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Will state housing fix what KiwiBuild can’t?

The KiwiBuild scheme is certainly not looking like the answer to the housing problems of poor New Zealanders, and nor was it intended to be, says the Government. So can we rely on the Government’s state housing programme to help fix the problem? Dr Bryce Edwards argues it’s time for Labour to massively expand social housing.

KiwiBuild is increasingly seen as not only delivering “too little, too late”, but also as focused only on housing relatively wealthy citizens. The Government has responded to criticisms of the scheme by pointing, as the answer, to its state housing initiatives and, in particular, to major work on providing low-cost rental housing.

But is this really true? It certainly looks like this Government will build more social housing than the last one. Towards the end of its nine years in power, National was also upping its rate of state house building – but only adding about 500 homes per year to the total state and community housing stock.

In contrast, Labour campaigned last year on building 1000 a year. Labour have now increased their promise to 1600 more homes a year, for the next four years – leading to a total of 6400 additional homes.

This is nowhere near enough. Given that New Zealand is experiencing such a serious housing crisis – especially for those at the bottom of the heap – surely a Labour Party might be expected to be doing something more impressive.

What’s more, given the very buoyant economic conditions and high government surpluses, it might be expected that a Labour government would be doing significantly better than a National government governing during a serious economic crisis.

New Zealand currently needs a much higher number of state houses than in the past, due to both burgeoning population growth, but also greater need resulting from worsening affordability of home ownership.

The benefits of a large-scale expansion of state housing are already very clear to the Labour-led Government, but they are simply unwilling to make the investment.

According to economist Shamubeel Eaqub, New Zealand is short of 500,000 low-cost homes. And given the failure of the market to supply this shortfall, it seems sensible that the state should build more homes to rent out.

Back in the early 1990s there was one state house for every 50 citizens, and now there is only one for every 70. As Eaqub stated earlier in the year, “On a per capita level, we're at the lowest level since the 1950s. It is a frickin travesty”.

Massively increasing the supply of state housing would have a huge impact on fixing the demand-side problem of the current housing crisis. Not only would it get many poor families into accommodation, it would also have a significant impact on relieving house price increases.

Unfortunately, this looks unlikely to happen. The benefits of a large-scale expansion of state housing are already very clear to the Labour-led Government, but they are simply unwilling to make the investment. Instead, Labour in government have put a greater priority on other spending. Remember, for instance, the surprise announcement that the Government was going to spend $2.3 billion on “submarine-killing” combat planes for the Air Force.

" ...in the future, governments will simply be able to justify their lack of state house construction with reference to the lack of land to build on."

The Government’s Budget Responsibility Rules also make such an expansion of housing difficult to implement. Despite the high surpluses and the very favourable government lending conditions, there seems a strong resistance to expanding the housing stock significantly.

Unfortunately, the Government is also making it harder to expand state housing because it is currently selling off a lot of state housing land. At the moment, around the country – most notably in Porirua, Mangere, Mt Roskill and Northcote – state houses are being demolished and the rebuilt on smaller sections. The rest of the land is being sold to private owners – either through KiwiBuild or other private developers.

Essentially, state housing land is being privatised by the new Government. That this is happening when there is a massive need for building more state housing seems reprehensible. And in the future, governments will simply be able to justify their lack of state house construction with reference to the lack of land to build on.

Housing New Zealand have declared they are ready to ramp up construction at any time, with the CEO stating earlier this year, “We have capacity to build whatever the Government wants us to build”.

But if the idea of a mass production of state housing is just too extreme for the current Government, they could at least consider some sort of “rent-to-buy” scheme. This might also seem overly-experimental, but has been used in plenty of places to ease lower-income families into home ownership.

The Government need not borrow all the money itself. Already Housing New Zealand is being told to raise loans itself in order to pay for new houses. And since it already has large assets and steady income from rents, it could easily borrow much more itself, if necessary.

So, how serious is this Government about solving the housing crisis? Is it really a transformative government? On the issue of housing, it’s looking likely that the current administration will be judged in the future as being guilty of neglecting one of the biggest social problems of our time.

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