Steven Joyce: Why this Govt won’t fix the housing shortage

OPINION:

There are two big housing challenges in New Zealand currently, and this week’s start to the political year suggests the Government doesn’t have serious new answers for either of them.

The most visible problem is rapidly inflating house prices, and the noises ministers made on Thursday about “solving” that one fall squarely into the public handwringing and “must be seen to be doing something while not doing very much” categories.

Lengthening the bright line test, for example, will do nothing to restrain house prices but would punitively tax people whose personal circumstances quite reasonably change. Higher subsidies for first home buyers will, if they do anything, simply add fuel to the house price fire.

House prices and other asset prices will only moderate when the time for ultra-loose monetary policy has passed. Fortunately for the Government, yesterday’s inflation statistics suggest that may well be earlier rather than later but, of course, tighter monetary policy would have wider economic ramifications, including potentially denting the economic recovery story.

Much depends on the timing and dexterity of the Reserve Bank governor and his committee as they walk their monetary tightrope.

The other housing issue is the large and growing shortage of social housing. This is housing for people whocan’t afford to rent or buy on the open market, or can’t access general housing for other reasons. It’s a big problem, both for the peopledirectly affected, and wider society.

The shortfall in social housing places has been present for some time but has grown alarmingly under the current administration. The Ardern Government has resorted to papering over the cracks by renting more and more motel rooms around the country to house peoplewhile it seeks a longer-term answer.

Sadly, the public attention this shortage has been getting has been shrinking in inverse proportion to the problem’s growth. The left wing-driven political campaigns of the mid-2010s faded with the change of Government. Leasing motels was an outrageous option prior to the 2017 election but strangely acceptable in larger doses since.

The previous Government tackled the shortage of social housing in four main ways, under the supervision of then-Finance Minister Bill English.

First, it sought to put a rocket under Housing New Zealand, whichuntil then had been very slow in meeting the country’s social housing needs, and then distracted by the issues created by the Canterbury earthquakes. This was problematic when the organisation was supposed to be the Government’s main lever to deliver on social housing.

A number of outsiders were recruited to run HNZ, including those who oversaw the successful government-led Hobsonville Point development. It was eventually whipped into shape to update and expand its housing stock, particularly by using its substantial land holdings in Auckland to build new higher-density housing.

This leveraged off the new Auckland Unitary Plan and became known as the Auckland Housing Programme, the results of which have ever since been trumpeted by the new Government as their own work.

Other steps included investing heavily in more emergency and transitional housing places, and in new concepts like Housing First, which aims to reduce people’s need for emergency housing by helping them with other issues that exacerbate their housing problems.

At the other end of the pipeline, the then-Government encouraged people who no longer needed the support of social housing to move into the wider rental market, to free up more social housing places for others.

The most innovative idea of the time was to tackle the shortage head-on by recruiting and nurturing more non-government community housing providers to help give more Kiwis a home. This was on the principle that no matter how well or badly Housing NZwas run, it had never fully met the need for social housing in this country, and as a single monopoly government-owned organisation was never likely to. We believed we needed to recruit clever outsiders with access to their own ideas and sources of capital to help solve the problem. Think of it as leveraging off the wider team of five million.

Groups of social houses in different parts of the country were to be transferred at a relatively low cost to not-for-profit and philanthropic entities, which would use their asset base to buy and build more social houses. This would seed a healthy number of additional social housing providers to run alongside Housing New Zealand, helping to meet the housing need for at-risk New Zealanders. Importantly, they would also be incentivised to help their customers lead more independent, successful lives.

A few transactions were completed, and the new owners quickly started coming up with their own innovative ways to redevelop properties, build more homes and support more tenants.

Unfortunately, with the change in Government in 2017 the programme became the victim of political ideology.

The new Government, wedded to the view that the only real social house is a state-owned house, pulled the pin on community housing providers and went back to the old way of doing things. Worse than that, it persists to this day in condemning the previous Government for “selling off” state houses, when it knows the true story was about enlisting non-government providers to expand social housing provision.

The problem ministers have now created for themselves is they have no other new ideas for solving the rapidly worsening social housing problem. Somewhat ironically given their relative youth, they have once again harked back to an unsuccessful old-fashioned, top-down, capital-constrained approach and closed their minds to using new ideas.

Thus they were reduced this week to starting the year by re-announcing their social housing announcement from May last year. Their entire strategy now seems to be to exhort the now renamed Kāinga Ora Housing New Zealand to go faster. Decades of evidence suggest that, despite its sometimes valiant efforts, it will never be able to go fast enough on its own.

– Steven Joyce is a former National Party MP and former Minister of Finance.

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