herald was probably not what National was looking for: 4200 new affordable homes in Auckland under Govt-run building plan. The article by Isaac Davison calculates the number of houses sold below the cost of $650,000 – which is the official new government measure of what is “affordable” will only be about 4200, given that National is only promising that one-in-five houses built by Housing New Zealand for private sale would have to be affordable.

The article suggests that the number of state houses, too, won’t meet demand: “Housing NZ chief executive Andrew McKenzie said 1700 new state house places would be built in the first four years. At last count, there were 2015 people on the official waiting list for social housing in Auckland, and another 600 waiting for a transfer.”

The most interesting and insightful critique of the announcement comes in today’s Dominion Post editorial, National changes tack over the housing crisis. Looking at the figure of 26,000 additional new houses, the newspaper says: “This is not a sumptuous number in a city where house prices have exploded and where thousands of young people have given up hope of buying a house and where homelessness is a serious issue. And partly a modest policy is inevitable when National still can't bring itself to mention the ‘crisis’ word. Even the supposedly ‘new broom’ minister Amy Adams is still talking coyly about the city's housing ‘challenges’.”

The editorial could see the significance of the announcement but was sceptical about the motives: “Housing is the area where National is most vulnerable, and yesterday's announcement is a recognition of this fact. It also represents a softening of National's ideological objections to state house-building and in particular to Housing New Zealand's ability to competently manage a new building programme. If this represents a new and more pragmatic approach to the housing crisis it is welcome. If it is merely the government doing the least it possibly can to manage the crisis and give the appearance of action, it's not.”

And for equal measure, the editorial criticises Labour for being too moderate in its house-building ambitions. But it wonders if the public’s horizons have been lowered, encouraging such unambitious policies: “There is a housing crisis but plenty of voters are leery of the scale of Labour's promises. Can we really afford to build 100,000 houses over 10 years, half of those in Auckland? Nine years of careful and incremental policy changes have encouraged voters to think that a bold plan is reckless. There is still not a widespread feeling that it's time for big political changes.”

Similarly – and not surprisingly – the leftwing blog, No Right Turn is caustic about the National’s low house-building ambitions but also makes the point that a U-turn by the government might still have positive unintended consequences: “By announcing this and conceding the principle that the government must build houses, it has enabled other parties to announce that they will build more of them, and keep them under state ownership. So it's not a bad announcement – just too little, and too bloody late” – see: The usual story.

Reasons to be sceptical
The main challenge to National’s new policy is that it’s simply not up to the scale of the housing problem in Auckland. The severity of the situation was best illustrated last week by Isaac Davison’s report: House price limits could be eased again, as new data shows 4 out of 5 can't buy a house in Auckland.

And it’s not just the house buying market, but also the rental market, under stress – see Anne Gibson’s The pressure's on: 44 tenants for each Auckland property.

The problem is that too few houses have been built in recent decades. Bernard Hickey reports economist Shamubeel Eaqub, “who has analysed New Zealand's house building record since the 1920s,” says New Zealand is missing 500,000 houses. This is “because of its inability to build at the same rate over the last 30 years as it did between the mid-1940s and the late 1970s.” Apparently, in this former period, the house building rate was near eight per 1000 people, but since the 1980s this has dropped to five per 1000.

Eaqub also “pointed to a slide in the number of state houses from nearly 20 per 1000 people in the late 1980s to less than 15 per 1000 now as another sign of the failure of the housing market and the government's response.”

But are building rates now turning around? The Herald’s Brian Rudman is extremely sceptical about the government delivering what it promises: “Yesterday's desperate catch-up attempt by Social Housing Minister Amy Adams is a welcome gesture, but her grandly titled Crown Building Project will in effect only add 2,600 houses a year for the next ten, which is an underwhelming response to a full-blown calamity. And given this Government's track record of over-promising and under-delivering when it comes to Auckland housing, whether it actually happens, is another matter” – see: House building targets remain elusive as ever.

Rudman goes into the detail about what was promised and what was delivered in Auckland: “Nothing quite underlines the government's failure to solve Auckland's housing crisis as the latest Auckland Council figures admitting that only 7200 new houses were completed in 2016. This is only half the 14,000 needed just to cope with annual population growth, let alone reduce the estimated 35,000 shortfall build up over recent years. This is also well short of the 9500 new houses a year Housing Minister Nick Smith was claiming credit for this time last year, in a Budget press release.”

Furthermore, Rudman says, “It's a far cry from the 39,000 new houses in three years Dr Smith was boasting in March 2013 would be built as a result of the special housing accord he had forced on Auckland Council.”

But the government has been undertaking other housing initiatives, which Jason Walls reports in NBR: “Today’s announcement follows a range of other social housing initiatives undertaken by the government. The government injected $300 million into emergency housing in November last year, which included $120 million to build, buy or lease properties suitable for emergency housing – $100 million of this will be as a loan to Housing NZ. Earlier this month Ms Adams revealed Hamilton would get 43 new two-bedroom houses, to be built by the end of July. In April, Ms Adams told the Otago Daily Times the Ministry of Social Development would increase the social housing stock in Dunedin by 40 within the next three years” – see: Government's new social housing plan derided by opposition MPs.

Also raising questions about the practicality of National’s latest project is Infrastructure NZ chief executive Stephen Selwood, who is reported today by Richard Harman saying that the new building would put massive pressure and costs on Auckland Council, which would need to significantly increase its infrastructure to be able to cope with the new housing – see: Taking the campaign to Auckland. According to Harman, "The government’s announcement today adds a $1 billion bill to a council which is already at the limit of what it can borrow.”

And there are reasons to be sceptical, too, about Labour’s alternative policy, and whether it will have the capacity to deliver. For example, although the party is promising 50,000 new builds in Auckland, Amy Adams “questioned Labour's plan, saying there was not room on Crown land in Auckland to build more than 34,000 new homes. The government was ‘maximising the available land we have’, she said” – see the Herald’s 4200 new affordable homes in Auckland under govt-run building plan.

In fact, the Labour-friendly blog site, The Standard, also recently published a challenge to the Kiwibuild concept, saying “the musculature of state needed to shape the whole of New Zealand’s built form no longer exists. Even if Labour were to start the Affordable Housing Authority from day one, it would be as a letterhead and not as the vast dealing, financing, constructing, and selling machine needed to get 100,000 dwellings built” – see: Is the Labour Housing policy even possible? The answer, they say, is to establish a new housing agency similar to the NZ Transport Authority, with equal powers and capacity.

Finally, it seems that the politicians are so quickly moderating all their policies and removing their policy vulnerabilities that voters might be faced with a lack of real choice at the election. Jane Clifton’s latest online Listener column deals with this problem – see: Oppositional behaviour: The Nats' looting of other parties’ policies is complete. Obviously written before National’s latest U-turn, she says: “There’s such a thing as a decent degree of ideological demarcation, and National keeps trashing it. Although the government hasn’t stolen every policy plank from Labour, the Greens and New Zealand First, it has territory-marked most of the important ones in the manner of an extremely ambitious tomcat. Short of appointing Nicky Hager to head an inquiry into the SAS, National has barely left an electoral itch unscratched. If not for Nick Smith’s regular belligerent rampages to remind us otherwise, National could now pass for Labour on many fronts and NZ First-lite on others. There may be scope for remedies under the Fair Trading Act for misleading labelling.”