English's Housing Solutions Won't Work

The housing crisis has been with us for some time and the last Labour Government must also shoulder some responsibility for it. I originally wrote a post about housing four months ago and while it has been a huge issue for all the time that National has been in government it has only been this past week that it has been acknowledged and Bill English has made the first tentative steps to doing something about it. The lack of action before now is probably due to the fact that the crisis has only effected low income earners, who are largely ignored by this government. The fact that English himself once claimed an allowance of $1,000 a week to live in his own Wellington home, is an indication of how removed this Government is from the housing realities for most people. Now that many middle income earners can't to afford to buy a house and many even struggle to find reasonable rental properties, the Government is being nudged into action.

A number of factors have reportedly led us to the current situation (much of the information listed below comes from the Department of Building and Housing Report 2009/2010):

• The lack of a capital gains tax has meant property investment is very lucrative and this has pushed our house prices up to a level which makes our housing amongst the most expensive in the world. 
• The median house price in New Zealand is 5.2 times the median wage and in Auckland houses are 6.4 times the median wage. This makes housing in New Zealand more expensive than New York and Los Angeles.
• Our housing is generally of poor quality (it has been suggested that the quality of our housing stock is 50 years behind Scandinavia) and the level of abysmally insulated and maintained housing is problematic. The Green's home insulation scheme has supported the insulation of over 100,000 homes but not generally those belonging to the lowest income earners or the cheaper rentals. There are still a large number of leaking homes that need to be repaired (around $11 billion worth).
• There is little commitment or encouragement for innovation or the inclusion of energy efficient criteria in most new housing construction (e.g. using passive solar heating principles or solar water heating).  
• Almost half of the current state housing stock are the original state homes built around seventy years ago.
• The supply of Government housing has not kept up with demand with 350 families on the waiting list for a state house in Auckland alone, many of them desperate. The waiting lists are said to be managed by raising the criteria so that the lists are reduced.
• One consequence of a housing shortage is the over crowding in existing homes and when this occurs there are often negative health consequences. In 2006 43% of Pasifika people lived in over crowded homes, for Maori it was 23% and for Asians it was 20% (only 4% of Europeans live in crowded conditions). Given the growing shortage of houses these percentages would have got worse over the last six years.
• According to the Department of Building and Housing Auckland alone will be short of over 90,000 dwellings by 2031. 
• The cost of building materials has increased considerably, it is 30% more expensive to build a house here than in Australia. It has been suggested that the Fletcher Building's monopoly of the construction industry has a major influence on construction costs. 
• Due to high construction costs it is uneconomic to build affordable housing, so that almost all new houses are built for the elite market and our new homes are the third largest in the world after Australia and the US. The average floor area of housing being built now is almost double what it was in 1974.
• With high demand and fewer houses, rental properties are a lucrative business. Even in Christchurch where the shortages are acute the Government has allowed market forces to dictate rental rates, which are now beyond many families and allowing huge profits for landlords. Some families have even resorted to sleeping in cars.
• The construction industry is losing capacity at a time when it should be in most demand. 15% of the workforce (33,000 workers) have been lost from the industry since 2007. Little has been done in training new workers for the industry and building capacity for the predicted demand.
• Construction related compliance costs are over five times what they were in 2002.

Given that the Government would have had all this information for at least two years it is extremely concerning how little has been publicly acknowledged until now and only after advice from the Productivity Commission. Bill English has admitted the complexities involved but his business, neoliberal leanings has lead him to the following four solutions: 

• Increasing land supply - this would include both brownfield and greenfield development and expanding city boundaries. 
• Reducing costs and delays with the RMA process - This would especially relate to medium sized housing related consents. This may also involve centralizing consent authorities into regional or national hubs and introducing competitor agencies (possibly private?). 
• Speed up the provision of housing infrastructure - Ensure that the coordination and provision of service infrastructure to housing developments occurs in a "timely" fashion.
• Improving productivity in the construction sector - Looking at a 20% increase in productivity. 

"Many of the changes that will make a difference lie with councils and the Government expects them to share the commitment to improve housing affordability," said Mr English. He has made sure that he has shifted responsibility from himself and his Government if it doesn't occur. It also looks like developer heaven, with fresh land to develop, cheaper building consents and timely provision of services. With faster, cheaper turnarounds the resulting increase in profits will be welcomed.

What English has ignored is the poor performance of Housing New Zealand and their hundreds of substandard or unoccupied homes. There is also no indication that any of the soon to be constructed "affordable" housing will have to meet any particular levels of quality (other than building codes) or specifications. When Michael Savage instigated the building of the first state houses there was a concerted effort to ensure their quality was of the highest standards for the time (the fact that so many still form around half of current state housing stocks supports this strategy). With the quality of houses largely left to private developers there will also be no such assurance of quality control, houses will be built for maximum profits, not to meet long term demands or to future proofing them by building them to last.

Gareth Morgan also makes the good point that availability of land is not the real issue and claims those who wrote the Productivity Commission report were using dated thinking around how housing can be created (the quarter acre section is no longer necessary). Morgan suggests a "capital" tax rather than a "capital gains" tax to shift investment from property and make the price of housing more affordable for ordinary New Zealanders. 

I have a concern that there has been no apparent effort by this Government to stop the continuing segregation of communities by their socioeconomic status and supporting the removal of state housing from areas of growing affluence is a concerning precedent. If private interests dictate housing developments they would want to maximise profits and having developments of mixed housing will diminish the value of the higher end houses and so not meet that end. Central government has a role in determining the shape of our future communities and ensuring a more equitable approach, otherwise we will head further to the establishment of exclusive or gated communities at one end of the spectrum and areas that resemble ghettos for the growing numbers of poor.

There also needs to be an investment in training new construction workers from the high numbers of unemployed youth and attract back the 33,000 workers who have left for greener pastures. What we don't want is a reliance on overseas workers to meet labour shortages and a plethora of unskilled, but cheap workers who may create difficulties in quality control. We don't want urgency and cutting of regulations to be the catalyst of another leaky building type debacle.

New Zealand is not a poor country in international terms, our level of government borrowing is growing but we are still better off in this regard than most, and we have $12 billion set aside for motorways that largely fail cost benefit analysis. Surely we need to reassess our priorities and have some minimum standards and expectations for how our most vulnerable children and families will be housed. Unlike the motorways, investing in housing will be cost effective through helping alleviate the billions spent on health care and remedial education, partly caused by unhealthy homes. An investment in energy efficient housing will reduce energy consumption and the costs of  having to continually increase power production.

Michael Savage had it right, good accessible housing can make a huge difference to lifting the living standards and aspirations of our poorest citizens and provide a useful boost to our economy.