How NZ Fell Into Its Housing Emergency

The housing crisis is increasing income and wealth inequality, tearing apart the fabric of our society and doing nothing for our economy.

And sadly the Government’s latest efforts have failed to make a dent in the problem.

Today the Closing the Gap campaign explains how Aotearoa got into this state…

How we got here

This section is based on several sources, particularly the in depth paper: “Transformative Housing Policy for Aotearoa New Zealand — Jacqueline Paul, Jenny McArthur, Jordan King, Max Harris and Scott Figenshow, Public Policy Institute, University of Auckland, October 6 2020.”  

The housing crisis is neither inevitable nor inescapable. Allowing the crisis to continue unabated will do lasting damage to health, inequality, levels of debt and the hopes of a generation, to take action to prevent this from happening we need to understand how we got here.

We need to be clear about what kind of society we want to move towards and how housing fits into that vision.”(Ref: Transformative Housing Policy for Aotearoa New Zealand, Jacqueline Paul, Jenny McArthur, Jordan King, Max Harris and Scott Figenshow, Public Policy Institute University of Auckland, October 6 2020, pg 3.)

The Maori viewpoint 

Paul et al 2020 point out that Māori land is considered to be taonga tuku iho, a treasure handed down through the generations. Acts of colonisation enabled land loss which is at the core of every Indigenous people’s struggle and injustice. 

There is only five percent of Māori land remaining under the custodianship of Māori and alienating consequences of this result in poorer standards of living, social and health status.  Settler colonisation brought different ideas of land and resource ownership which disrupted Māori ideas and practices relating to land, and became embedded through land/civil wars and the court/legislative system.

The commoditisation of land

Land became commodified, with the country seeing speculative frenzy and significant profits for urban land holders, but also significant inequity grow in a relatively unregulated market as the new land owning elite benefited and grew politically powerful.

Eventually poor housing conditions for many saw the state step in, taking responsibly for housing availability, quality and affordability. 

Labour (1935-49) faces up to the problem

The first Labour government (1935-1949)  prioritised the social value of housing, developing the large-scale public housing programme in response to constrained housing supply, poor conditions and the effects of financial instability of housing finance during the Great Depression (Paul et al, 2020). Financial instability can be reduced to an extent if people started educating themselves regarding finances and started resolving legal disputes with the help of attorneys for commercial legal disputes. They should know whom to depend on and the conditions.

Despite significant challenges, not least the Second World War, 32,000 state houses were built by the Labour government between 1937 and 1949.

State housing represented a paradigm shift in New Zealand’s housing system. State planning, finance, construction and maintenance delivered decent, affordable housing to many who had previously experienced insecurity, high rents, poor design and overcrowding.” (Paul et al, 2020,Pg 5.)

Homeownership became framed as the norm, associated with’ freedom’ and ‘security’, a key tenet of the ‘kiwi’ dream (Paul et al, 2020).

Public policy and state finance supported the expansion of private homeownership, through low rate mortgage finance via the Housing Corporation and families being able to capitalise the family benefit towards a home deposit.

State housing was recast as an option for those who were not able to secure home ownership. By the mid-1990s, homeownership reached 74%, but state rentals were only 5% of housing stock.

The 4th Labour Government’s malign influence

The role of the state in housing, and in other public policy areas, was rolled back following the election of the fourth Labour Government (1984-1990), and marked a major turning point in how housing has been regarded valued.

The Treasury advocated for housing supply to be coordinated by the private sector, with little reason for the state to be involved as a renter or lender. Financial and banking sectors were deregulated, with overseas borrowing restrictions on banks abolished and the BNZ and PostBank were privatised. 

Nationl’s part in the problem

The National government of the 1990s brought in housing reforms designed to “alter radically the state’s involvement, in line with neoliberal approaches to social welfare and international trends in housing policy, where direct provision of state housing was supplemented by direct income supplementation.” (In Paul et al, 2020 pg 6)

State Housing tenants had received an Income-Related Rent Subsidy (IRRS) which capped rents at 25% of a tenant’s income but National viewed it as a market distortion privileges state housing tenants over private rental tenants and encouraging dependency on the state rather than self-reliance and personal choice.

It introduced an Accommodation Supplement in 1993 to empower tenant choice as part of a policy to elevate the role of the market, considered to produce greater efficiency. Other policy included legislation requiring the housing Corporation to run primarily as a business turning a profit for the government, rather than a social delivery agency and no longer able to offer subsidised rents.

State tenants faced large rent rises

This lead to large rent increases for state tenants. The Housing Corporation’s state housing stock was reduced by 16% (70,000 down to just under 59,000) and its mortgage portfolio was sold to private banks including Westpac, ANZ and TS, further extending their involvement in the housing system. People has to be taught right investment methods. They can be advised to go through Ironfx review.

The 5th Labour Government

The fifth Labour government (1999-2008) reintroduced the IRRS and returned social objectives to the Housing Corporation’s governing legislation as well as resuming the development of state housing stock by acquiring more property, bringing stock numbers to 66,000 by 2005. 

State housing remained a residual support for those in greatest need. Housing prices doubled between 2000 and 2007 and a major rise in household debt was facilitated by poorly regulated mortgage lending practices, low Reserve Bank interest rates and access to low-cost overseas funds.

A social housing reform programme was introduced by the National lead government (2008-2017), intending to increase supply of affordable housing through increasing involvement of the community housing sector.

They were underpinned by the neoliberal belief that establishing a social housing market would deliver better social outcomes in contrast to direct public sector delivery. However the policy failed to support the community housing sector with the financial back necessary to assume the primary role in growing social housing.

Little new social housing was added (with the government resorting to using motels for emergency accommodation), prices continued to rise, doubling in Auckland between 2008 and 2016.

Paul et al, 2020 identify this occurred because of an under regulated mortgage lending system, which is extended significantly to wealthiest New Zealanders and few constraints on wealthy investors speculating on price increases This allows tax free capital gains investments in rental housing and fuels a speculative bubble underpinned by bank lending (Paul et al, 2020, pg7) .


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